Prioritizing high-impact renewable energy certificates

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Allowing electricity customers to shrink their environmental footprint by participating in the development and growth of renewable energy was a laudable goal when Bullfrog Power started in 2005.

The Canadian company offered electricity from renewable sources such as wind, solar and low-impact hydro facilities. Rather than developing parallel distribution systems to supply green energy directly to corporate and residential buyers, Bullfrog issued renewable energy certificates (RECs) to ensure the electricity being added to the grid on their behalf was from such sources.

Today, RECs are a globally accepted instrument for tracking how much renewable energy is produced and recording the environmental benefits for users. But the concept is at a crossroads given changes in the power-generation landscape, variations in definitions of green energy and the imperative for corporate power users to reduce and disclose their impact on the environment.

“This is not just a nice-to-have anymore,” says Andrew Yang, director of market strategy and innovation at Bullfrog Power in Toronto. The private company is Canada’s leading green energy provider, with a customer base of more than 1,500 businesses and 10,000 homes.

Mr. Yang notes that when renewable energy is put into the grid, it mixes with the power generated from fossil fuels and other sources. “Tracking the electricity from a wind or solar farm would be like tracking a glass of water poured into a river,” he explains.

Through the REC mechanism, every time one megawatt-hour of energy is injected into the system from a clean, renewable source, one REC is produced, attributing to the buyer the accompanying environmental and social benefits. Bullfrog customers buy RECs to match the electricity they at the same time buy from their utility, with the premium going to support renewable-energy generators and to fund community-based projects like the installation of solar panels on schools and in Indigenous communities.

However, the function and impact of RECs are changing, Mr. Yang notes, and they’re not all created equal, especially given variations in the renewable energy source, the age of the generating facility and its location. Bullfrog sources the highest quality RECs that have the most positive environmental impact, publicly stated and audited by Deloitte.

There’s a need for more transparency in the reporting of deals and the definition of renewables, he says. The Globe and Mail reported last autumn that Microsoft would buy RECs from Ontario Power Generation’s hydroelectric dams and nuclear reactors. It noted that was contentious because nuclear energy, while considered by Microsoft to be low carbon, creates radioactive waste. And REC sales to customers outside of Ontario can end up going to places where electricity is generated by burning coal.

This disparity in carbon intensity between different regions puts a spotlight on the fact that electricity grids are aging “and are not as interconnected as previously understood,” Mr. Yang points out. When RECs were first introduced, they were useful “because anywhere you were building renewables, you were meaningfully reducing the carbon footprint,” he recalls. “But we’re in a situation now where we can be much more targeted and focused on where we support continued renewable development.”

There’s a debate in the industry around “additionality,” Mr. Yang says, whether a dollar spent on a REC “really goes to change the makeup of the grid.” The key is the pedigree of a renewable energy facility and where it and the customer are located. He says it’s tempting for companies to buy RECs at low prices from a jurisdiction that has a friendly regulatory environment or incentives.

There’s a need for quality vendors with green-energy solutions that can withstand scrutiny and reliably bring on renewable capacity, Mr. Yang says. “Is a dollar spent on a REC actually going to take a proportional amount of carbon off the grid, or is it just displacing another unit of clean electricity somewhere?”

It especially doesn’t make sense to build up renewables in jurisdictions that are already highly renewably powered and export the power to paces with “dirtier” grids, he says. Bullfrog focuses on “demonstrably additional” developments in places with high carbon intensity. For example, if a company has operations in British Columbia and Alberta, it would be better if its RECs were mostly sourced from Alberta, which lags behind other provinces on the adoption of renewables. (Bullfrog has signed two large deals in Alberta specifically in support of this approach.)

Bullfrog wants to ensure that RECs are used “to support renewable development in renewable generation-scarce areas,” while jurisdictions look at ways to improve the wider electric transmission system, Mr. Yang adds. “Let’s do the best that we can to tie consumption to renewable development in a very clear way.”

Advertising feature produced by Randall Anthony Communications with Canada’s Clean50. The Globe’s editorial department was not involved.