Are RECs a Legitimate Element of Corporate Environmental Strategies?

In the October 29, 2007 issue of BusinessWeek, Ben Elgin’s article Little Green Lies questions the value of the renewable energy certificate (REC) market in helping to develop new supplies of renewable energy and states that companies might be relying too heavily on RECs to meet emissions targets.

There is growing interest from many corporations to reduce their impact on the environment. WRI and the Green Power Market Development Group (GPMDG) have worked with dozens of companies over the years to identify strategies to reduce emissions and promote the use of renewable energy sources. GPMDG member companies have pursued a diverse range of options to reduce their environmental footprint that include:

• reducing electricity use through energy efficiency,
• pursuing a diverse mix of on-site renewable energy projects,
• purchasing green power through utilities (where available), and
• purchasing Green-e certified renewable energy certificates (RECs).

Many GPMDG companies have used RECs as one part of their overall strategy to meet their renewable energy goals and have been active in developing the REC market. It is our view that the market for RECs has played and, will continue to play, a critical role in encouraging the development new renewable energy projects through:

• providing renewable energy project developers with a valuable source of revenue that can shift the balance in favor of receiving project financing;
• providing an additional revenue source that improves investor confidence in the renewable energy sector and leads to further investment; and
• allowing companies to support renewable energy, even when on site options are not feasible or when the local utility does not provide green power.

Finally, in order to bring the renewable energy market to scale, strong federal and state policies are needed. Well-designed incentives will remove some of the barriers to the development of new renewable energy projects and will boost corporate investment in the clean energy sector. In the meantime, RECs will remain a valuable tool for the companies that buy them as well as the renewable energy industry.