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Understanding the Role of RECs in Energy Management

Understanding the Role of RECs in Energy Management

Be part of the green revolution and meet your renewable energy targets! Renewable energy certificates (RECs) are issued to businesses and households just like yours to promote renewable sources of energy.

Fully understanding the​​ role of renewable energy credits in your business can contribute to effective carbon footprint reduction and ensure a positive environmental impact.

Read on to explore the role of renewable energy certificates so you can improve your energy management skills and unlock sustainable business performance!

What are Renewable energy certificates?

Renewable energy certificates (RECs) are tradable instruments that act as a tracking mechanism for solar, wind, and other green energies as they flow into the power grid

A market for renewable energy certificates is created which runs heavily on supply and demand.

RECs are split into a range of environmental certificate schemes to reduce emissions across each scale renewable energy scheme. 

This includes Small Scale Technology Certificates (STCs) and Large Scale Generation Certificates (LGCs), initiated under the Renewable Energy Target (RET).

Small-scale renewable energy

Small-scale Technology Certificates (STCs) are designed to promote the adoption of solar energy systems among businesses and households. Over 49 million STCs have been validated.

There are financial incentives available when participating in the STC scheme, with reduced upfront costs and substantial environmental benefits.

Large-scale renewable energy

Large-scale generation certificates (LGCs) allow various organisations to develop clear energy from solar panels or wind turbines and sell them. Over 35.9 million LGCs have been validated.

Large-scale organisations buy LGCs to reduce their own carbon footprint with their renewable electricity generated. They also meet their large-scale renewable energy target. 

Image: Gridcog

The number of LGCs is vastly increasing year-on-year as demand for renewable energy certificates increases.

Image: Australian Government Clean Energy Regulator

Overall, the most recent highlights from the Clean Energy Regulator show that 5.2 gigawatts of new renewable energy have been created. 

Over 56.1 million tonnes of CO2 equivalent have been abated as a result and 101% of contracted carbon abatement has been delivered.

How are RECs used in energy management?

Renewable Energy Certificates are used in energy management to track and confirm the production and use of renewable energy. RECs are created and traded transparently to ensure the credibility of the program.

Here are the top 4 functions of RECs in energy management:

1. Encourages the use of renewable energy

Australians know that the key to unlocking a greener future is to switch to using renewable energy as much as possible. However, encouragement and a financial incentive are still required to maximise use.

A REC is issued for every MWh of electricity made from renewable sources. This may include solar, wind, or hydro sources.

Creating a financial incentive for every MWh of electricity produced provides you with a personal reason to seek RECs.

2. Certifying energy use

You can purchase RECs to certify that you are using renewable energy and that you are part of the sustainable journey. 

Even if you are not actually using renewables, the purchase of RECs indicates your support for the program even if you are using traditional fossil fuels. 

This promotes green marketing and heightens corporate social responsibility.

3. Helps to maintain standards

The state or territory you reside in may have Renewable Portfolio Standards. This ensures that a percentage of energy production is sourced from renewables.

Purchasing RECs can ensure that suppliers are adhering to the Renewable Portfolio Standards without having to directly change their power sources.

4. Adding to energy diversity

Supporting RECs leads to greater development of renewable energy initiatives and renewable power stations. This adds to the mix of energy diversity and demonstrates why energy conservation is important.

Energy security is then enhanced as the reliability of energy sourced from fossil fuels reduces. The environmental benefits of this are substantial and can gradually increase over time.

How can businesses use RECs effectively?

Businesses should use RECs effectively to increase their use of renewable energy sources and demonstrate their sustainability commitments.

Here are the top 5 strategies your business can adopt to use RECs effectively:

1. Meeting targets

Your business may set renewable energy targets in line with its corporate social responsibility initiatives. However, investing in renewable energy projects directly can be costly for a business.

Utilising RECs in your business is a simple way to meet renewable energy targets without too much investment. RECs are accessible and flexible options.

Issue your own RECs according to each megawatt hour of renewable energy made and used from renewable sources. You can sell excess RECs and generate money for the business.

Or, purchase RECs from other companies so you can enjoy the benefits of their RECs and meet your renewable energy targets.

2. Offsetting usage

Purchasing RECs from others in line with the amount of electricity your business consumes can offset your electricity usage. This will help to improve the carbon footprint of your business.

Such purchases of RECs enable your business to claim that you are accessing renewable energy.

Eventually, your business could follow Epson Australia as they complete their transition to 100% renewable energy use.

3. Improved branding

Whether you create or purchase RECs, your branding will improve through green marketing. 

Consumers, organisations and fellow businesses will be impressed with your commitment to using renewable energy sources, attracting the eco-conscious. 

Your business may positively differentiate itself from competitors as a result.

4. Enhancing CSR

Corporate social responsibility (CSR) shows a commitment to sustainable practices and the environment in the business.

RECs can be incorporated into your energy strategy, heightening your CSR efforts and increasing your business reputation with others.

5. Supporting the local community

When purchasing RECs, you can choose to buy your RECs from local businesses in your area. 

This will help to support the area, increase energy initiatives in the region, and strengthen community ties.

How can my business generate RECs?

Your business can generate RECs with the help of a third-party verifier, such as Ecosaver.

Here are the 5 steps to take when creating renewable energy certificates:

1. Project registration

Register your intention to generate RECs with the Renewable Energy Standards program. This may vary according to the state or territory you reside in, however.

Follow the guidance to assess if you qualify for the scheme. The electricity you use must be produced from renewable energy sources. 

Typical renewable sources of energy include solar, wind, hydro, and geothermal.

2. Monitoring equipment

The necessary systems must be installed to measure the production of renewable energy.

This data will be used to issue your RECs so it must be accurate and reliable.

3. Certification

A third-party verifier, such as Ecosaver, must assess your renewable energy project and certify that the standards are being met. 

The amount of renewable energy generated will be confirmed, with one MWh required for each REC.

4. Tracking RECs

Once RECs have been generated, they must be recorded effectively in a database and then tracked accordingly. 

The tracking process prevents accidental errors such as double-counting RECs as well as intentional misuse of RECs.

The RECs and their database must show an accurate representation of renewable energy use.

5. Trading RECs

After RECs have been issued, you can trade or sell them. This takes place on an open market, or through direct agreements between organisations.

You can sell RECs to generate income or purchase RECs to demonstrate that you have used the associated renewable energy.

What’s next for energy management in Australia?

The Australian Government is planning to introduce a scheme for REGOs in 2024. However, what this means for you and your business could change, depending on your own circumstances.

Get in touch with Ecosaver today and talk to an expert. You will receive unique guidance about renewable and energy-efficient products and services so you can do more with less!

Take our FREE Audit & Quote now!

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