What is PPA?
This option for claiming avoided emissions is different from the previous ‘RECs by themselves’ option in that the RECs involved here remained “bundled” with an underlying wholesale power purchase agreement (PPA). The same issues differentiating voluntary versus RPS compliance RECs apply. As do the same conclusions and recommendations. Here we focus on the distinctions between the bundled and unbundled compliance REC options.
Location
Same as compliance RECs.
Cost and Management Burden
Cost per metric ton of CO2e:
The cost would be negotiated as part of a PPA. Unfortunately, there is no standardized methodology currently for quantifying the avoided emissions impact of a PPA.
Environmental Integrity
The same environmental integrity issues related to differentiating voluntary versus RPS compliance RECs apply to this option. Although, by keeping compliance RECs bundled with a PPA it will be easier to procure a longer-term contract, which should increase the probability that the action will result in additional avoided emissions.
Social and Environmental Co-Benefits
There is minimal risk of harm, as well as limited opportunity for co-benefits with this option.
Potential Risks
It is increasingly common for companies to use a renewable energy PPA and retire the associated RECs to make green energy purchasing and avoided GHG emission claims. This option provides far more environmental integrity than voluntary RECs alone, but the effectiveness of the various types of PPAs requires further study to establish.
Conclusions
Although further research on the impact of PPAs on renewable energy investment and generation is needed, this option presents fewer environmental integrity problems than solely purchasing voluntary RECs. Buyers could establish a stronger claim to avoided emissions, and further reduce environmental integrity risks, by bundling and retiring under-supplied RPS compliance RECs with their PPA.