Renewable Energy Certificates: The Complete Guide

Your Complete Guide on RECs

Renewable Energy Certificates

If you've been keeping an eye on the clean energy market, you've probably seen the term 'RECs' popping up everywhere. RECs stands for Renewable Energy Certificates—a term you may recognise but might not fully understand. Even if you know what the acronym stands for, the deeper meaning and mechanics might still be a mystery.

But don't worry, we're here to break it down for you and explore the significant impact they have right here in Singapore.

Let's dive into the details of this key player in the saga of sustainable energy.

What Are Renewable Energy Certificates (RECs)?

Renewable Energy Certificates, commonly known as RECs, are tangible records that electricity has been generated from renewable resources like solar, wind, hydro, or geothermal sources. Each REC symbolises the environmental benefits derived from producing one megawatt-hour (MWh) of electricity using these green methods.

These certificates are incredibly valuable in the energy marketplace because they can be traded separately from the actual electricity. To put it simply: When you purchase a REC, you're not just buying electricity; you're investing in the future of green energy, helping to fund and promote further sustainable practices.

There are other forms of RECs, such as Guarantee of Origin (used mostly in Europe) or Energy Attribute Certificate (EAC), and they can be used interchangeably.

Attributes of RECs

Renewable Energy Certificates come with a variety of attributes, each underscoring a different aspect of their value and utility. Here's a closer look at the core attributes that define every REC, along with market-dependent characteristics that vary depending on specific market demands and regulatory requirements:

Core Attributes of RECs:

Verifiable: Each REC verifies that a megawatt-hour (MWh) of electricity was produced from a renewable resource, contributing directly to a cleaner environment.
Financially Motivating: RECs serve as a financial incentive for renewable energy producers. By generating and selling these certificates, they can secure additional revenue, encouraging the development of more renewable energy projects.
Tradable: RECs are tradable assets in the energy market, creating a dynamic environment for supporting renewable energy development.
Unique: With a unique serial number for each certificate, RECs ensure that each unit of green energy is accounted for once, preserving the integrity of environmental claims.

Market-dependent Attributes:

Technology-specific: Some RECs specify the type of technology used, such as solar panels or wind turbines, allowing buyers to support specific green technologies.
Location-specific: The geographic origin of renewable energy can be crucial for buyers looking to meet their sustainability reporting requirements.
Vintage: Unlike fine wine, RECs don’t get better with age. The year a REC is generated can affect its value—a newer one might be better for meeting current environmental goals. Who knew clean energy could also experience depreciation?

What's The Difference between RECS & Carbon Offset?

“Hold up, what about carbon offsets? They're mentioned everywhere these days, right?"

If you're pondering this, you're not alone. It’s time to unravel another layer of the sustainability conversation. Let’s delve into the nuanced distinctions and see how RECs stack up against carbon offsets across several crucial factors:

Essentially, carbon offsets are about neutralising emissions, similar to mopping up a spill; they deal with the problem after it has occurred. RECs, on the other hand, focus on promoting the use of renewable energy and reducing the carbon intensity of electricity consumption, akin to turning off the tap to prevent spills in the first place. Both strategies are vital to climate action, yet they function differently and tackle distinct aspects of environmental impact.

At Flo Energy Singapore, we champion RECs as a greener alternative because they directly support the production of renewable energy. Instead of merely offsetting your company’s carbon footprint, focusing on removing carbon emissions altogether through renewable energy is a more proactive and sustainable approach.

Types of RECs

When it comes to RECs, they generally fall into two categories: bundled and unbundled, each serving different needs and goals within the renewable energy landscape.

Bundled RECs:

When you purchase a bundled REC, you receive the complete package: both the energy produced by a renewable project and the corresponding RECs. This typically occurs through a Power Purchase Agreement, where end-users directly contract with renewable energy generators. An example of this is rooftop solar installations, where a business directly consumes the solar power generated on-site and retires the associated RECs to complement their energy consumption.

Unbundled RECs:

In contrast, unbundled RECs are sold separately from the energy they represent. This type of REC provides flexibility for consumers who want to purchase just the environmental benefits without the associated energy. Purchasing unbundled RECs is generally easier and can be facilitated to match your preferences, e.g. a specific amount or on a recurring basis.

How Do RECs Work: Tracking and Utilisation

When you purchase electricity, you're essentially buying the right to draw a specific amount of charge from the grid. Tracking an individual unit of energy from its source to your consumption isn't straightforward, but it’s made possible through book-and-claim accounting principles.

