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Thank you for your interest. There's a lot of healthy skepticism in the green market place these days, but Village Green is confident that we're doing things right. Read on to see how.

What is a Renewable Energy Certificate?

A Renewable Energy Certificate (RECs) is the environmental property right for 1 Megawatt-hour of electricity generated with renewable energy resources. RECs may be sold along with the actual electricity, or can be unbundled from the electricity and sold separately. Only the owner of RECs can claim to be powered by renewable energy

What is a Carbon Offset?

A Carbon Offset represets 1 ton of Carbon Dioxide that was either prevented from entering the atmosphere or sequestered out of the atmosphere. The methodologies for achieving carbon abatement are varied and reflect a range of legitimacy.

An example of an illegitimate carbon offset is one that comes from most forest protection projects. The idea is that trees "inhale" CO2 and "exhale" oxygen. Thus, if you protect a tract of trees from being cut down, that tree survives to "inhale" CO2 for the rest of its life.

The main problem here is that this method does nothing to curb the demand for lumber. If a logger can't cut down that tract of trees, he will just go cut down other trees. Same number of trees felled, same decrease in carbon "inhalation".

Village Green offers a different kind of carbon offset. The carbon offsets we offer are part of a brand new, legally binding carbon cap and trade market that launched a few weeks ago in ten states in the Northeastern United States called the Regional Greenhouse Gas Initiative (RGGI). The law requires all power plants to hold a permit for each ton of carbon dioxide they emit. Over time, the regulators reduce the number of permits available, thereby tightening the cap. Village Green enables businesses to buy these rights away from power plants and tear them up, thus forcing reductions in carbon emissions.

Permits all have a unique serial number and are tracked through an online database run by these 10 state governments. The linking of our offsets to the legally regulated RGGI market gives our approach far more credibility and additionality than other strategies, and providing full transparency to our customers is completely unique in the carbon offsetting industry.

Check out http://www.villagegreenenergy.com/rggi for more.

Can Renewable Energy Certificates be counted as Carbon Offsets?

It is possible to estimate the amount of CO2 that is displaced by generating power with a renewable resource instead of a conventional resource. This estimation depends on the location of the power generators, and the time of day and year during which the power is generated. The actual amount of CO2 will vary depending on which type of power generation the renewable power is replacing, and how much. The U.S. Environmental Protection Agency has a cool calculator that shows you how clean or dirty your local grid is.

However, in order for renewable projects to reduce carbon emissions, the purchase of a REC must pass the "additionality test."

What does the term "additionality" mean?

The additionality test for RECs boils down to the following question: "Did my actions result in more generation of renewable power, or would the same amount be generated even if I had not taken action?"

For carbon offsets, the question is "Did my actions result in a reduction or prevention of CO2 in the atmosphere?"

Projects where the sale of RECs or carbon offsets caused new renewable energy capacity into the market or reduced carbon emissions are deemed "additional."

Do Renewable Energy Certificates pass the additionality test?

Not all RECs pass the additionality test. Non-additional RECs are simply extra revenue for energy companies who make their power with renewable technology. In this case, the renewable generator already exists, and your purchase of RECs essentially does nothing. Some would argue that these projects could not have existed without planning for the future revenue from RECs. While in some cases that may be true, it is extremely difficult to prove, and this alone makes a weak case for additionality.

Some RECs do pass the additionality test. Village Green only sources such RECs. There are two main ways for Renewable Energy Certificates to pass the additionality test.

  • One is to source RECs from supply constrained compliance markets, where voluntary purchases of RECs force compliance bound utilities to source additional renewable power capacity to meet their legal minimum requirement.
  • The other is to finance new construction of renewable power with future contracts for RECs.

Which is better - a REC or a Carbon Offset?

Many carbon offsets are created by projects that reduce overall carbon dioxide levels in the atmosphere - either by pulling CO2 out of the atmosphere (e.g. planting trees) or by reducing emissions (e.g. flaring methane). Customers who purchase carbon offsets continue to use coal, oil, natural gas, and nuclear, and then pay for another project to neutralize the carbon emissions. In Village Green's view, these types of projects are a "band-aid" that attempt to address the symptoms of a problem, rather than work towards a solution - namely, ending dependence on fossil fuels.

The problem is that we as a society use a lot of energy, and the way we create that energy produces a lot of carbon dioxide and other pollutants. The solution is to use less energy, and produce the energy we do use with renewable resources. The path to that solution involves energy efficiency projects at home and at work, and the increased development of renewable resources.

When a consumer purchases Renewable Energy Certificates, they are forcing more renewable energy into the market, thereby working towards a broad solution, rather than applying a band-aid. In addition, RECs have other benefits beyond simply avoiding carbon dioxide emissions.

