Renewable Energy Certificates (RECs) are documentation to provide proof of the generation of green energy. This page will answer some general questions about RECs and how they're captured and reported for both locaiton-based and market-based emissions reporting
The primary reasons an organizations want to purchase and manage RECs in Envizi is to
quantify the amount of renewable energy consumed,
quantity the GHG Reductions achieved through purchasing carbon neutral power (in the context of Scope 2 location-based emissions reporting) and to
quantity the impact of RECs when reporting on Scope 2 market-based emissions.
For more information on market-based emissions, reporting and configuration, see here.
Background on RECs
RECs can be produced and purchased with electricity (when bundled together this is typically called ‘green power') or on their own (typically called 'unbundled certificates’). If purchased on their own, then the environmental benefit of generating green power is separated from the electricity itself, as shown in the diagram below.
Organizations will often purchase RECs to effectively reduce overall Scope 2 emissions. According to the GHG Procotol - Corporate Standard, it is necessary to report all Scope 2 emissions from purchased grid electricity separately from offsets and RECs. However, organizations may still want to see the impact of RECs on Scope 2 totals in the same way as a organization’s overall carbon footprint can be reduced using carbon offsets.
Envizi handles this by recording emissions reductions resulting from REC purchases separately from Scope 2 totals. The Performance by Scope Dashboard is a good example of this whereby Scope 2 emissions are summarized separately from RECs and offsets. In this way organizations are able to clearly see their Scope 2 location-based emissions resulting from grid electricity purchases separately from RECs and offsets.
Also note that while there are 3 categories of REC purchases handled by Envizi’s Market-based emissions PowerReport, only RECs related to green power purchases (bundled RECs) are included in the green GHG Reduction total row in the above summary.
Emissions Calculation for GHG Reduction Total
As an example, an organization consumes 1000 kWh of grid power at a location in the UK through an electricity product that provides 70% green power. Envizi will pick the grid electricity emission factor from the DEFRA factor set which for 2023 is a value is 0.207 kgCO2e/kWh. The following 3 calculations are made:
100% * 1000 kWh * 0.207 = 207 kgCO2e
70% * 1000 kWh * -0.207 = -144.9 kgCO2e
Net GHG Inventory Total
207 kgCO2e -144.9 kgCO2e = 62.1 kgCO2e
Disabling the GHG Reduction Calculation
If your organization would prefer that RECs did not calculate GHG reductions, this can be achieved by capturing a custom emission factor with the following settings:
Region = Earth
Data type = ‘Electricity - Green [kwh]'
kgCO2e/unit = 0
If you don’t see the ‘Electricity - Green [kWh]’ data type in the picklist, reach out to support to have this data type added.
Difference Between RECs and Offsets
RECs are credits that represent the environmental and other non-power attributes of renewable electricity generation and are a component of all renewable electricity products (one REC for every 1 MWh or 1,000 kWh). RECs are measured in single megawatt-hour increments and are created at the point of electric generation. Buyers can select RECs based on the generation resource (e.g., wind, solar, geothermal, etc), when the generation occurred, and the location of the energy source.
It is important to note that RECs cannot be purchased as a method of carbon offset, but only carry the environmental attributes of renewable energy. The two mechanisms are different and serve different purposes: Carbon offsets allow companies to reduce their liability for greenhouse gas emissions, with each carbon offset financing a one ton reduction in carbon dioxide (CO2e) emissions through a variety of projects. RECs account only for renewable energy generation—most often electricity—and thus represent a direct impact on the energy system (in effect reducing emissions associated with power consumption).
This important distinction between a REC and a carbon offset is that RECs are measured in kWh and carbon offsets are measured in tonnes of CO2e. While RECs are carbon neutral, it is in their application or apportionment against electricity consumption that can show reduced emissions.
