Author: Maya Kelty

Maya is Director of Regulatory Affairs at 3Degrees.

Green-e® Energy certification provides important market value

Green-e energy

Green-e® is the leading independent certification and verification program for renewable energy in the North American retail electricity market. The program aims to uphold the integrity of renewable energy and climate products and advance clean energy policy and technology. At 3Degrees, we are committed to ensuring all renewable energy certificate (REC) sales help support a robust voluntary renewable electricity market, and therefore always advise our voluntary buyers to purchase Green-e® Energy certified RECs in North America. Recently, as the price of Green-e® Energy certified RECs has increased, it has become more common for some suppliers to offer RECs that do not meet Green-e® Energy standards to buyers.     

In this blog, we’ll explore how and why Green-e® Energy certification was developed and the role the certification continues to play in supporting strong standards for the voluntary renewable energy market.

Background about Green-e® Energy certification

When retail marketing of certificates started gaining popularity in 2000 and 2001, the risk of consumer confusion and the potential for misleading advertising quickly became apparent. In response, the NGO Center for Resource Solutions incorporated RECs into The Green-e® Energy Standard in 2002. From the start, Green-e® Energy has been based on a stakeholder-driven standard and guided by an independent governance board with representatives from environmental NGOs, renewable energy project developers, and other industry experts.  

Since 2002, the standard has been updated numerous times (at least every three years) to maintain relevance to voluntary market needs. This rigorous commitment to public process has led to the standard being referenced or required by a number of certification standards and reporting frameworks. 

Throughout this evolution, the mandate of Green-e® Energy has always remained the same: maintain credible standards for renewable energy products that support the growth of renewable energy development above and beyond state mandates, while also ensuring consumer protection and transparency. To do this work, Green-e® Energy requires:

  • Chain-of-custody audits of the REC supply chain to prevent double counting
  • Facility-level review of potential double claims 
  • Verification of the accuracy and transparency of suppliers’ marketing messages
  • Validation that the renewable energy is incremental to any government mandates for renewable energy, which also helps customers maximize their impact
  • Additional steps to address potential interactions with state policies that could limit the ability of voluntary customers to claim custody of purchased RECs

Clear, credible REC specifications support a robust voluntary market

3Degrees firmly believes that markets have the power to lead meaningful environmental change. The Greenhouse Gas Protocol reaffirms this concept of change by including a market-based methodology in its Scope 2 Guidance. Demand for specific attributes of electricity generation — in this case, renewable attributes — push up prices and can stimulate supply.

While a REC is created for each MWh of renewable energy generated, the type of renewable energy generation, the age or location of the facility, and other information about renewable energy represented by a REC can vary considerably. Green-e® Energy certification defines baseline criteria for renewable energy generation, which adds value to RECs that qualify for certification. For example, the certification stipulates that facilities supplying a certified product must be newer than 15 years old and that RECs must be generated close in time to a buyer’s electricity consumption. When RECs that meet these criteria increase in price, it signals to the market that more buyers value the attributes defined in the Green-e® standard and more generation that meets this standard should be built. This is the outcome that NGOs, 3Degrees, and most voluntary buyers want to support.     

A supplier offering non-certified RECs significantly below Green-e® market price is likely offering RECs that are not eligible to be Green-e® certified, which undermines the integrity of the market. Many factors can contribute to ineligibility, including the facility being older than Green-e® Energy online date requirements, the facility not meeting sustainability criteria for hydro and biomass, or double claims issues that arise when multiple parties aren’t clear in public statements about REC ownership. RECs that are not eligible for Green-e® and are not eligible for a renewable portfolio standard (RPS) are typically thought to have little to no environmental value and have not been salable. Buyers and sellers who insist on Green-e® Energy certified RECs will ensure this continues to be true.    

Occasionally, there may be older projects that warrant voluntary market support, such as when a project requires funding in order to continue to operate or to complete upgrades to key generation equipment. If a supplier is marketing RECs in this way, we recommend that clients ask the supplier to substantiate the claim that REC revenue is needed to properly maintain the facility. 

Voluntary renewable energy markets can have an even greater positive impact

Voluntary REC buyers support the development of renewable energy projects of all sizes and types across the country. As a leading supplier of Green-e® certified RECs, 3Degrees has sent tens of millions of our customers’ dollars to project developers. As the price of energy from new renewable generation has declined and an increasing percentage of new projects represent the lowest-cost option, many voluntary buyers are thinking about how to ensure their purchase remains meaningful beyond simply reducing their Scope 2 emissions.     

The good news is that there are many options. One recent paper we recommend reading was authored by Megan Lorenzen and Max Scher at Salesforce. Entitled More than a MW: Embedding social and environmental impact in the renewable energy procurement process, this paper discusses a list of values, such as being located in regions with higher-than-average emissions, that can be supported by projects which also generate RECs. The REBA Institute has since launched a program to further explore the findings of this paper. 

