RECs, PPAs, and Other Paths to Renewable Energy

June 9, 2022
Renewable Energy Certificates (RECs), Power Purchase Agreements (PPAs) and green business energy tariffs are key tools in a data center sustainability strategy. Here’s a closer look at how they work.

This concludes our article series on paving a sensible path to sustainable data centers. Last week, we looked at two final sources of renewable energy – biomass and hydropower. We also considered options for storage solutions that can reduce the need for diesel-powered generators. This week, we’ll explore how RECs, PPAs, and green business energy tariffs can quickly get your data center on the path to sustainability.

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Renewable energy certificates and power purchase agreements

The most immediate way data center operators can progress against their renewable energy goals is through their pocketbooks. Renewable Energy Certificates (RECs) and Power Purchase Agreements (PPAs) are the most commonly used ways to do that.

RECs are essentially investments in alternative energy. A REC is created for every megawatt-hour of renewable electricity generated by a power supplier. Energy-consuming companies can then purchase RECs and apply the carbon credits to their goals. This can move them closer to becoming a “net zero emissions” company although not an absolute zero-emissions company. Prices fluctuate and vary by the type of renewables being employed.

PPAs are a contract between an energy consumer and a renewable energy supplier. They provide for the developer to receive a fixed price for every megawatt-hour of energy it generates in exchange for the customer receiving the associated RECs. PPA contracts generally span many years. They are a vital asset for companies looking to build renewable power plants because they provide the guarantee of future business that they need to obtain financing.

RECs are somewhat controversial in that they can subject buyers to charges of greenwashing. The reality is that RECs don’t produce any new green energy but rather incentivize others to do so. A more effective way to link investments to results is through “bundled RECs,” which are RECs that are tied directly to the financing of a new project. Once the project is built, the operator passes along the resulting RECs to the buyer, who can then associate its investment with tangible green energy output.

PPAs are a direct investment in the creation of new renewable sources and are a better option for companies looking to assure stakeholders that they are committed to green sources.

Green business energy tariffs

Another fast and easy way to make your data center greener is to switch to a renewable business energy tariff or green power contract. Many utilities offer plans that ensure that some or all of the power the customer uses is matched with energy derived from green sources. In most cases, little or no setup is involved as the power is delivered through the existing grid. In addition to major utilities, many smaller suppliers offer attractive discounts and good customer service. The risk of working with them is that service levels may not meet utility-level standards or the company may not be as financially stable. It’s important to investigate these factors and write provisions into the contract that cover exceptions.

Green power contracts can often be financially attractive, particularly if the customer is willing to make a long-term commitment. There’s also no requirement that all energy must come from green sources; it may be as little as 10%. This allows data center operators to “go green” incrementally.

Download the entire paper, “Getting to Green: Paving a Sensible Path to Sustainable Data Centers,” courtesy of Kohler, for exclusive access to information on primary and backup power alternatives and recommendations for creating a sensible path to sustainability for your data center. 

About the Author

Paul Gillin

Paul Gillin is a speaker, writer and technology journalist who has written five books and more than 400 articles on the topic of social media and digital marketing. A technology journalist for 25 years, he has served as Enterprise Editor of the tech news site SiliconAngle since 2014. He was founding editor-in-chief of B2B technology publisher TechTarget, and served as editor-in-chief and executive editor of the technology weekly Computerworld.

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