For a growing number of companies, electricity is a prime resource in the value chain. Being able to trace the origin of power has never been more important. Renewable energy certificates (RECs) offer a unique ability to support new renewable energy projects and to engage with stakeholders. They provide companies with much needed solutions in the rapidly changing energy market.
Companies are expanding the share of renewable energy in their consumption
Global corporates have increasingly come under fire from the general public and major NGOs with regards to energy procurement. The failure to adequately manage corporate energy can leave a company vulnerable to risks, such as changing regulations and legal requirements. What is more, being seen as a big polluter carries detrimental effects for any brand.
With this backdrop, more and more companies have set themselves a target of growing the share of renewable energy in their consumption. These commitments have been reflected in the global investments in sustainable energy: the past year witnessed a steep increase of green energy investments worldwide, with a surge of a solid 17% to US$270 billion according to the 2015 report by the United Nations Environment Programme.
Leading businesses, NGOs and renewable energy experts have also joined forces to form RE100, a global initiative aimed at motivating and recruiting major companies to use 100 percent renewable power across their operations. The initiative is also a reflection of the wider interest to disclose and communicate corporate performance in energy efficiency: calculating and, more importantly, reducing emissions from purchased or acquired electricity ("scope 2 emissions") is a prerequisite for inclusion in the CDP's prestigious Carbon Disclosure Leadership Index. In this vein, the World Resources Institute (WRI) released new guidance on reporting scope 2 emissions under the GHG Protocol Corporate Standard.
Nonetheless, joining initiatives and disclosing data alone will not be enough to boost corporate brand image and ranking. A key challenge for today's companies when consuming electricity is the difficulty of tracing directly whether the electricity was produced using renewables or fossil fuels and nuclear.
Reliable renewable energy tracking schemes have been put in place
The need for reliable certification systems to identify the sources of electricity has never been more important. Renewable energy certificates (RECs) contain and disclose the renewable sources from which the electricity is consumed and are issued for every megawatt-hour (MWh) of electricity produced by a power station. The US and Canadian RECs and the European Guarantees-Of-Origin (GOs) are well established REC tracking mechanisms overseen by the respective state and national governments; some countries such as Australia, Japan, Brazil and Mexico have launched similar schemes or are in the process of doing so. However, most countries in South America, Africa and Asia have not established similar mechanisms and thus voluntary initiatives such as GoldPower and the International REC Standard (I-REC) fill in this gap.
Making substantiated claims with RECs
The existing RECs markets have been historically categorised by oversupply: there is thus little market incentive to increase the supply of RECs by building additional capacity from renewable energy plants. There are however high-quality RECs and so-called eco-labels that address this problem in three ways: either through a fund model, whereby a portion of the REC price paid by the purchaser is reinvested in new renewable energy plants (as done by Tüv Süd EE01 and EKOEnergy labels in Europe), by applying restrictions on maximum age of the plants as with North American Green-e and German OK Power, or finally by seeking certification by the Gold Standard Foundation on the additionality claim of each power plant that generates RECs. This claim ensures that the plants would not have reached financial closure without the revenues from the sale of environmental attributes.
The third solution referred to is called GoldPower, a global REC product offered by South Pole Group and backed by thought leaders such as WWF and WindMade. Apart from GoldPower, South Pole Group's comprehensive renewable energy offering also comprises GOs with specific eco-labels, I-RECs and North American Green-e certified RECs. All of these products comply with WRI's new guidance for GHG reporting and effectively allow companies to reduce their electricity-related scope 2 emissions in a cost-effective way.
The growing expertise in renewables also marks South Pole Group's transition over the years from pure play project developer to resilient sustainability solutions provider. The company's ability to transform in a volatile market has not weaned its mission to help clients grow with groundbreaking solutions that positively impact the environment and society. Major market influencers and RE100 signatories such as SAP have already tapped into the pool of solutions offered by South Pole Group's high quality RECs by sourcing GoldPower RECs from wind power in Turkey, for example, SAP not only enables the construction of new turbines, but also contributes to the further development of renewable energy generation in the region.
Apart from ensuring the production of new renewable electricity, South Pole Group as project developer has also invested in the well-being of communities that live near the power plants. In other words, SAP's renewable energy investment helps power the company, but equally the funding needs of three primary schools in the Mersin province of Turkey.
Good power is good for business
Clean energy has moved from being a hip trend among environmentalists to becoming a real energy solution that provides a plethora of benefits to businesses and organisations. Companies are also becoming more demanding about how exactly their green power is produced. The capacity of RECs to both mitigate business risks and engage in meaningful discussion with divided stakeholders is an indispensable asset when moving towards wider implementation of renewable energy.
