Category: Glossary news

Price hedging in environmental commodities refers to the practice of using financial instruments or strategies to manage or reduce the risk associated with price fluctuations in markets for environmental commodities, such as carbon credits, Renewable Energy Certificates (RECs), or other emissions trading instruments.  Environmental commodities, like carbon credits or RECs, often have variable prices that…

Renewable electricity procurement involves the acquisition of energy generated from sustainable sources such as wind, solar, and hydroelectric power. One crucial aspect that significantly influences this process is the concept of “vintages.” In the context of renewable energy, the energy generation year defines the vintage. Understanding vintages is essential for businesses, policymakers, and consumers involved…

A facility or carbon project experiences unit contingency when it possesses surplus environmental credits or allowances beyond compliance or usage requirements. This surplus could occur due to reduced emissions resulting from operational changes, increased efficiency, or the purchase of more credits than necessary for compliance.  Unit contingency comes into play when there is an environmental…

A Renewable Portfolio Standard (RPS) is a regulatory policy requiring electric utilities and other retail electric providers to supply a specified minimum percentage (or absolute amount) of customer demand with eligible sources of renewable electricity.  State or national authorities can set these standards. Many states have adopted RPS requirements due to their efficient, cost-effective, market-based…

A Power Purchase Agreement (PPA) is a contract between two parties, commonly a power producer (such as a renewable energy developer or generator) and a power purchaser (often a utility company, corporation, or a large energy consumer). This agreement outlines the terms and conditions for the sale and purchase of electricity.  Key elements of a…

Virtual Power Purchase Agreements (vPPAs) are financial contracts used to procure renewable energy between a renewable energy developer (such as a wind or solar farm) and a buyer (such as a corporation or large energy consumer) without the physical transfer of electricity. The buyer secures environmental attributes and renewable energy certificates (RECs) without directly purchasing…

Energy Attribute Certificates (EACs) are a broader term encompassing various types of certificates that verify the environmental attributes of renewable electricity generation. It is the only digital instrument that verifies that one megawatt-hour of energy was generated and entered the transmission system from an eligible renewable source. Eligible renewable sources are solar power, hydro power,…

Additionality is the extra benefit or impact gained from a particular action or investment in environmental conservation or sustainability.   In the case of carbon offset projects, additionality is crucial. It ensures that the reduction in greenhouse gas emissions claimed by the project is additional to what would have occurred without that initiative. This means…

Renewable energy certificates (RECs) are a tradable, market-based instrument representing the environmental attributes of electricity generated from renewable sources.   When a renewable energy facility generates electricity from a renewable source, it produces two distinct elements:  The physical electricity, which is the actual electrical energy generated by the renewable source. This is the energy that flows…