In the next installment of our Edison Plugged In Series, which shines a spotlight on the people, projects, and perspectives of the Edison Energy team, we are featuring the insights of Jacqui Levere. As Edison Energy’s new Environmental Commodities Manager, Jacqui supports clients in the purchase or sale of environmental attributes that help them to achieve their sustainability goals. Click here to learn more about Jacqui’s background.
With a growing emphasis on decarbonization, the private sector is increasingly looking to mechanisms like Renewable Energy Certificates (RECs) and carbon credits to help lower Scope 1, 2 and 3 emissions.
With this significant rise in demand, Edison Energy is seeking to broaden its clean energy offerings through the recent creation of an Environmental Commodities function, led by Jacqui Levere, who will serve as Environmental Commodities Manager.
With increased pricing and volatility in the REC and carbon credit markets over the past six months, the creation of a more robust environmental commodities offering will help Edison’s clients navigate an increasingly challenging market.
“I think what we’re seeing generally is a really large increase in requests to focus on carbon neutrality, net zero or science-based targets by lots of corporates,” said Levere. “One of the critical pieces of hitting those emissions reductions is often via RECs, EACs (Energy Attribute Certificates) or carbon credits. As we’re seeing a growing need for that among our renewables, energy efficiency and our traditional energy supply clients, we want to make sure we’re able to meet them at that part of their sustainability journeys and help with either the sale or purchase of these environmental commodities.”
While Edison has been navigating REC and carbon credit purchases for clients for years–either ahead of signing VPPAs (virtual PPAs) or as part of their strategy to meet renewables goals—Levere sees a growing need for longer-term strategies as clients expand renewables targets and implement more energy efficiency projects.
“We’re looking to expand beyond one-off projects to get to goals, to look at how this can fit into a longer strategy, and how best to approach these markets as they become very expensive, with carbon credits almost certainly becoming more expensive in the future,” she said. “How do you best navigate trading off carbon credits or RECs for a more commercially investable solution? We’re looking to expand on that more as we stabilize into this new market.”
Getting to net-zero
States first created RECs to track compliance with Renewable Portfolio Standards, and in some cases to verify electricity supplier statements to consumers around fuel mix and environmental impacts of their electricity.
Voluntary markets and programs require RECs as proof of clean energy purchases, while the Federal Trade Commission has issued environmental marketing guidelines that require ownership of RECs to substantiate commercial renewable energy claims. These guidelines extend not only to those who claim to be using renewable energy, but also to those who claim to be selling renewable energy.
“RECs are more broadly accepted and less controversial than carbon credits for a lot of reasons,” Levere said. “They’re very easy to purchase. It’s easy to understand what the source is, where it’s coming from, what produced it. It’s one of the simplest steps you can take for your Scope 2 emissions. For RE100, RECs get you there. It’s easier to account for from a carbon perspective as well. We’re definitely seeing an increased demand for RECs among companies.”
The same holds true for carbon credits. While the voluntary carbon market (VCM) represents just 0.2 percent of global greenhouse gas emissions, a recent Trove analysis shows that demand is likely to increase significantly, driven by a growing number of corporate net-zero commitments.
“Carbon credits are a new demand,” Levere said. “There have been some early movers there, but in the past year demand has gone absolutely through the roof. Clear guidance on best practices for carbon credit purchases are still being developed, so a lot of companies with science-based targets are waiting for confirmation on what is acceptable for SBTi before moving forward with purchases. That will bring a whole other wave of corporations into the carbon credit market. Carbon credits are where you’re going to see that aggressively sharp incline. That being said, projects that produce carbon credits require significant diligence as they vary widely in type and quality, particularly as the market is still developing. We work with our clients to navigate the market to make credible claims and select high-impact projects.”
A market in flux
In 2016, member states of the International Civil Aviation Organization (ICAO) adopted a global market-based measure for aviation emissions. The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is a global offsetting framework in which airlines and other aircraft operators will offset any growth in CO2 emissions above 2020 levels.
This means that aviation’s net CO2 emissions will be stabilized, while other emissions reduction measures, such as technology, sustainable aviation fuel, operations and infrastructure options, are pursued.
“They have requirements for what they need to buy,” Levere said. “When they set those requirements, they expected those credits to cost between $1 and $2. They are now trading on one of the exchanges for $6 to $7. Those Corsia-eligible offsets are very valid with strict criteria, but a lot of the more sought-after nature-based projects, removal projects, and products with additional co-benefits cost more.”
REC prices have also spiked, with Green-e Certified RECs–primarily sourced from Texas–increasing from $1.75 to $4.50, with an August peak of $7/MWh since February.
“It’s just a very different strategy that you have to take when something costs 80 cents versus $6 when multiplying against 40,000 to 300,000 credits,” Levere said. “We’re definitely looking to help build longer strategies, come up with unique solutions for our clients, and make sure they can take advantage of the benefits of having extra RECs or to still meet their goals if their VPPA operational date is delayed. The reality is with these markets being so expensive, we’re going to have more interesting things we can do, and it just leads to more interesting products on the market. We’d like to facilitate some of those.”
For both the compliance and voluntary markets, RECs have long been a credible way for purchasers to demonstrate that they are using renewable energy. In the U.S.,10 regional electronic REC tracking systems facilitate the creation, management, and retirement of RECs, according to the National Renewable Energy Laboratory (NREL). These tracking systems ensure that each REC is counted only once by assigning a unique serial number to each megawatt-hour of renewable electricity generation.
“Even before getting into this market from a VPPA perspective, I think there was a notion that purchasing RECs or carbon credits was a greenwashing move, but I think there’s a lot of really good reasons to be making these purchases if they are made as part of a bridge strategy to avoid and reduce emissions,” Levere said. “RECs are really a great way to make an impact on the renewables market and to accelerate reaching your emissions targets, because driving up the price means that there’s more money on the table for renewables to be built.”
RECs and carbon credits are also a more accessible strategy for much of the private sector for whom VPPAs or onsite solar are not viable.
“It’s a revenue stream to help increase the cost of carbon around the world, which is already driving more development,” Levere said. “It’s often the best first step towards larger goals or to complement on-site solar or renewables. I hope that making this offering more accessible will offer a different group of corporations, universities and cities the ability to support renewables and carbon credits.”
Learn more about the trends shaping the global renewable energy market in our Q2 Renewables Market Report. Download a copy of the full report here and signup for Q3 insights.