Why Companies Are Choosing to Build Their Own Solar Arrays Instead of Purchasing Renewable Energy Credits (RECs)
Do you have renewable energy goals or mandates your company has committed to reach?
How should you go about meeting them? You have two primary choices:
- Install or build a renewable energy producer like solar power or wind
- Purchase renewable energy credits (RECs)
As you’re about to see, option A is the one more and more companies are choosing. Companies are pursuing solar energy with increasing frequency and scale for three primary reasons:
1. Your Shareholders, Board, or Company Leaders Push for It
As of 2018, fully 53 of the Fortune 500 companies had set goals to achieve 100% renewable energy. With the completion of a 258MW wind farm in the Irish Sea, LEGO reached its goal of 100% renewable energy three years early.
Adobe set a renewable energy goal in 2017 committing them to 100% renewable energy by 2035. Likewise, Novo Nordisk is building a huge solar power farm in North Carolina which will complete its journey to 100% renewable energy for all its production facilities.
Many other companies are ramping up their investments in solar, such as AT&T, Nestle, GM, Apple, Google, Walmart, and Toyota.
These and many other big corporations and manufacturers are using newly built solar arrays, not RECs, to hit their renewable energy goals. One reason for this is because producing your own energy has a greater environmental impact than buying credits. It has a direct ‘cancel’ effect on your company’s energy use: We use this much and produce that much. RECs are much less directly attributable to your company’s actual energy footprint.
2. Costs of Solar Energy Are at All-Time Lows
Forbes reported in 2018 that the cost of solar energy is now on par with that of fossil fuels, and “should be a consistently cheaper source of electricity generation than traditional fossil fuels within just a few years.”
As the prices of solar decline, the prices for fossil fuels continue to climb due to increasing scarcity and higher costs of acquisition and production. They’re trending in opposite directions, and companies are taking notice that to extract maximum ROI from solar, the sooner they invest in it, the better.
The money companies stand to save each year after going solar isn’t a flat line. The savings increase each year because the costs of doing nothing would keep them tethered to ever-increasing power rates from the utilities.
In numerical terms, suppose one of your company’s sites uses 10,000kWh in a month at a cost of $0.12 per kWh. In ten years, assuming you’re using the same 10,000, it might cost you $0.20 per kWh.
So if you can produce a large portion of your energy from solar power, say 8000kWh, your savings grow each year the utility raises their prices because you won’t have to pay for that portion of your bill.
In other words, solar power is inflation-proof energy production.
So as the costs to install solar continue to decrease, the savings you will reap continue to rise. The same cannot be said for renewable energy credits, as you’ll see in a bit.
3. Your Customers Demand It
Repeated studies continue to find the same conclusion: Customers increasingly prefer to do business with companies that are using renewable energy like solar. One study found hat 55% of US consumers want companies to increase their use of renewable energy, and a majority said they are more likely to buy from companies that use it.
This explains why so many of the biggest companies are setting goals to produce 100% of their energy from renewables.
Are You Prepared to Set and Meet Renewable Energy Goals?
Setting goals is fun and exciting. Meeting them can be hard, grueling, and even discouraging. This is no less true for your company’s renewable energy goals.
Coastal Solar has created a corporate and manufacturing sustainability program for the specific purpose of helping companies get on track to meet their energy goals.
The complexity of meeting energy goals through solar power often stems from inaction and uncertainty about how to proceed. What is the most cost-effective path toward solar energy? Are all of our locations and sites appropriate for solar? Who should we talk to? Do any solar installation companies have the ability to implement projects that fit our scale and our needs?
It’s easier to talk about marketing, profits, shareholders, customers, and hiring than to tackle new and unfamiliar topics like this. So, it gets delayed.
This is why many companies that have set renewable energy goals and mandates are far behind in meeting them. They need help.
The Inferiority of Renewable Energy Credits
Cummins, an equipment manufacturer and Fortune 500 company, initially set their renewable energy goals based on two principles: The energy investment had to minimize the total cost to the company, and it had to enable access to or drive development of new renewable energy projects.
Later, they added two requirements in any project they might undertake to meet their goals: Any project they invested in had to have an “identifiable environmental and social impact” and be local to their plant in Indiana.
As the article above puts it, “A purchase of unbundled RECs would not meet these standards.”
Why is that?
RECs typically go toward renewable energy projects that are already slated to be built anyway. Thus, even if the newly completed renewable energy project produces more energy than the company uses, it would be a dubious claim to say that the company has completely offset their energy usage.
But if they build a fully realized solar farm, for example, and it is entirely their own investment, then their energy impact is a 1:1 ratio. The energy they produce offsets that amount of the energy they use.
There are other problems surrounding renewable energy credits as well.
For one, the costs are often unreasonably high. You are typically paying a utility company to build renewable energy capacity. But how the prices for each REC get calculated is very complicated, and not linked to market prices.
Thus, as the costs of solar energy decline, the costs of renewable energy credits don’t tend to keep pace.
Another problem with RECs is the cumbersome process and vagueness surrounding them. What are we really buying? There is a whole administrative process for verifying that your credits are real (fraud has been a problem). It is abstract, process-heavy, and marred by red tape and regulation. And in the end, the renewable energy project you are ‘buying’ might be in a completely different part of the country.
Contrast that with a brand new solar array on your roof. Or a larger solar farm a few miles down the road. You can show it to your customers, take pictures of it, talk about the size of what you built and how much energy it produces, and so on. It’s tangible.