Purchasing carbon allowances out of a cap-and-trade market such as the Regional Greenhouse Gas Initiative also addresses the problem directly. Forcing greenhouse gas emitters to reduce their emissions amounts to forcing them to become more efficient or to generate power with cleaner or renewable fuels. Renewable energy development and energy efficiency are both central parts of a sustainable energy future.

When should I buy a Renewable Energy Certificate and when should I buy a carbon offset?

Renewable Energy Certificates represent renewable electricity. Buy RECs to account for your electricity use.

Carbon offsets are better suited towards offsetting other types of energy use, like natural gas for heating or gasoline for transportation. These fuels emits many pollutants when burned, so offsetting their carbon emissions isn't a comprehensive solution. However, it is much easier to equate these emissions to tons of carbon dioxide than it is to equate electricity usage to tons of carbon dioxide. Addressing the carbon dioxide emissions on a ton to ton basis is more direct than estimating the carbon reduction that would be achieved by purchasing RECs.

How can RECs be "non-additional"

RECs are non-additional if your purchase of RECs does not force new renewable energy into the market. The most common examples are the purchase of RECs from facilities that were built without the revenue stream for RECs and that are not within a compliance market. In this case, your purchase of RECs is simply a payment to a generator for installing a system several years ago.

As we will see in the question "What is a compliance market for Renewable Energy Certificates," it is possible to buy additional RECs from generators that have been in operation for several years, but only these RECs are eligible for a compliance market.

Do Green-e certified RECs pass the additionality test?

Green-e is a voluntary certification process for renewable energy certificates, created by the Center for Resource Solutions, an environmental organization based in San Francisco. Green-e monitors to ensure that each REC is sold to only one customer, and that RECs do in fact come from renewable energy generators.

However, many RECs in the market are Green-e certified, but not additional. Green-e certification does not ensure that RECs are additional (although clearly many Green-e RECs are additional). Village Green Energy sells Green-e certified RECs, but we go beyond their requirements by sourcing RECs only from compliance markets, so that we can be confident of their additionality.

What is a compliance market for Renewable Energy Certificates?

A compliance market in this case is a state that has enacted a Renewable Portfolio Standard (RPS). An RPS mandates that the utilities operating within the state must source a minimum amount of their electricity from renewable sources by a certain date. For example, in California, where Village Green sources its RECs, the law requires utilities (PG&E, SoCal Edison, and SDG&E) to be 20% renewable by 2010.

The utilities in these states must purchase both renewable electricity AND the renewable energy property rights, which are often called Renewable Energy Certificates. If a utility buys the power from a generator but not these certificates, it cannot count the electricity towards its renewable goal.

When voluntary market participants like individuals or business owners purchase RECs from a compliance market, they are competing with the utilities for the rights to renewable power. Since there is a finite amount of renewable power that can be generated over a given period of time, this competition creates scarcity in the market which must be met with new renewable generation. Thus, voluntary purchases of renewable energy from compliance markets force new capacity into the market, and can therefore be considered additional.

Are RECs "additional" if they are purchased through future contracts as part of the financing of a new renewable power facility?

Using future contracts for RECs in order to finance a new renewable facility is another strong case for additionality. In this example, a company raises the money they need to build new renewables by selling the future RECs that will be generated from this new facility to the voluntary marketplace. The argument here is that these future contracts enable the facility to be built. As previously mentioned, the argument that revenue from REC sales enabled a given project to exist is difficult to make without the use of future contracts. After all, if no future contracts existed prior to the facility's operation, then the project happened without any help from RECs.

There remain some concerns with this approach as well. The main one is that it is often difficult to determine whether the sales of RECs actually made a project happen that wouldn't have otherwise. For example, one financial perspective is that extra revenue upfront from REC sales reduces the payback time on a new generator. But it is difficult to say that if RECs reduce the payback time on a new generator from 10 years to 8 years (as a hypothetical example) the unit is now "economic." Some investors would still build it with a 10 year payback period, while others still wouldn't build it at 8 years. These situations must often be reviewed on a case-by-case basis.

What are some other advantages of RECs over other types of Carbon Offsets?

In contrast to Carbon Offsets, Renewable Energy Certificates address more than just one part of the problem. In addition to preventing carbon dioxide from entering the atmosphere, RECs represent:

  • Avoided emissions of, mercury (birth defects), particulate matter (asthma and other respiratory illness) and nuclear waste associated with conventional energy generation
  • Increased overall grid efficiency via distributed generation from small plants like the Sunnyvale Power Generation Facility
  • Decreased reliance on foreign sources of fossil fuels for electricity generation, such as natural gas

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