3Degrees is doing its part to push the market toward higher impact REC products. We continue to expand our portfolio to include products that improve the integrity and impact of renewable energy purchases, including products that are certified through the Green-e® Energy, EKOenergy, and Peace REC programs.  Even as we focus on product differentiation, our commitment to helping maintain clear, credible standards for the majority of voluntary RECs purchased remains unwavering.

Supporting the longevity of Green-e® Energy Certification and other global ecolabels is vital to safeguarding these standards and promoting the continued growth of the renewable energy market in North America and around the world.

 

Translating the NREL Voluntary Green Power Market Report

NREL-report-2018

With the release of NREL’s 2017 U.S. Voluntary Green Power Market report, and most of 2018 in the rear view mirror, we can now safely look back on a few of the prevailing trends in the market with confidence and clarity as we gear up for 2019. The year of 2017 was a bumper year for the U.S. voluntary green power market: MWh sales grew almost 28% from 2016 levels – the largest YoY growth since before 2010 1 – and total sales eclipsed the 100 million MWh mark for the first time on record. Here are a few key takeaways to help explain this marked growth and keep an eye on going forward.

Product Differentiation:

The proliferation of differentiated products within the voluntary green power market has helped fuel sales growth by creating a more robust market capable of supplying a wider range of customer segments. Indeed, 2017 saw customers buying a more diversified mix of green power (all backed by RECs) than ever before.2 PPAs and Utility Contracts (green tariffs and bilateral contracts) accounted for their highest combined share of sales on record (>20%), while Unbundled RECs, Competitive Suppliers and Utility Green Pricing programs continued to make up the majority of the market. Declining costs of renewables and enabling market conditions together helped catalyze this growth in product differentiation.

Corporate Target Setting:

The trend in corporate renewable energy and emissions reduction target setting is picking up pace and driving demand in the voluntary green power market. One out of five North American headquartered companies reporting to CDP now has a renewable energy target in place and that number is even higher for companies setting broader emissions reduction targets.3 Moreover, the number of renewable energy targets reported by North American headquartered companies reporting to CDP grew 35% in the 2017 reporting year. This trend is even more exaggerated at the global scale; since 2015, the number of science-based targets has grown at a compound annual growth rate of 62%, marking a concerted and strategic effort by the private sector to work towards a shared goal.4 We see this trend continuing to strengthen as more companies learn of the benefits of setting and meeting renewable energy targets.

Unbundled RECs:

Heading into 2018, the market for national Unbundled RECs experienced a sustained uptick in prices for the first time in almost five years. Many in the industry had wondered where the floor was for this market and early 2017 prices appeared to be the answer. Unbundled REC prices have since rebounded and we can now safely attribute this market adjustment to higher voluntary demand.

Unbundled REC sales in 2017 totaled over 51 million MWh, representing 14% growth over 2016 levels. Despite the significant growth in MWh sales via PPAs over the same period, demand for Unbundled RECs does not appear to be stunted. In fact, in addition to the 14% growth in sales, the number of buyers participating in the unbundled REC market grew 78% in 2017, by far the highest YoY growth on record.5 We believe the bulk of this growth in participation came from the residential and small commercial sectors; however, it may be that PPAs have played a part in the spike in Unbundled REC participation by generating awareness and attracting first time buyers to the green power market. Either way, we expect continued growth in the unbundled REC market, especially as many corporate renewable energy and emissions reduction targets have deadlines due up in 2020.6

A Paradox of Choice and the Risk of Customer Confusion:

As with many markets, more customer choice can bring the potential for more customer confusion. Several green power products on the market today run a higher risk of not being backed by RECs, thus not counting as green power. For instance, in 2017 less than 25% of sales through Community Solar offerings were backed by RECs.7 This is because RECs from Community Solar projects are often sold separately in state RPS’. Community Choice Aggregations and Competitive Supply contracts also run a higher risk of not being backed by RECs, or supplying RECs from non-local projects without an explicit disclaimer. Consumers can guard against this by ensuring that the purchase agreement in place between buyer and seller explicitly include and disclose the source of the RECs, or by seeking out certified products.

The diversification of the renewable energy product mix marks a decidedly positive evolution in voluntary green power markets: it allows different customer segments to satisfy specific needs by tailoring products to those needs. It also highlights the need for strategy and discernment on the part of buyers to ensure internal needs are met by the product and to avoid unintentional shifts away from green power.

The U.S. voluntary green power market continues to grow and mature. Catalyzed by falling costs, a more diverse set of available products and an increasing appetite from corporations needing to meet sustainability targets, we believe the market is primed for strong future growth and is well equipped to meet a growing set of customer needs, while making significant contributions to the decarbonization of the U.S. power grid.

(1) NREL data, going back to 2012,  (2) NREL data, going back to 2012 (3) 2017 CDP climate change questionnaire (4) Science Based Targets, Nov 2018 (5) NREL data, going back to 2012 (6) 2017 CDP climate change questionnaire (7) Figure 38 in NREL’s 2018 report