Frequently Asked Questions
Answer: There is a disconnect between the GHG Protocol - Standard and the requirements for Scope 1, 2 and 3 GHG reporting, and the electricity products organizations are able to purchase electricity retailers. The GHG reporting requires Scope 1, 2 and 3 emissions to be reported separately from RECs and offsets, but in practice most electricity retailers offer electricity products that are ‘carbon neutral’. For these products, electricity retailers have purchased and retired RECs for all ‘green power’ that has been sold. From the point-of-view of the electricity retailer customer, they have purchased carbon neutral electricity.
As a result, Envizi has had to devise a methodology where both requirements can be satisfied. The requirements from the GHG Protocol have been met since 100% of grid purchased electricity is reported using the grid average factor, and organizations looking to report their ‘net’ Scope 2 emissions can do so as well by subtracting ‘GHG Reductions’ from Scope 1, 2 and 3 totals.
Another way to ask this question: For companies that purchase RECs, is it considered to be a best practice or a requirement (or neither) to purchase RECs generated in the same eGRID region or an adjacent eGRID region as the region in which electricity is consumed?
Answer: It is a requirement for RECs to be generated in the same market as the electricity consuming location for those RECs to meet the Scope 2 quality criteria. The US is considered one electricity market so the guidance allows for a REC generated in any US location to be applied to any electricity consuming location in the US. However, it is not uncommon for companies to only apply RECs generated in a particular eGRID subregion to electricity consuming facilities in that same eGRID subregion, and this would be considered best practice.
Answer: This depends on how the REC was captured. If the REC was captured as part of a Green Power account (bundled certificates), envizi will apply the negative value of the grid average emission factor (in this case the associated Texas eGrid region). The result of this calculation can be seen on the Performance by Scope Dashboard and the Emissions Performance Dashboard. If the REC is unbundled and captured using a ‘Certificates - <region level>’ account style, the effective emissions reduction amount can only be seen when running the Market-based emissions PowerReport. With this example, the REC could be recorded at any Location in NYC and resulting Scope 2 market-based emissions will be reduced in that region.
Answer: The US is considered one market; the EU is also typically considered one market. Per the Scope 2 guidance: "The United States, for example—despite differences in state law, local regulatory policy, and variation in physical interconnection within these regions—operates under broad federal laws and regulations, and therefore has constituted a single market for use of certificates. The EU represents a multi-country market united by a set of common market rules and a regional connection."
Answer: Offsets, and their global avoided emissions claim, represent a different instrument and claim from the energy attributes associated with energy production and therefore should not be incorporated into Scope 2 accounting. Offsets convey tonnes of avoided CO2e using project-level accounting, but they do not convey information about direct energy generation emissions occurring at the point of production, like contractual instruments do. An offset credit does not confer any claims about the use of energy attributes applicable to Scope 2.
Answer: This will depend on whether the green power was sold by your retailer as ‘bundled green' electricity, or if you purchased RECs separately from another provider.
If you purchased from your retailer, you likely have an account style configured with a name similar to ‘Green Electricity'. In this account style you should enter total grid consumption (including green power kWh) into the ‘Grid kWh’ field, and then enter total green power purchased in kWh into the ‘Green Power kWh' field. If purchasing 100% green power, then the ‘black’ and ‘green’ amounts will be the same.
If purchasing separately from your electricity retailer, these RECs are not considered bundled or ‘Green Power’ and are instead captured using ‘Certificates’ account styles and apportioned across your grid consumption when calculating market-based emissions. Follow the MB Emissions - Certificate Allocation Methodology if this is the case.
Answer: For market-based emissions reporting, the answer is no. Emissions reductions will occur based on how RECs are applied to grid consumption. Bundled certificates serve to reduce grid consumption before emission are calculated directly in the same account where the green power is consumed (this is why this form of RECs are considered ‘bundled’ with grid consumption).
For location-based emissions reporting, the answer is yes. Only bundled RECs purchased from retailers will contribute to ‘GHG Emissions Reductions’ on standard dashboards. Any ‘unbundled’ certificates captured will not have an emission factor applied for the purposes of showing GHG Reductions in standard Envizi dashboard and reports.
See the MB Emissions - FAQ for more information.