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Chris Goldie's answer to a question on sustainable web infrastructure brought this question up.

From the US Environmental Protection Agency:

A renewable energy certificate, or REC (pronounced: rěk), is a market-based instrument that represents the property rights to the environmental, social and other non-power attributes of renewable electricity generation. RECs are issued when one megawatt-hour (MWh) of electricity is generated and delivered to the electricity grid from a renewable energy resource.

According to Wikipedia:

RECs allow for purchasers [of electric power] to support renewable energy generation and allows the economic forces of supply and demand to spur the further development of renewable energy generation.

Both of these sources reference the RECs in the US, however the concept is similar around the world (based on answers/comments so far, similar systems exist in at least: Australia, New Zealand, the Netherlands, and Norway).

Is the purchase of RECs an effective means to reduce the environmental impact of a business or industry? Does this system work in practice, or is it simply a PR play?

Stated another way, does the increase of investment in renewable sources of electricity translate to reduction in environmental impact of the businesses which use electricity from the grid?

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As greening measures go RECs tend to be one of the better options since they guarantee that for each certificate a given amount of renewable electricity is generated, so if that's what you want they work perfectly.

If a power retailer wants to sell "green power", for example, this is a simple mechanism to do that. The electricity supply is a common pool - all the generators feed "the grid", the customers draw from "the grid" (which is a local thing for a sometimes international value of "local", but there is not a single world-wide grid). So your "green power" is just normal grid power, but the retailer buys RECs to cover the green power they sell. So the renewable generator gets a price premium for (at least some of) the electricity they generate, and the customer is assured that the price premium they pay actually goes to renewable generators.

The problem is that "greening industry" is essentially unrelated to the question of electricity supply. RECs work to green the electricity supply, no more. But for most industries electricity is a small part of their costs, and those emissions form a small part of their pollution. For example the coal-fired steel refinery is going to be almost completely unaffected, since its major emissions are from thermal heating using coal. At the other extreme, for an office building electricity makes up a small portion of the rent, and salary costs normally dominate that by a huge margin. Halving or doubling the electricity cost won't much affect the cost of running a business in the building.

RECs are often introduced as the measurement device for a renewable electricity requirement, and the latter is where the major benefit comes from - few people with buy RECs just to have RECs. But when legislation requires that some percentage the electricity supply has to be renewable and measures that using RECs, RECs work very well.

There is usually a small secondary effect where the cost of electricity goes up because historically renewable electricity has been more expensive to the consumer than fossil electricity. This makes investment in efficiency more attractive and hence lowered demand slightly. But that is a small effect, and most consumers will not invest in efficiency just to save money (this includes businesses who consume electricity). It's also an effect that is local (some countries already have either all or no renewable electricity) and reducing over time as the cost of building renewable generators drops.

Note that in Australia when the government wanted to boost the take-up of residential solar, rather than increase the payment directly they instead issued more RECs per unit of installed solar (thermal hot water or PV). So now there are "large scale RECs" and "small scale RECs". The latter being worth a fraction as much as the former, as well as being worth less because they were based on an estimate of lifetime output rather than actual output (the renewable energy requirement specifies that only a small portion can come from residential RECs). This is a classic case of politicians making a mess of a simple concept for arguable short-term political benefit. But it's what Australia has.

  • Interesting. It sounds like the purpose of RECs is then to increase the fraction of the the total electric supply composed of renewables in a way that reduces transaction costs and allows each power producer to do what they do best, without sacrificing profit. – LShaver Jan 18 '17 at 5:00
  • pretty much, yes. I added the green power paragraph to link that to power consumer behaviour. – Móż Jan 18 '17 at 5:07
  • I tend to disagree with this answer, but that's primarily because RECs don't work well where I live (The Netherlands). Many energy suppliers here buy cheap RECs to sell their non-renewable electricity as green. The RECS are cheap because they are abundant and come from old Norwegian hydrodams that have been paid off years ago. The money spent is not invested in new renewable energy sources, so that's why it's not effective. I guess how effective RECs are depends very much on what a REC seller does with the money. – THelper Jan 18 '17 at 8:01
  • @THelper they work well in Australia despite the best efforts of the politicians, which is kind of astonishing given what the same lot have done in other areas (for example to refugees). But in NZ similar thing with offsets - the govt is not doing anything about emissions, instead they've legislated and negotiated to get dodgy offsets from former communist countries. – Móż Jan 18 '17 at 8:54
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    I didn't think you were disagreeing. My impression, but I can't find a decent international comparison, is that they do work well when there are few renewables in the system. But for countries like NZ and Norway where the system is already effectively renewable, they don't have any useful effect and for countries that can export power like Norway can, they can poison systems in other countries. – Móż Jan 18 '17 at 9:29
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RECs are issued when one megawatt-hour (MWh) of electricity is generated and delivered to the electricity grid from a renewable energy resource.

This quote is self-speaking. The REC says only, how much electricity is generated from energy sources considered renewable*. It is completely irrelevant for the benchmark, how negative impact on the environment that electricity unit had.

Considering how destructive impact on environment production of solar panels and windmills has**, it is possible, that more REC would mean more negative impact on environment. The opposite is also possible. The problem is, REC doesn't care.

*sorry to disappoint you, it was proven than perpetum mobile can't exist, therefore, strictly speaking, no energy source is renewable

**see rare earth metals acquisition

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    Solar panels do not require REEs, and while some wind turbine designs require neodymium (Nd), there are plenty of designs which don't. While on a surface level your assertion that no energy source is truly renewable is correct (see discussion here), the competition (fossil fuels and nuclear) is worse by several orders of magnitude. – LShaver Jan 18 '17 at 19:00
  • @LShaver do you have any proof for that 'worse by order of magnitude'? – Danubian Sailor Jan 18 '17 at 21:10
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    Comparing coal to wind, the difference in lifetime CO2-equivalent emissions is two orders of magnitude, per the IPCC (via Wikipedia). While other effects (such as air pollution from combustion, land use changes from fuel mining, thermal contamination of lakes/rivers, etc) are not included here, I may have exaggerated a bit :). – LShaver Jan 18 '17 at 21:22
  • @Lshaver CO2 emission is irrelevant, since it can be absorbed by plants, so technically it's not even a polution. You compare ants to elephants. Compare the real pollution, toxicity of used materials, extreme damage by resource acquisition (REE once again). – Danubian Sailor Jan 19 '17 at 17:54
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    @DanubianSailor but then you end up comparing the heavy metals emitted by coal plants to the rare earths used to make wind turbines, and that's a very hard comparison to agree on. Especially because you need lifetime estimates. And the short term effects of CO2 emissions are a very real problem, even though over the next few million years they possibly won't have much effect. Although even that is seeming unlikely, we're laying down a very distinct signature in the geological record right now. – Móż Jan 19 '17 at 21:07

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