Renewable Energy Certificates (RECs) 101: The Business Basics

Renewable Energy Certificates (RECs)—also called Renewable Energy Credits—are powerful assets to corporate sustainability strategies. As businesses strive to meet carbon reduction targets and align with global climate commitments, RECs provide a flexible, verifiable way to demonstrate a business’s use of renewable energy and its dedication to carbon reduction efforts. But what exactly are RECs, and how do they contribute to emissions reductions and sustainability goals?

At their core, RECs are tradable instruments that certify that one megawatt-hour (MWh) of electricity was generated from a renewable source and delivered to the power grid. Since renewable and non-renewable electricity mix indistinguishably within the grid, RECs serve as the official mechanism for tracking and claiming renewable energy usage. Companies that purchase RECs can credibly claim to be using green energy, regardless of their actual electricity source.

The Connection Between RECs and Scope 2 Emissions

For businesses reporting greenhouse gas (GHG) emissions, understanding the three scopes of emissions is crucial.

• Scope 1 Emissions
  Scope 1 emissions come from direct sources owned or controlled by the company, such as company vehicles or on-site fuel combustion.
  
  
• Scope 2 Emissions
  Scope 2 emissions, on the other hand, stem from the electricity, steam, heating, and cooling that businesses purchase.
  
  
• Scope 3 Emissions
  Scope 3 includes indirect emissions from supply chains, transportation, and product lifecycle impacts.

RECs play a direct role in mitigating Scope 2 emissions. When a company purchases RECs equivalent to its electricity consumption, it is effectively reducing its Scope 2 emissions by ensuring that the amount of energy it consumes is matched by an equal amount of renewable generation. This allows businesses to report lower emissions, demonstrating progress toward sustainability commitments such as net-zero strategies and Science-Based Targets initiative (SBTi) goals.

Why Businesses Value RECs

The demand for RECs has surged as organizations increasingly recognize their value in sustainability and corporate social responsibility. In fact, the RECs market is expected to grow to approximately $26.5 billion by 2030—more than double what it was at the start of the decade. Why? Because for businesses of every size, RECs provide several strategic advantages that become more critical with every passing year.

• Environmental Impact
  By supporting the renewable energy market, RECs drive investment in cleaner energy infrastructure. This contributes to the reduction of greenhouse gas emissions, improving air quality and reducing dependence on fossil fuels, which contribute to a host of environmental and public health issues.
  
  
• Regulatory and Compliance Benefits
  In many regions, companies are required to meet Renewable Portfolio Standards (RPS) or other environmental mandates. RECs serve as an effective tool to comply with these regulations without requiring direct investment in renewable energy generation.
  
  
• Market Differentiation and Brand Reputation
  Sustainability has become a significant factor in consumer and investor decision-making. Businesses that integrate RECs into their energy strategy can enhance their brand image, attract environmentally conscious customers, improve relations with stakeholders, and realize several other benefits that have been observed in businesses that align their operations with improving their environmental performance.
  
  
• Financial and Operational Flexibility
  Developing on-site renewable energy facilities is a costly and time-intensive process. RECs offer a cost-effective alternative for businesses looking to achieve sustainability goals without the need for direct capital investment in renewable infrastructure. What’s more, is they can easily scale up or down to adapt to (and balance) over-arching and regional sustainability needs with financial ones as standards and economic variables shift. In many cases, they even offer tax credits and incentives.
  
  

How Businesses Can Generate RECs

While many companies choose to purchase RECs, some opt to generate them by producing renewable energy themselves. Various technologies enable businesses to contribute to the green energy market while benefiting from additional revenue streams associated with REC sales. The most common methods include solar power, wind energy, hydropower, and biomass. However, some of the most promising and innovative approaches rely on recovering energy from waste.

“Renewable energy recovery” is a term that encompasses several advanced methods of processing waste materials into electricity, steam and / or heat, all of which address critical waste management and carbon reduction challenges while providing power sources that continually replenish. Businesses operating in industries that generate large amounts of waste especially benefit from renewable energy recovery for obvious reasons, but also because they can leverage the various recovery technologies to avoid the risks of landfill disposal, convert otherwise unsalvageable materials into energy, and contribute to REC generation—all of which can support greater sustainability goals without having to invest in in-house infrastructure or resources that they weren’t already being produced.

