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Environmental Value of Purchasing RECs

The U.S. Environmental Protection Agency (EPA), through the Green Power Partnership, works with organizations to voluntarily purchase green power as a way to reduce the environmental impacts of conventional electricity use. Thousands of organizations are leading this effort by installing their own renewable energy systems or purchasing renewable electricity. Within the Partnership, many Partner organizations have found that buying renewable energy certificates (RECs) is one of the most effective ways to reduce their carbon footprint.

EPA regards REC purchasing as a simple way for organizations and institutions to affect the United States' electricity generation mix at a national scale. These voluntary purchases send a demand signal and provide financial support to new projects that are competing with conventional technologies. Bringing new renewable electricity facilities online will help the electricity sector emit fewer tons of carbon dioxide emissions than it would have if these renewable energy sources had not been operating or built.

EPA works to ensure Partner environmental claims are supported and accurately communicated. EPA does not encourage organizations to claim that their REC purchases alone makes them "carbon neutral," or that their REC purchase has reduced their direct carbon emissions to the atmosphere. However, organizations can claim that their REC purchases reduce the carbon emissions associated with their purchased electricity, which is often a key contributor to organizations' carbon footprint. EPA guidance and corporate GHG accounting rules support these claims.1

Even if Prices are Low, REC Purchases Help Build New Renewable Electricity Projects

Current REC prices are a reflection of competitive market dynamics, such as available supply and demand. Low wholesale prices in some regions and for some renewable technologies (i.e., $1 to $2 RECs) have led some to falsely conclude that retail REC purchases do not support new renewable energy generation.

RECs command a lower price premium than other green power options, such as on-site systems, for several reasons: 1) RECs have no geographic constraints and therefore can provide access to the least expensive renewable resources; 2) the supplier does not have to deliver the power to the REC purchaser, avoiding the associated transmission and distribution costs; 3) the supplier is not responsible for meeting the purchaser's electricity needs on a real-time basis; and, 4) REC prices reflect greater competition because RECs are fungible in a voluntary market.

Regardless of their price, REC purchases provide an additional revenue stream for renewable energy project developers to help recover costs, pay off debt, and reduce project risk. As a result, RECs have allowed thousands of businesses and individuals to help grow U.S. renewable energy capacity in a way that is most cost-effective and efficient for the economy.

As demand for RECs rises, REC prices are expected to rise as well. EPA encourages organizations to continue purchasing RECs so to provide an economic price signal to build more renewable power plants.

U.S. Renewable Energy Supply Has Been Growing

Nonpolluting sources of electricity have been shrinking as a percentage of U.S. power supply. However, this recent downward trend is not connected to the failures of the voluntary green power market, which primarily supports the following subset of renewable resources: wind, solar, geothermal, biogas, biomass, and small or low-impact hydropower. Non-hydro renewable electricity generation, in fact, has seen significant growth in recent years due to federal and state policy incentives and, to a limited extent, demand created from the voluntary market.

Voluntary market sales grew four-fold in the last four years—from 6 billion kilowatt-hours (kWh) in 2004 to 30 billion kWh in 2009—largely because of organizational demand for RECs. Of the total voluntary market sales in 2009, two-thirds were RECs (the remainder were utility green power products). According to the National Renewable Energy Laboratory, since 2006 the amount of renewable energy capacity serving green power markets increased nearly threefold—from 3,500 MW in 2006 to about 9,400 MW at the end of 2009, with about 8,000 MW of that from "new" renewable energy sources. 2, 3

EPA invites Green Power Partners who have questions about the environmental claims they can make from REC purchases or would like additional information to contact Matt Clouse (clouse.matt@epa.gov) or (202) 343-9004. Partners are also invited to read a recent white paper released by the Green Power Partnership dedicated to this topic: The Environmental Value of Purchasing Renewable Energy Certificates Voluntarily (PDF) (4 pp, 163K, About PDF).

1. These claims are supported by the World Resources Institute and World Business Council for Sustainable Development (Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard [Revised Edition], p. 61), Exit EPA Disclaimer as well as EPA's voluntary GHG reporting and goal-setting guidance and the U.S. Council on Environmental Quality (Federal Greenhouse Gas Accounting and Reporting Guidance (PDF) (47 pp, 309K)). Exit EPA Disclaimer The Climate Registry (PDF) (5 pp, 66K) Exit EPA Disclaimer has a draft policy for its Climate Registered Leadership program that is also consistent with these claims, but it has not been finalized at this time.

2. Bird, Lori, and Jenny Sumner, Green Power Marketing in the United States: A Status Report (2009 Data), National Renewable Energy Laboratory, United States, 2010, p. 7, http://apps3.eere.energy.gov/greenpower/pdfs/49403.pdf (PDF) (69 pp, 1.1MB).

3. "New" renewable energy capacity defined here is capacity that was sourced from renewable energy systems that were built or repowered after January 1, 1997.

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