Many corporations proudly announce they're powered by 100% renewable energy. The claim sounds impressive—a commitment to clean power driving the grid toward sustainability. But there's an uncomfortable truth behind these announcements that sustainability professionals need to understand.

Most of these claims rely on renewable energy certificates, or RECs—tradable instruments that represent the environmental attributes of renewable electricity generation. Companies purchase these certificates separately from actual electricity, then apply them to their consumption accounting. On paper, they're 100% renewable. In practice, the electrons flowing into their facilities come from the same grid mix as everyone else.

This wouldn't matter if certificate purchases actually drove new renewable development. The sustainability logic assumes that demand for RECs creates financial incentives for renewable generators, eventually adding clean capacity to the grid. But the economics tell a different story—one where certificate markets often function as little more than sophisticated greenwashing mechanisms.

The core issue with renewable energy certificates is additionality—whether a purchase causes something to happen that wouldn't have happened otherwise. For a climate intervention to matter, it needs to put more clean energy on the grid than would exist without it.

When companies buy unbundled RECs, they're typically purchasing certificates from existing renewable projects. A wind farm built five years ago generates electricity and RECs whether anyone voluntarily buys those certificates or not. The project's economics were locked in at construction. Your REC purchase in 2024 doesn't retroactively influence the investment decision made in 2019.

The math is stark. Unbundled RECs often sell for $1-5 per megawatt-hour. Building new wind or solar capacity requires $40-80 per MWh in revenue to be economically viable. The certificate price doesn't come close to covering the cost of new generation—it's a rounding error in project finance.

Some defenders argue that REC demand eventually raises prices, making new projects more attractive. In theory, this could work. In practice, certificate markets have remained oversupplied for years. When supply consistently exceeds demand, prices stay depressed, and the signal to build new capacity never materializes.

Takeaway

An environmental claim only matters if it causes something that wouldn't have happened otherwise. Accounting tools that redistribute credit for existing clean energy don't add new clean energy to the world.

Electricity doesn't work like a supply chain where you can trace specific electrons from source to consumer. When a wind turbine generates power, those electrons enter the grid and mix with coal, gas, nuclear, and solar electrons. Everyone drawing from that grid receives the same physical mix.

RECs attempt to create a contractual layer on top of this physical reality. Company A buys certificates; Company B doesn't. Both receive identical electricity. The difference exists only in spreadsheets and sustainability reports.

This matters because emissions reductions require physical changes—less fossil fuel burned, more renewable capacity built. Contractual arrangements that don't change physical electricity flows don't change atmospheric carbon concentrations. The grid doesn't care about your certificate portfolio.

The disconnect becomes especially problematic with time and location mismatches. A company might claim 100% renewable electricity annually while actually running on fossil fuels at night when solar isn't generating. The certificates balance out mathematically but mask hours when the company's consumption directly drove coal plant operations. Some organizations are now moving toward 24/7 carbon-free energy frameworks that require hourly matching—a much more rigorous standard.

Takeaway

When contractual claims diverge from physical reality, ask which one determines environmental outcomes. Spreadsheet accounting doesn't reduce atmospheric CO2—only physical changes in electricity generation do.

If unbundled certificates don't drive new capacity, what does? The gold standard is the power purchase agreement—a long-term contract to buy electricity directly from a new renewable project. These contracts typically span 10-20 years and provide the revenue certainty developers need to secure financing.

When a corporation signs a PPA for a new solar farm, they're directly enabling a project that wouldn't exist without their commitment. The additionality is clear: no contract, no project. This is fundamentally different from buying certificates from facilities that would operate regardless.

Virtual PPAs allow companies to support new projects even when they can't physically receive the electricity. The company agrees to pay a fixed price for power; the generator sells into wholesale markets. Financial settlements flow based on the difference between contracted and market prices. The key is that the contract enables new construction.

Beyond PPAs, some companies invest directly in renewable development through project equity or green bonds financing specific new capacity. Others engage in policy advocacy to improve grid-level renewable economics. The common thread is causing new clean energy rather than merely claiming credit for existing generation.

Takeaway

Effective renewable procurement creates new capacity that wouldn't exist otherwise. Long-term contracts that enable project financing drive real change; purchasing surplus certificates from existing projects does not.

The gap between renewable energy claims and actual emissions impact represents a significant credibility risk for sustainability programs. As stakeholders become more sophisticated, generic REC-based claims will face increasing scrutiny.

For sustainability professionals, the path forward requires honest assessment of procurement strategies. Not all renewable energy claims are created equal. Understanding the difference between additionality-driving approaches and accounting exercises isn't academic—it determines whether your climate strategy produces real-world results.

The good news is that effective alternatives exist. Power purchase agreements, direct investment in new capacity, and hourly matching frameworks all provide pathways to meaningful renewable procurement. The choice isn't between perfect and nothing—it's between approaches that drive change and those that merely shuffle paper.