Corporate Renewable Procurement Certificates

1. Introduction

Corporate Renewable Procurement Certificates are legal or market instruments used to show that a company has obtained or supported electricity generated from renewable sources. They are important for companies that want to increase renewable-energy use and demonstrate progress towards environmental or climate targets.

Companies may buy renewable electricity directly through a Power Purchase Agreement (PPA) or purchase renewable-energy certificates connected with renewable generation. Certificates can provide evidence of the renewable characteristics of electricity, even where the physical electricity is mixed with electricity from other sources on the grid.

The exact certificate system differs between countries. In the UK, an important instrument is the Renewable Energy Guarantee of Origin (REGO).

2. Meaning of Renewable Procurement Certificates

A renewable certificate generally represents a specified amount of electricity generated from an eligible renewable source.

The certificate may contain information such as:

the renewable generating station;

type of renewable source;

amount of electricity generated;

date or period of generation; and

relevant environmental attributes.

The certificate can then be transferred to another party according to the applicable market rules.

The basic idea is that electricity and its renewable attributes can be treated separately. Physical electricity entering the electricity grid becomes mixed with electricity from other generators, but certificates can provide evidence about the renewable generation associated with a particular amount of electricity.

3. Corporate Use of Renewable Certificates

Companies may purchase renewable certificates for several reasons.

Environmental Reporting

A company may use certificates when preparing reports about its electricity consumption and renewable-energy procurement.

Corporate Climate Targets

Companies may use certificates as part of wider climate strategies.

Renewable Energy Procurement

Certificates can provide a mechanism for companies to claim renewable electricity attributes without directly owning a renewable generating facility.

Supporting Renewable Generation

Depending on the system, certificate demand can create an additional source of value for renewable generators.

However, companies must ensure that their claims accurately reflect what the certificate represents.

4. UK Renewable Energy Guarantees of Origin

In the UK, Renewable Energy Guarantees of Origin (REGOs) are an important part of the renewable electricity certification system.

REGOs are issued for eligible renewable electricity generation. They provide information about the source of renewable electricity and can be used to demonstrate the renewable origin of electricity.

Ofgem administers the UK REGO scheme.

A company purchasing renewable electricity should therefore understand:

whether REGOs are included;

who owns them;

whether they have been transferred;

whether they have been cancelled or retired;

what claims the company can make; and

whether the claim complies with applicable reporting rules.

5. Certificates and Greenwashing Risk

One important legal issue is greenwashing.

Greenwashing occurs when a company gives consumers or investors a misleading impression about the environmental benefits of its products, services or activities.

For example, a company should not automatically claim that all of its electricity is physically supplied from renewable sources simply because it has purchased renewable certificates.

The legal and accounting basis of the environmental claim must therefore be clear.

6. Contractual Issues

Corporate renewable procurement agreements should clearly identify who receives the certificates.

A PPA should normally specify:

ownership of certificates;

transfer arrangements;

certificate quantity;

eligibility requirements;

cancellation or retirement;

reporting rights;

environmental claims;

changes in law; and

consequences of certificate failure.

This is important because the same renewable attribute should not normally be used by two different parties to make competing claims.

7. Relevant Case Laws

ClientEarth v Shell plc [2023] EWHC 1897 (Ch)

ClientEarth brought a derivative claim concerning Shell directors' management of climate-related risks. The High Court refused permission for the claim to proceed.

Relevance: Although the case was not directly about renewable certificates, it shows the growing importance of climate issues in corporate decision-making. Companies need to consider whether their environmental strategies and public statements are properly supported.

Milieudefensie v Royal Dutch Shell plc

This Dutch climate case concerned Shell's responsibility for reducing greenhouse-gas emissions. The litigation became an important example of climate-related corporate responsibility.

Relevance: The case demonstrates why companies must carefully consider their climate strategies and the legal basis of environmental commitments.

R (Friends of the Earth Ltd) v Secretary of State for BEIS [2022] EWHC 1841 (Admin)

The High Court examined the UK's Net Zero Strategy and found that the government had failed to provide sufficient information demonstrating how statutory carbon budgets would be achieved.

Relevance: The case highlights the importance of credible and evidence-based climate strategies. Corporate renewable procurement claims should similarly be supported by reliable evidence.

SSE Generation Ltd v Competition and Markets Authority [2022] EWCA Civ 1472

The case concerned electricity-market regulation and transmission charging.

Relevance: It illustrates that renewable-energy procurement does not operate separately from electricity-market regulation. Corporate procurement arrangements must fit within the wider legal and regulatory structure.

8. Problems and Challenges

Corporate renewable certificates can create several challenges.

Double Counting

The same renewable attribute should not be counted by two different parties.

Additionality

A company may want to know whether its purchase actually supports new renewable generation rather than simply purchasing certificates from existing projects.

Certificate Quality

Not every certificate provides the same environmental value or information.

Consumer Understanding

Companies must communicate clearly what renewable certificates actually demonstrate.

Changing Regulation

Rules concerning renewable-energy claims, disclosure and sustainability reporting may change over time.

9. Importance for Corporate Renewable Procurement

Certificates can make renewable procurement more flexible. A company does not always need to build its own renewable project. It can purchase renewable attributes through the relevant certificate market.

However, certificates should normally be considered as one part of a wider renewable-energy strategy. Companies may combine certificates with PPAs, on-site solar generation, energy efficiency and direct investment in renewable projects.

10. Conclusion

Corporate Renewable Procurement Certificates provide a mechanism through which companies can obtain and document the renewable attributes associated with electricity generation. In the UK, REGOs are an important example.

Their legal importance lies in ownership, transfer, cancellation, reporting and environmental claims. Companies must avoid misleading claims and should ensure that certificates are properly accounted for.

Cases such as ClientEarth v Shell, Milieudefensie v Shell, Friends of the Earth v BEIS and SSE Generation v CMA demonstrate the wider importance of climate responsibility, credible environmental claims and electricity-market regulation.

Therefore, corporate renewable certificates can support renewable procurement, but they should be used with clear contractual arrangements, accurate reporting, proper certificate management and transparent environmental claims.