How Renewable Energy Certificates and Carbon Offsets Work

With more organizations working to reduce their environmental and energy footprint — whether it’s to meet corporate sustainability goals, follow local regulations or promote social responsibility — interest in renewable energy certificates (RECs) and carbon offsets is growing. But what are those, exactly?

Broadly speaking, RECs and carbon offsets both match, or neutralize, something: RECs counterbalance electricity usage generated by traditional electric grid resources, such as fossil fuels, and carbon offsets offset emissions produced by an activity. RECs can address Scope 2 emissions — indirect emissions associated with purchased electricity — while carbon offsets can apply to Scopes 1 through 3. Both can be purchased proactively, in anticipation of expected electricity consumption or emissions, or retroactively, after the fact.

Let’s dig in a little deeper, starting with RECs.

Electricity generated using fossil fuels has a certain value. Electricity generated using “green” or renewable energy has added value — an environmental attribute — because it is produced by a clean resource. The environmental attributes associated with the generation of 1 megawatt-hour of electricity from a renewable resource equals one REC.

RECs can be sold and purchased. For example, a local renewable energy producer might sell their RECs to a broker or aggregator, who in turn might sell them to an organization. Large corporations often purchase RECs by the thousands and can then claim to use low- or zero-emissions renewable electricity.

When it comes to implementation, a common approach is for a company to buy RECs to cover a portion of its electricity consumption while simultaneously pursuing energy efficiency measures, energy management or on-site renewable energy. Over time, taking those steps should allow the company to rely less on grid-supplied electricity and therefore need fewer RECs to meet its objectives. Ultimately, RECs, and carbon offsets, represent just one part of an organization’s overall carbon reduction journey.

Advanced Energy offers RECs through its NC GreenPower program, which has been supporting them since 2003. Here’s how the process typically works. A company might approach us asking for information on a variety of REC options, and we’ll contact owners and developers of renewable energy projects to assess REC availability. All of our RECs are sourced from North Carolina, benefiting community projects, the local economy and the environment. We’ll then compile our findings to help the company compare choices.

RECs will differ on a few factors, including asking price, vintage (i.e., age) and source. With the latter, companies may have a preference for RECs from particular renewable resources or technologies, for example, a wind project over a solar project.

Carbon offsets, as noted earlier, are used to neutralize the carbon emissions associated with a facility, activity or supply chain. Carbon offsets are created by projects that reduce or avoid one metric ton of carbon dioxide or carbon dioxide equivalent from the environment. These projects include methane collection and combustion from landfills or farm animals, as well as reforestation, other industrial and nature-based solutions, and more. A company could approach carbon offsets similarly to how it might approach RECs, often by buying them initially to reach its goals while working to reduce emissions at the same time.

Since 2008, NC GreenPower has offered regional carbon offsets that are sourced from North Carolina, South Carolina and Virginia. All carbon offsets must meet quality criteria and standards — examples include the Verified Carbon Standard, Climate Action Reserve, Gold Standard and American Carbon Registry — to ensure projects are making a positive difference.

RECs and carbon offsets can be a great piece of an organization’s decarbonization puzzle, helping to meet sustainability goals and support a cleaner environment, particularly when on-site renewable generation is not yet available or feasible.

Want to learn more? Let us know, and click here to read about our other decarbonization services.