By Neon Steinecke, Director, ENGIE Impact
Energy Attribute Certificates (EACs) are often viewed as a costly option with limited impact for corporate decarbonization. However, when evaluated through the lens of internal carbon pricing (ICP) and cost per ton of carbon dioxide equivalent (CO2e), EACs can present a compelling financial and sustainability case.
Accordion Dropdown: What is an Energy Attribute Certificate?
An Energy Attribute Certificate (EAC) is a contractual instrument conveying information (attributes) about a unit (MWh) of energy. Attributes may include when the MWh was produced, its source (renewable or fossil-fuel), and the location and age of the facility where the energy was generated. A typical EAC verifies the renewable origin of the energy produced or consumed. A producer may sell an EAC together with underlying power (bundled) or separately from it (unbundled). An EAC verifies a company’s own use of a MWh of renewable electricity and reduces its Scope 2 emissions (electricity bought from a supplier).
Guarantees of Origin (GOs) are a type of EAC commonly used in Europe. Renewable Energy Certificates (RECs) are a type of EAC commonly used in North America.
Comparing the Value of EACs
EACs provide flexibility in sourcing renewable energy and can be certified for quality — ensuring it meets high environmental and consumer protection standards, adding more value to the investment (e.g. Green-e in the US, TÜV in Germany; RE100 requirements have also led to higher prices for EACs from younger assets). And compared to other decarbonization measures, like Power Purchase Agreements (PPAs) which provide key benefits but can be complex, EACs can offer a more straightforward way to achieve similar impacts.
One of the primary concerns we hear is understanding the future price of EACs and the reasons behind their price fluctuations. The price of EACs can vary significantly based on market demand, the type of renewable energy, and regional factors. But even with those fluctuations, when compared to carbon credits or considering a company’s internal carbon pricing (ICP) companies can better understand the value of EACs. Many companies use internal carbon pricing to guide their investment decisions. By setting a high internal carbon price, EACs become more attractive and the business case around investing in this tool to increase RE usage and reduce carbon footprint becomes easier to make.
EACs can be evaluated based on their cost per ton of CO2e avoided, and positioned in comparison to other options. When standardized around cost per ton of CO2e, these are typical costs of some common decarbonization projects (values to be considered as orders of magnitude):
- Motors / Pumps renewal – 150€/t
- Tech Carbon Credits – 150€/t
- Industrial Heat Pump / Electrification – 100€/t
- Removal Carbon Credits – 30€/t
- EACs – high quality – 25€/t
- Avoidance Carbon Credits – 5€/t
- EACs – low quality – 5€/t
It should be noted, while low quality avoidance credits and EACs are available on the market, their use can damage companies sustainability credibility and erode public trust in this important market mechanism. While more expensive in comparison, high quality EACs generate far more value, for the company and the renewable energy sector more generally.
Long-Term Benefits of EACs
Investing in EACs not only helps companies meet their sustainability goals but also improves the overall EAC ecosystem — signaling a growing demand for these types of market-based instruments. The additional funding would help improve the entire EAC ecosystem — developing a more transparent system of valuing high-quality EACs, to more accurately correlate consumption with the market price of production. It would also potentially lead to more renewable energy projects and electricity infrastructure, additional renewable capacity, new technologies for flexibility solutions like battery storage and demand-side response, and could provide signals to regulators to improvements improve grid infrastructure and interconnections — all of which will be necessary to generate and more efficiently use larger amounts of renewable energy in future.
So while EACs may seem expensive at first glance, they can provide high value at a low price. By investing in EACs, companies can not only meet their sustainability goals but also contribute to the development of a more robust and reliable energy system based on renewables.
This article appeared in the Nov/Dec 2024 issue of Energy Manager magazine. Subscribe here.