Friday, September 4, 2009

On Renewable Energy Credits (RECs) and Carbon Offsets

Workday is purchasing RECs to offset our use of electricity consumption. What does this actually mean? Well, we are not using renewable energy directly, because we cannot have our data centers powered by a hydroelectric power plant exclusively and we do not have a large solar panel array on the roof of our office. Instead, we are consuming "normal" electricity as it is available in the grid. But if someone, like a wind farm, produces clean electricity somewhere else in the US and puts that into the grid (hence making the overall mix greener), they get a "Renewable Energy Credit (REC)" for each 1000 kWh they feed in. These RECs need to be certified by a third-party organization, such as by Green-e Energy. Green-e is a leading voluntary certification program certifies renewable energy credits that meet environmental and consumer protection standards. So we are buying Green-e Energy certified RECs from Renewable Choice which helps the producers of clean energy compete in the energy market. By purchasing RECs for 100% of the electricity we use, we are ensured that clean, renewable energy is added to the national power grid to offset our conventional electricity use.

We do not offset carbon directly, which would be more applicable to companies that have manufacturing processes that emit carbon or other direct emisions. In that case, companies leverage "verified emission reductions" (VERs) to reduce their footprint.

This is nicely depicted by the following image which shows scope 1 (what you emit directly), scope 2 (what your electricity emits) and scope 3 (what your supply chains emits. Ultimately to claim carbon neutrality, all 3 scopes need to be considered.

A good over view of some of these terms can be found here.

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