by Chuck Hurchalla
Due to the adverse effects fossil fuel generation has on the environment, sustainability has become an essential part of business practices. But what does it mean to be sustainable? There are many ways to market your business as sustainable, but the most common and generally cheapest option is purchasing renewable energy certificates (RECs).
What are RECs and how are they generated?
Electricity can come from clean energy sources such as wind and solar, or from fossil fuels, such as natural gas and coal. However, once the electricity is delivered to your business there is no way to quantify how much of it comes from a renewable source. Renewable energy certificates (RECs) are a measurement tool for states, utilities and businesses to quantify what percentage of their electricity is generated from clean or “green” resources, like solar and wind.
A REC is created for every 1 MWh of electricity generated and delivered to the grid from a clean energy source. For example, if a hotel uses 100 MWh/year and wants to market themselves as purchasing 100% clean energy, they will have to purchase 100 RECs to reach their goal.
Purchasing options
An organization has many different options when it comes to who they can purchase RECs from. Businesses can purchase RECs from any entity that owns a renewable energy project or has invested in a renewable energy project. This includes utilities, third-party suppliers, third-party party brokers or another organization that has invested ownership in a renewable energy project.
Organizations that have invested ownership acquire the RECs associated with that project. For example, if Marriott entered into a solar virtual power purchase agreement (VPPA), they would receive the solar renewable energy certificates (SRECs) associated with the project and could sell them to another organization.
Businesses can also specify what state their RECs come from, what generation source and the specific project. If an organization in Philadelphia wants to support local solar energy projects, they can request that their RECs come from a solar project in Philadelphia.
When it comes to who you should purchase RECs from, the two cheapest options are from a third-party supplier or a third-party broker. Suppliers can bundle RECs in with your supply agreement for a small premium. Third-party party brokers have access to renewable projects from all over the country and therefore can find the most affordable option for your budget.
Which state and what resource RECs come from also affect how much an organization pays. Texas wind and Maine hydropower are two of the cheapest options due to the overabundance of wind in Texas and hydropower in Maine.
What are the benefits of buying RECs?
Purchasing RECs is an inexpensive option for hotels to market themselves as sustainable without having to install their own renewable energy project on their roof or land. Solar projects can cost anywhere from $10,000 to $100,000, which many businesses cannot afford. REC purchases can cost a fraction of what it would cost to install a solar project, without having to pay for the development and installation, which can take months to complete.
For example, a hotel that uses 1,500 MWh/year uses 100% clean energy by purchasing National Green-E Certified RECs from a Texas wind farm, which cost $0.9/MWh. Instead of paying upwards of $50,000 to install a solar array, this business paid $1,350 (1,500 MWh*$0.9/MWh).
In addition to the economic benefits, purchasing RECs allows hotels to market themselves as a sustainable business to potential customers, employees and investors. Sustainable businesses are now expected in the hospitality industry and can lead to higher job satisfaction among employees. A survey conducted by The National Environmental Education Foundation (NEEF) found that 90% of salaried workers believe engaging in their business’ sustainability practices enhances their overall job satisfaction.
Purchasing RECs can also help a hotel reach their environmental goals by reducing the amount of electricity they consume from fossil fuels, lowering emissions. By purchasing RECs, businesses are investing in renewable energy projects, such as solar and wind, which do not emit harmful greenhouse gasses.
With hotels placing a larger focus on how to market their business as sustainable, it is important to know that there are many options to choose from. Purchasing RECs is a simple, low-cost option that allows organizations to meet their sustainability goals. RECs show that your business is invested in reducing your carbon footprint to create a more sustainable future.
Chuck Hurchalla, president, Evolution Energy Partners, has more than 30 years of experience in the deregulated energy markets, including natural gas, electricity and petroleum products.
This is a contributed piece to Hotel Business, authored by an industry professional. The thoughts expressed are the perspective of the bylined individual.
