Insights from Renewable Energy Markets Conference 2011: What's Your REC Strategy?

Last week at the Renewable Energy Markets Conference, leading corporations, renewable energy generators, and utilities gathered to discuss the state of voluntary and compliance green power and renewable energy certificate (REC) markets.  The conference demonstrated the growing use of green power by corporations and institutions, but also highlighted some of the most pressing challenges facing the industry.

Lori Bird from NREL began the conference with some findings from her recently released Renewable Energy Certificate Status and Trend report.  For the first time ever, the compliance market for RECs was greater than the voluntary market.  The compliance market grew rapidly from less than 30 million megawatt-hours (MWh) in 2009 to 55 million MWH in 2010, in response to increasing RPS requirements.  In the voluntary market, organizations and individuals purchased 35.6 million MWh of green power. The purchase of voluntary RECs, which had been growing between 20-75 percent annually, slowed significantly, growing by only six percent.  You can read more about our analysis of the report here.

In a panel session entitled, “Making the Business Case for Green Power,” representatives from SC Johnson, WhiteWave Food, and New Leaf Paper discussed their motivations for purchasing RECs and green power. All of the panelists mentioned that purchasing RECs was a strategic decision driven by company and founder values.

For New Leaf Paper, green power purchases are an important part of their overall sustainability effort, which is vital to the company’s strategy.  New Leaf’s commitment to sustainability has allowed the company to line up large corporate buyers and grow rapidly with no outside funding, in a low margin industry.  For WhiteWave Foods, REC purchases are a key differentiator of their products.  REC purchases are so important to its marketing strategy that funding comes from the marketing budget.  At SC Johnson, green power purchases are key to meeting organizational and product sustainability goals. SC Johnson’s green power purchases have helped to build its reputation, and it ranks as one of the top ten green brands.

Another interesting topic of debate at the conference focused around installing on-site renewable energy versus purchasing off-site green power.  Yet most corporate representatives at the conference described on-site renewable energy and purchasing green power as complimentary rather than competing solutions. 

Organizations are taking a portfolio driven approach to cost effectively meet sustainability goals.  For many, installing on-site renewables is either too expensive or restricted by physical limitations (lack of roof space, sunlight, etc.). Additionally, installing on-site renewable systems can take years to develop, while RECs can have an immediate impact on a company’s sustainability efforts.  For Intel, RECs are a key part to the company’s multi-pronged approach to address the company’s energy use.  While Intel has installed on-site renewables, purchasing voluntary RECs allowed Intel to make an immediate splash and gain recognition from the EPA’s Green Power Partnership.

The conference also featured a number of interesting panel sessions and conversations around the challenges facing organizations looking to purchase and install green power.  Bob Valair of Staples expressed the difficulties of dealing with different regulators and utilities across different locations.  A number of panelists also noted that the lack of legislative certainty around carbon and energy has prevented them from making long-term REC purchases.  

Perhaps the biggest issue discussed was the low price of voluntary RECs.  At less than $1/MWh, many panelists are concerned about how well voluntary RECs are actually helping to stimulate development of renewable energy in the market.

Yet the underlying trends motivating corporations to purchase green power are likely to intensify in the coming years, including enterprise sustainability, rising energy prices, consumer environmental awareness, and investor demands.  Despite the economic downturn, green power purchases and the number of organizations purchasing green power continues to grow.  At the same time, as the cost of energy efficiency and renewables technologies continues to decline, more organizations will make direct investments in reducing demand, and on-site renewable generation.