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It’s Time for “REED”: A LEED-like Certification System for Corporate Renewable Deals

Dan Seif
March 15, 2021
Customers, Energy Brokers

Twenty-eight years ago, the “Leadership in Energy and Environmental Design” (“LEED”) platform for third-party certifying energy efficient and environmentally less burdensome buildings was birthed, originally guided by the Natural Resources Defense Council (NRDC), and later under the auspices of the U.S. Green Buildings Council (USGBC). Over the following decades, LEED has been widely credited with pulling the efficiency of buildings forward. LEED has been more of a platform for certification of leading-edge buildings (a few thousand per year), while having large enough pull-forward effects that ripple downward into the broader commercial building stock as well as manufacturers of building materials and in-building items.

Meanwhile, the corporate renewable deal space in the U.S. has effectively reached it’s 10-year anniversary, with only a smattering of deals prior to 2011.  Yet this crucial market to corporate power cost savings and sustainability, renewable energy project financing, and global carbon reduction, is effectively absent of any real standards, other than the underlying RECs (via Green-e certification), which unfortunately are too narrowly conceived as to cover the sufficiency of scope of what is actually going on in corporate renewable energy deals.

It’s time to have the ability to separate what renewable energy procurement and/or financing actions are material to enabling renewable energy, via a “Renewable Energy Enablement Demonstration” (“REED”) voluntary certification, and what’s effectively a “green-washed” power offering for which the connection to new renewable energy steel in the ground is vague at best.  Furthermore, a REED tiering system, such as utilized in LEED (“Certified”, “Silver”, “Gold”, and “Platinum”), would be highly valuable in covering the various types of renewable energy deals, and the extent to which the corporate action impacts their deal, as well as the impacts on the broader growth of renewable energy and decarbonization.

DeFacto, Fuzzy Certification

Currently, the reference “standard” for a higher quality corporate renewable energy deal in the U.S. is inclusion in the Renewable Energy Buyer’s Alliance (REBA) deal tracker.

REBA includes wholesale power deals that are primarily power sales, via PPAs, Green Tariffs, and full project financings. They do a good job tracking higher quality deals that fit into these easily recognizable deal types, so stakeholders can have some faith in the belief that the market is expanding, who’s involved, and if they are making progress toward REBA and the external parties’ goals. But it’s not set up, as REBA would most likely agree, with sufficient transparency and stakeholder input to be considered a certification platform.  Furthermore, it might be too narrowly inclusionary, as good deals that significantly contribute to new steel in the ground might not pass their limited, approved deal types.

There are other corporate renewable energy deal trackers out there (e.g., BNEF is often referenced), but again there’s no formalized standardization of what a true enabler of new renewable power is, and generally those other trackers are less discriminatory than REBA.

Much Innovation and Variation to Consider

Should a brown power + RECs deal be considered “in” if the RECs are priced at over 5% of the power cost?  If not, what about 10%?  15%?  Should there be a minimum term for REC purchases?

Should tax equity-only financings be included? If not, what if tax equity also captured the RECs?

What about secondary transactions where the power sale between the project and the initial buyer (like a power marketer such as commodity trading bank) is closely mirrored in the secondary transaction? When power marketers have confidence that there will be a strong secondary market for their renewable power purchases, doesn’t that build confidence in primary power purchases by these entities and grow the renewable PPA market?

Are Google’s deals, which match real-time renewable power generation to real-time load, truly a higher plain of renewable transaction?

Does a WattTime power market carbon offset score of the new renewable power generation profile have relevance to the quality of the score?

Is a LevelTen-structured aggregation of smaller corporate power buyers in a renewable PPA a step above standard green pricing products of brown power plus RECs?  Likely so, and wouldn’t it be great to give those aggregation participants some kind of 3rd party designation that indicates as much?

I’ve heard these questions from others and pondered them myself, and frankly, they are all good questions for which a certification system and its evaluative stakeholder groups could address.

Too Much Bureaucracy?

When a REED-like concept is discussed in the solar development community, it’s generally met with these three dismissing sentiments, to which I’ve provided my responses.

  • It’s a healthy transaction space, why mess with it?
    • While it is healthy for renewable energy developers and some, more well-heeled corporations, it is not sufficiently healthy for the planet (pace is too slow for major global carbon impact), nor is it healthy for lower power load profiles that are less energy-knowledgeable and have lower credit scores.
  • Does certification standardization freeze out innovation?
    • While it may seem like there are many innovative deals out there, when you really drill down, you find that there is more commonality than not on the most important precepts. Therefore, in cost-benefit ratio of being more agile versus ensuring more renewable energy gets on the grid more quickly, the benefit tilts in favor standardizing the process.

Furthermore, with the level of experience in the industry, non-profits, and other institutions that surround the space, a well-diversified certification committee could ensure that there is an even balance between truly innovative deals and a more agile standardized process.

  • Renewable energy developers don’t want it.
    • I believe developers would embrace a voluntary certification system, if it meant more companies could believe in the quality of their decisions, and not be regularly scanning the public domain to see if their deal type is “out of vogue” when new innovations come along.
    • Developers would also support a REED certification system if it let them select how much certification “burden” they pursue. They could have available an “easy button” for certain, more prevalent deal types.
    • Furthermore, when the Center for Resource Solutions (CRS) first launched Green-E certification, there was a “Green-e certifiable” designation, which indicated that if a company’s attestation about what was occurring with a renewable power project were true, then the RECs could be “Green-e certified.” The renewable project developer and or operational owners would make the decision as to how far up the certification chain they wanted to go.  In some cases, their purposes were well served with the simpler “certifiable” designation, and in others there was merit to getting the full certification.  A similar flexibility in extent of certification would make developers more welcoming to a REED system.
Who Should Create it and Run It?

While CRS and REBA (a 501(c)(6)) industry organization) may be the obvious choices, I think the REBA Institute (a 501(c)(3)-affiliate of REBA) would make for an intriguing partner with the USGBC. The combination of deep corporate renewable energy expertise and the decades of successful LEED certification management and instruction would be compelling. Albeit perhaps CRS is already edging toward a REED platform under their Clean Energy Accounting Project (CEAP), though only time may tell.

In Summary

The corporate renewable energy community should follow the successful model of LEED, and develop “REED”, a certification system for corporate renewable energy deals. The lack of quality standards leads to confusion by power buyers as to the merits of what their transaction efforts are, and there are a fair number of deals that contribute nearly nothing to new renewable power on the grid. This existing very knowledgeable and involved stakeholder community is more than capable to support a REED system for this important and growing renewable energy transactional space.

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