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Monday, 20 February 2012 13:40

RECs vs. Carbon Offsets: Two different options for supporting renewable energy

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RECs vs. Carbon Offsets: Two different options for supporting renewable energy PHOTO: Joe Boomgaard
GRAND RAPIDS — Many business owners support renewable energy but either cannot afford to install the systems or are not allowed to do so because of local regulations.

Even with onsite renewable energy installations off the table, people still have secondary ways to support other projects by purchasing renewable energy credits (RECs) or carbon offsets, two very different options.

Ryan Cook, VP at Clear Energy Brokerage & Consulting in Grand Rapids, said the markets for renewable energy, which were created around the mid-1990s, have become better defined since their inception as the rules of ownership, auditing and actual carbon reductions have been clarified. Numerous tracking systems, audit procedures and a defined wholesale market stepped in to address the vagaries of the fledgling market.

Carbon offsets make up for an emission in one place by reducing, avoiding or sequestering carbon emissions in another place. The offsets are useful for companies looking to make up for Scope 1 emissions, for example, those made directly by a company.

RECs, on the other hand, represent 1 megawatt hour of energy created by a renewable or alternative form of energy. Many experts say RECs are best used to negate Scope 2 emissions, those produced by energy providers from traditional fossil-fuel sources to power the company’s operations.

While RECs and carbon offsets serve different purposes, many think of them as interchangeable ways to reduce one’s carbon footprint.

Mark LaCroix, executive VP at the CarbonNeutral Company in Grand Rapids, is hesitant to fully endorse RECs.

“RECs, while providing support for renewable energy, are not appropriate for greenhouse gas accounting purposes,” LaCroix said.

The reductions from offset projects, he explained, must be shown to be “in addition to” reductions that would not occur without the incentive provided by the sale of the offsets. The revenue from selling the offsets should be reasonably expected to incentivize a project’s implementation for an offset to be considered additional.

Cook maintains his view that organizations like The Center for Resource Solutions and Green-e, which does a large portion of REC certification, help retail and wholesale consumers by functioning as a “Good Housekeeping” seal of approval.

Still, LaCroix said he remains skeptical about the fundamentals involved with RECs.

“Actual emissions reductions as a result of renewable energy generation only takes place at fossil fuel-fired plants, not at the renewable energy generation site,” he said. “Currently, there is no market infrastructure in place that supports how these reductions would be quantified, verified, guaranteed or exclusively assigned to a purchaser of a REC.”

What is clear is that a preponderance of scientists believe the planet’s climate is changing and that manmade factors, including greenhouse gas emissions, are to blame. To help stave off the march of global climate change, many believe alternative energy must be implemented to avoid greenhouse gases contributed from traditional fossil fuel-based energy. Over the past decade and thanks to state policies, many renewable energy projects have started to crop up in Michigan.

Many sustainability-minded businesses have begun to take notice of the various energy options.

Brewery Vivant, a microbrewery and restaurant located in a LEED-certified building in Grand Rapids’ East Hills neighborhood, chose to purchase RECs. In forming the plan for the now year-old business, Jason and Kris Spaulding placed a high value on being sustainable, but they still had to face budget realities. With the project over budget, the owners turned to Catalyst Partners for help on sustainability decisions. Catalyst is a Grand Rapids-based design firm specializing in certifying LEED projects.

Kris Spaulding said sustainability measures can be cost-prohibitive for a startup business, and their upfront cost can be a hard to swallow. While the Brewery Vivant building didn’t allow for many on-site renewable energy options, Catalyst advised the Spauldings to purchase RECs to help the project attain LEED certification.

“We needed a relatively inexpensive way to show our commitment to renewable energy,” Spaulding said. “One of our business goals is to be powered by renewable energy. We’d like to be on-site eventually.”

Spaulding, who previously worked at Herman Miller in the environmental department, said she had good knowledge of the options available. For now, RECs made the most sense from a cost perspective, she said.

“The most important thing to remember is that RECs and carbon offsets are two very different environmental commodities,” LaCroix said. “A REC is essentially a subsidy that makes renewable energy projects more financially successful, while a carbon offset is an environmental credit that supports renewable energy, but also provides unambiguous ownership of greenhouse gas emissions reductions and additionality.”

While RECs may not directly reduce a purchaser’s carbon footprint, they do support renewable energy efforts. For small businesses such as Brewery Vivant, many say RECs are reasonable, voluntary starting points for sustainable business practices.

“(RECs) are about the only LEED points that you simply just pay for,” said architect David L. Bell of Progressive AE. “(Progressive AE) sees clients all across the board, and most have little understanding about the process. It’s basically a free market way to subsidize renewable energy, but LEED certification is always the biggest driver for small to medium sized businesses.”

LaCroix said a growing number of companies, including Haworth, have used carbon offsets from renewable energy projects as a means to achieve the LEED green power credits.

Probably more important to small business owners, though, is that RECs can be purchased for as little as $2 to $3 per REC, the equivalent of one-megawatt hour. In contrast, solar renewable energy subsidies can range up to $600 per share, Campbell explained.

“RECs are good, but people have to understand what they are,” LaCroix said.

Where on-site alternative energy generation is not an option, RECs can fill in while also shoring up perceptions that a company cares about renewable energy. Those actions can help define a company’s image. In Brewery Vivant’s “green” scenario, RECs just made more sense than trying to build a wind turbine or paying the cost to install solar panels, according to Spaulding.

Experts’ best advice is to study both options and understand the differences before making a choice. The best answer can come down to cost, intention and opinion.

“The voluntary REC market is perhaps the best and highest functioning environmental market out there,” Clear Energy Brokerage’s Cook said.

For LaCroix, the global carbon market remains the optimal choice because of its consensus-based standards and robust infrastructure.

“The REC market is very U.S.-centric,” he said. “It doesn’t exist outside the U.S.”

Read 2374 times Last modified on Thursday, 30 August 2012 23:29

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