Common Types of Renewable Energy Recovery

As mentioned, “Renewable Energy Recovery” isn’t a single process. It’s an umbrella term for several different technologies that convert waste, industrial byproducts, and / or organic materials into usable energy. Some of the most widely used methods include:

Waste-to-Energy

Though their names differ from region to region, waste-to-energy (WTE), energy-from-waste (EFW), incineration and the like all refer to the same technology. Waste-to-energy is a well-established process where waste is burned at high temperatures to produce steam, which drives turbines to generate electricity. While many businesses and communities are aware of WTE’s ability to drastically reduce landfill dependencies, far fewer are aware of its ability to reduce greenhouse gas emissions and stimulate recycling.

In the United States, the most modern sites for waste-to-energy processing are known as thermomechanical treatment facilities (TTFs). In addition to having WTE capabilities, these TTFs are also equipped with a number of advanced systems that filter and control emissions, extract metals for recycling, reuse water and perform several other functions that contribute to minimizing environmental impacts while maximizing value creation.

Gasification

Unlike waste-to-energy, gasification involves heating waste materials in a low-oxygen environment to produce syngas, a mixture of carbon monoxide and hydrogen. This syngas can be burned for electricity or processed into biofuels, offering a cleaner alternative to traditional fossil fuels.

Pyrolysis

Similar to gasification, pyrolysis thermally decomposes organic materials in the absence of oxygen to produce bio-oil, syngas, and biochar. The resulting biofuels can be refined for transportation or industrial use, making pyrolysis a versatile solution for energy recovery.

Anaerobic Digestion

A biological process where microorganisms break down organic waste in the absence of oxygen, producing biogas (primarily methane and carbon dioxide). This biogas can be captured and used for electricity generation, heating, or as a renewable vehicle fuel.

Benefits of Waste-to-Energy for Businesses

WTE presents a compelling opportunity for businesses seeking to integrate sustainability into their operations while generating RECs. The key advantages include:

• Energy Production
  Unlike solar and wind, which are weather-dependent, WTE provides a consistent and reliable energy output. This ensures businesses (and homes) remain powered and RECs remain in constant generation.
  
  
• Waste Diversion
  Due to its high temperatures and advanced monitoring systems, WTE can safely handle a wide scope of waste. As a result, WTE serves as a critical piece of infrastructure for many businesses and communities who will not (or cannot) trust landfill disposal to effectively divert harmful materials from communities and the environment.
  
  
• Emission Reduction
  By diverting waste from landfills, WTE significantly cuts down greenhouse gas emissions, such as methane, which is 84 times more potent than carbon dioxide over a twenty-year period—a timeframe many experts consider pivotal in combatting climate change’s worst impacts. It’s because of this, compounded with the fact that inversely, many other renewable energy sources contribute to waste generation (due to having short-lived and / or difficult-to-recycle parts) that the RECs generated from WTE target Scope 3 emissions as well and are considered 10 times more environmentally beneficial than those derived from sources like wind or solar when total greenhouse gas offsets and contributions are taken into account.
  
  
• Risk Mitigation
  WTE can help companies meet ever-climbing safety and sustainability standards through its modern, highly regulated processes. This keeps businesses compliant and resilient to waste-related risks, helping them avoid fines, penalties, and lawsuits and secure their reputation as a responsible business.
  
  
• Revenue Generation
  By investing in WTE, businesses can lower their disposal costs while monetizing waste through energy production and REC sales. They can also capitalize on government incentives and better align themselves with the market’s demand for more transparent, sustainable operations.
  
  

Capitalizing on RECs via Waste-to-Energy

Renewable Energy Certificates (RECs) are an invaluable tool for businesses striving to meet their sustainability goals. Whether through direct purchasing or on-site generation, RECs enable companies to substantiate their renewable energy use, reduce Scope 2 emissions, and support the transition to a cleaner energy future.

Among the various methods of REC generation, waste-to-energy stands out as an innovative and impactful solution, turning a wide scope of waste challenges into sustainability opportunities. But successfully adopting waste-to-energy solutions and / or leveraging the RECs from its technology requires careful planning.

Companies must evaluate factors such as initial capital investment, regulatory compliance, public perception, and technological feasibility to determine what makes the most sense for their business’s specific needs. However, engaging with experienced partners in waste management and renewable energy solutions can help them navigate these complexities and optimize WTE implementation for maximum impact in terms of sustainability and strategic growth. By doing so, these companies can enhance their environmental commitments and strengthen the core of their business, all while positioning themselves as leaders in the global movement toward decarbonization.