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Data center sustainability: What are renewable energy credits?

Data centers claim 100% renewable energy by using renewable energy credits (RECs) and power purchase agreements (PPAs), highlighting the complexities of true sustainability.

Mary E. Shacklett, Transworld Data

Published: 16 Jul 2026

In January 2026, a congressional report found that data center energy consumption accounted for about 4.4% of total U.S. energy use in 2023 and was expected to triple by 2028. Consequently, consumer energy rates are rising.

The data center industry is trying to ease this energy concern by claiming that its data center operations are committed to 100% renewable energy, but what exactly does that mean?

Achieving 100% renewable energy in its purest form means a data center is entirely free of fossil fuels and uses only renewable energy sources. However, under current U.S. guidelines, data centers also receive credit, or certificates, toward their 100% renewable energy goals by returning renewable energy to the central grid. When they return renewable energy, data centers are issued renewable energy credits (RECs), which count toward their sustainability goals.

This article examines how data centers use RECs and power purchase agreements (PPAs) to claim 100% renewable energy status, exploring the implications and complexities of these practices in achieving true sustainability.

Understanding RECs

A renewable energy credit is a certification issued by an energy supplier. A facility earns one REC for each megawatt-hour (MWh) of electricity it supplies to the central energy grid from an eligible renewable source. RECs are intended to encourage more companies and data centers to transition away from fossil fuels and support climate control and clean energy.

RECs can be bought and sold. Accounting for RECs is tricky because once renewable energy is added to the grid, it is indistinguishable from energy generated by fossil fuels, making it hard to trace. Energy suppliers account for RECs by logging each megawatt of renewable energy they receive in a ledger and then adding to or subtracting from that number as RECs are issued or used. When the energy that a REC represents is consumed, the REC is "retired" from circulation.

The data center REC strategy

At the most fundamental level, data centers use their own renewable energy, largely generated by solar or wind, which may even be onsite. Unfortunately, in most cases, data centers can't generate enough renewable energy to run year-round. To "plug the gaps," data centers purchase renewable energy credits from other sources and earn their own RECs by selling renewable energy back to the grid.

One vehicle that data centers use is a PPA, which is a long-term contract that a data center enters into to buy renewable energy from the grid at a fixed price. PPAs help energy providers by guaranteeing a fixed-term income that they can plan investments around. PPAs help data centers by locking in a fixed rate for renewable energy over the life of the contract. Purchasing PPAs also counts toward data center sustainability goals. Data centers can and do obtain RECs from the PPAs they enter into, but only for RECs directly associated with the projects for which they have purchased PPAs.

Companies that use RECs and PPAs

Since 2019, AWS has been a major purchaser of RECs to help it meet its data center renewable energy goals. In 2021, AWS also helped a solar project take off through PPAs in Japan.

In 2024, Google entered into a PPA for 478 megawatts (MW) of new offshore capacity, enabling it to achieve 90% hourly clean energy consumption across its Dutch operations, according to McKinsey & Company.

Google and Meta use some -- not necessarily all -- renewable energy to power their data centers, and they're also using RECs to help them meet a 100% renewable energy commitment.

Complications with accounting for RECs

Using RECs and PPAs to count toward renewable energy credits involves complex accounting. While RECs are considered a metric of sustainable energy, there is an argument that counting these credits does not make a data center 100% sustainable in a physical sense. By buying or selling enough renewable energy credits "on paper" from the grid, data centers can artificially boost their sustainability ratings while continuing to run on fossil fuels.

There is a credible counterargument to this. It begins with understanding that running a data center with 100% renewable energy may not be practical. This is because renewable energy supplies fluctuate due to intermittent sources such as solar, wind and hydropower. Only fossil fuels and nuclear energy can be guaranteed to flow at predictable rates. Consequently, a data center might find it difficult to run entirely on renewable energy until fluctuations in renewable energy generation are resolved. Purchasing PPAs or earning RECs are two methods that help with the uncertainty of renewable energy flow.

Accounting for PPA and REC credits can be a nightmare. That's why third-party auditors, such as environmental accounting firms, independently verify the accuracy of PPA and REC purchases and claims, ensuring that these instruments are correctly registered, retired and not double-counted.

RECs and AI demand

The current data center sustainability strategy, which combines RECs and PPAs with actual renewable energy generation, is intended to advance environmental goals. Proponents argue that whether a data center generates its own renewable energy or buys and sells it to the grid, it still results in a net gain for data center and grid decarbonization.

However, the emergence of AI brings additional complications. Data center power demands from AI weren't factored into earlier REC and PPA strategies.

"Our capacity to build sustainably cannot keep pace with the data center construction necessary to support Gen-AI, and the global electricity consumption of data centers is expected to continue to rise," said Noman Bashir in an MIT Climate and Sustainability Consortium research study.

Transparency in data center PPAs and REC claims is essential to ensure their validity before data centers receive credit. However, it's also clear that these PPA and REC options alone will not be enough to achieve or maintain the 100% sustainability targets that data centers want. The impact of new technologies like AI must be factored in now, and no one yet knows what it will take to achieve 100% sustainability in a processing- and resource-intensive AI environment. Adjusting sustainability strategies for a new AI reality will be the first step.

Mary E. Shacklett is president of Transworld Data, a technology analytics, market research and consulting firm.

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