What is the business advantage for purchasing Renewable Energy Credits?
What is the driver behind a decision to purchase (LEEDS, brand enhancement, other compliance)? Finally, who is typically soliciting the purchase (REC brokers, regional power company, or the originating producer of the renewable energy)?
Answers (3)
At this point I would have to say that it is a corporate committment to reduce their carbon footprint. There is no 'business advantage', if you mean profit, to be had.
IMO the ideal scenario is for a company to optimize their energy efficiency first, utilize alternative forms of energy where possible and then use RECs to take their carbon footprint to zero.
From the capital investment side, there are a number of benefits to purchasing RECs. Many large manufacturers are shying away from purchasing renewable energy hardware (solar panels, windmills, etc) due to high capital cost, high maintenance cost, low TARR, etc. Some energy into Power Purchase Agreements, where a supplier provides and installs the hardware, then simply charges per kWh. But these contracts frequently require 10-30 year agreements. Other inhibitors include lack of natural resources (no wind or lack of sun at the site) or lack of enough space to install a wind or solar farm.
A great example is the Frito-Lay SunChips factory in Southern California. Frito-Lay wanted to make the factory carbon neutral. I believe they installed some small-scale wind turbines and photovoltaics. But there isn't enough wind at the site to generate a substantial amount of wind power. And there isn't enough land to install enough PV. Frito-Lay eventually purchased RECs. They are also a member of the EPA Green Power Partnership. You might also find good information at that web site.
Other benefits of RECs include the ability to purchase different forms of renewable energy, such as hydro or concentrated solar, when a facility is not located near these resources. RECs also allow all employees to feel like they are participating in renewable energy sourcing, as opposed to the plant or building that just happens to be located in a geographic area with resources.
Remember, thought, that like nearly all forms of alternative energy, RECs typically charge a premium for renewable energy over traditionally generated power. In my industry, automotive, our profit margin does not permit us to absorb that premium or pass it on to our customers. The food and drink industry is a whole different profit environment.
If you would like me to link you up with my counterpart at Frito-Lay for more information, just let me know. Thanks and good luck.
Links:
See an article about related 'Carbon Credits' here:
http://livepaths.brinkster.net/livepaths/content.asp?contentid=955
