REC demand increasing in the US: Interview with Edward Holt

Edward Holt is a green electricity expert with 40 years of experience in energy planning. As president of Ed Holt & Associates, he advises government agencies, utility companies and not-for-profit organizations on renewable energy policies and markets, and green energy programs. We interviewed Holt to hear more about the challenges in the industry, and the opportunities for REC and the voluntary market to help achieve environmental goals, especially in the US.

What is the current status of the US voluntary market?

The voluntary market is doing pretty well. According to a recent report from the National Renewable Energy Laboratory, the voluntary market for renewable electricity is now responsible for 1.7% of total retail electricity sales in the US. The voluntary market started in the 1990s with residential products, but over the last ten years, commercial and industrial demand has grown significantly and now accounts for about 80% of voluntary demand. Over time, green electricity will replace electricity from fossil fuels, the largest polluter and contributor to climate change.

What is your greatest concern at the moment?

The politicization of renewable energy. It wasn’t very long ago that we were struggling to grow the market, and we were grateful for any recognition of the potential contribution of renewable energy. Now renewable energy is becoming mainstream–it’s cost-competitive in many applications, it’s recognized as a solution to climate change, and the issue of integrating renewable energy with the grid is being addressed. But now that we’re having some success, it’s bringing out the opposition. At the state level, conservative think tanks funded by the fossil industry are trying to roll back renewable portfolio standards, and some utilities are actively discouraging net-metering. At the national level, the fossil industry continues to enjoy permanent subsidies and tax advantages, while complaining about the incentives offered to renewables. And all this has found its way into partisan politics. To be surprised is perhaps naïve, but it’s nevertheless disappointing.

How can a voluntary market help achieve environmental goals? 

Large corporations are the drivers because they have the biggest impact, and they’re doing innovative and interesting renewable energy transactions. For example, Google has entered into long-term Power Purchase Agreements directly with renewable energy project developers. This has stimulated new capacity and states are beginning to accommodate this. Three US states—North Carolina, Virginia and Nevada—have established the option for utility tariffs for individual companies that are willing to make long-term commitments to specific renewable energy projects. These initiatives are gaining recognition and acceptance.

There are different approaches that customers can take to help drive the voluntary market, including:

  • Purchasing a differentiated renewable energy product from a utility or competitive electricity provider.
  • Building and owning (or hosting and leasing) an on-site renewable energy project.
  • Joining a community solar project where customers buy shares in the project.
  • Entering into a long-term purchase agreement with a new project prior to its commencing operation, as described above.
  • Buying REC separate from electricity.

It is vital that renewable energy markets have a range of customer choice options because one size does not fit all participants.

Over the past decades, what have been the biggest milestones for renewable energy certificates?

The big ones are:

  • The creation and acceptance of renewable energy certificates, which has made it easier for companies to participate in the renewable energy market.
  • The establishment of REC registries where renewable energy generators register with a tracking system and provide information about the generator. The registry issues certificates based on each generator’s MWh output. This creates a single, standardized instrument, which makes it easy to track ownership and verify claims, and also prevents double accounting.
  • Organizations increasingly need to account for their greenhouse gas emissions. Larger multinational companies especially want to be transparent about their progress towards reaching their sustainability goals. New guidance from the Greenhouse Gas Protocol clarifies how to report their energy choices.
  • For more than 10 years now, the US Environmental Protection Agency has run the Green Power Partnership, a voluntary program that has been a significant stimulus to companies to buy renewable energy in exchange for public recognition by EPA.

All of these drivers are building momentum and stimulating the market.

What is the biggest challenge and opportunity for Guarantees of Origin or REC?

REC are widely recognized and accepted, but there are still some disagreements about claims. Some utilities want to count the renewable energy towards mandatory targets without owning the REC, and some companies want to build on-site generation and claim to be powered by renewable energy even as they sell the REC to reduce the project cost. Constant vigilance is the price of environmental integrity.

A second issue is that some criticize REC for not directly linking the buyer with a new project and not causing global emission reductions. It’s great if a purchase can cause a new project to be built, but those opportunities are available in limited situations. We also need to encourage aggregate demand, supporting increased generation over the longer term, as well as direct project support.

The biggest opportunities are greenhouse gas accounting guidance that reflect the market choices a company makes, and (in the US) the EPA Clean Power Plan that calls for an overall 30% reduction in carbon emissions from the power sector by 2030 (compared to 2005). The proposed rules for existing power plants will allow states to meet emission reduction targets using renewables and energy efficiency. The final rules won’t be adopted until next June, so the details will undoubtedly change..

What advice do you have for companies that want to make a difference?

My advice is based on the size of the company and their experience in the renewable energy market. If companies are new to it, then my advice is to get their leg in the water. REC options are very accessible, and it’s not too difficult to install a small on-site generator. By participating in this market, they will learn that it is easy to get started.

For companies that are already in the market for renewable energy, I suggest that they do two things: First, they should consider longer-term commitments to new renewable energy projects. This can directly stimulate new capacity and can provide price stability. Second, they should focus on tracking their carbon footprint, setting goals, and reducing their emissions from their use of electricity.

For bigger and more experienced companies, I call on them to become more politically active in the clean energy space. Convince their political leaders that renewable energy is mainstream—it’s here, it’s now, it’s competitive, and it should not be a partisan issue. They should advocate for policies that develop and sustain the renewable energy market.

Edward Holt was speaker at REM2014 in Sacramento.