When it comes to purchasing renewable energy, there are two popular options available for businesses: power purchase agreement (PPA) and renewable energy certificate (REC). While both are viable options for promoting clean energy, they operate in different ways. In this article, we’ll break down the differences between PPA and REC to help you determine which one is the best fit for your business.
Power Purchase Agreement (PPA)
A PPA is a contract between a business and a renewable energy provider, usually a wind farm or solar park. Through a PPA, the business agrees to buy a certain amount of energy from the provider for a fixed price over a set period of time, which is typically 10-20 years. The provider then feeds the renewable energy into the grid and the business is credited with that amount of energy. The energy generated by the provider is tracked and measured using a meter and credited to the business’ electricity account.
The main benefit of a PPA is the guaranteed fixed price for energy, which means that the business is not subject to fluctuations in energy prices over the course of the contract. This makes it easier for businesses to budget for their energy costs over the long term. Additionally, a PPA helps a business achieve their sustainability goals by directly supporting the growth of renewable energy.
Renewable Energy Certificate (REC)
A Renewable Energy Certificate (REC), on the other hand, is a certificate that represents the environmental attributes of a certain amount of renewable energy generated. For example, if a wind farm generates 1 megawatt-hour of electricity, they would be eligible to create one REC. These certificates can be bought and sold on the open market.
Businesses can buy RECs as a way to offset their carbon emissions. In doing so, they are purchasing the environmental benefits of renewable energy, but not the actual electricity. Essentially, purchasing RECs is a way for businesses to support the renewable energy industry without directly purchasing the energy itself.
Which Option is Right for You?
Deciding which option is best for your business depends on a number of factors. If you’re looking for a long-term agreement that guarantees a set price for energy, a PPA may be the best choice for you. If your priority is to offset your carbon emissions and support renewable energy, then purchasing RECs may be the better option.
Another important factor to consider is the location of your business. Certain states offer more incentives for businesses to purchase renewable energy, while others may have more restrictions. It’s important to research the regulations in your state before making a decision.
In conclusion, both PPA and REC are viable options for businesses to support renewable energy. The decision ultimately comes down to the specific goals and needs of your business.