Under the book and claim scheme, generators log the amount of electricity they produce and inject into the grid, receiving certificates as verification. These certificates, which are issued based on data from the Production Device metre, can be traded and cancelled by market participants to claim the use of that specific unit of energy. Once issued, the certificate's trade and use (redemption/cancellation) are independent of the associated electricity.

Navigating the world of RECs is straightforward. Let's walk through their lifecycle, from production to retirement:

1. Generation

The journey begins at renewable energy facilities, such as wind farms and solar panels, where clean electricity is produced. This electricity is then fed into the general power grid, contributing to the overall energy mix.

2. Certification

Once a megawatt-hour (MWh) of renewable energy is generated, the facility is granted a REC. These certificates undergo thorough verification by a dedicated tracking system, ensuring their authenticity and traceability.

3. Trading & Purchase

Whether it's individuals, businesses, or organisations, anyone can purchase RECs to claim the use of those particular units of renewable energy and substantiate their renewable energy claim—even if their direct power supply is connected to the grid which contains a mix of renewables and non-renewables.

4. Retirement

After purchase, a REC is redeemed, meaning it is removed from the market and cannot be resold. The retirement of the REC serves as tangible proof of the buyer's commitment to supporting renewable energy and reducing their environmental impact.

How Do RECs Benefit Stakeholders?

Now that you understand how RECs work, let's delve into why they're so important and the benefits they offer to different stakeholders in the clean energy landscape.

Key Players in the REC Scheme

Government / Authorities: Governments set the stage for REC markets by establishing regulatory frameworks and setting renewable energy targets. Their active involvement helps standardise measures for carbon emissions reduction and provides robust data to guide future environmental policies.
Generators: These are the renewable energy facilities at the heart of REC production. They not only generate green electricity but also benefit financially from the sale of RECs, which provides a vital revenue stream that enhances the economic feasibility of renewable projects.
Issuers (I-TRACK, TIGR): These organisations ensure the integrity of RECs by tracking their creation, sale, and retirement. They prevent double counting and ensure that each REC represents a genuine unit of renewable electricity.
End Users (Broker / Retailer / Customer): This group is diverse, ranging from brokers and retailers who facilitate the REC trade to meet regulatory or sustainability commitments, to individual consumers purchasing RECs to offset their carbon footprints and support renewable energy.

Incentives to each stakeholder

Government / Authorities: By endorsing and facilitating REC schemes, governments encourage the widespread adoption of standardised renewable energy reporting, fostering transparency and accountability. The data collected from these schemes provides valuable insights into how well the country is progressing toward its sustainability goals, informing future policy and regulatory decisions.
Generators: For generators, RECs represent a significant incentive beyond the immediate sale of electricity. This additional revenue stream makes renewable energy projects more economically viable and competitive, driving the growth and adoption of clean energy technologies.
Issuers (I-TRACK, TIGR): By ensuring that RECs are properly issued and tracked, issuers help maintain a stable and transparent market, which attracts more participants. A well-regulated market encourages investment in renewable energy projects, indirectly benefiting issuers by expanding the market they oversee.
End Users (Broker / Retailer / Customer): End users benefit by contributing proactively to environmental sustainability. RECs offer them detailed insights into their renewable energy procurement and allow them to support renewable energy indirectly. This is especially beneficial for companies in regions without direct access to green energy, enhancing their corporate social responsibility profiles.

How Are RECs Used in Singapore?

Singapore, renowned globally as a world-class green city, has always been at the forefront of sustainable and environmentally friendly practices. As the nation continues its journey towards greater sustainability, Renewable Energy Certificates (RECs) have emerged as a crucial tool in this transformation. RECs are instrumental in supporting Singapore's green initiatives, aligning perfectly with the city-state’s commitment to clean energy solutions and environmental stewardship. Here’s how various sectors in Singapore are harnessing the power of RECs to meet their sustainability objectives:

Corporate Sustainability

In Singapore, companies leverage RECs to enhance corporate social responsibility, align with global sustainability standards, and reduce ecological footprints. This strategic use of RECs not only boosts their green reputation but also helps them comply with stringent regulations, attracting eco-conscious consumers and investors.

Government Initiatives

RECs are utilised by the Singaporean government as essential tools to monitor renewable energy growth and evaluate policy effectiveness in fostering sustainable energy use. These certificates also play a crucial role in supporting incentives under the Green Plan 2030, aimed at developing and integrating renewable energy technologies across various sectors.

Furthermore, RECs are integral to government-led incentives that promote the development and integration of renewable energy technologies in various sectors. For example, as part of the Singapore Green Building Masterplan (SGBMP), the Building and Construction Authority (BCA) launched GMIS-EB 2.0 in June 2022. This scheme, which aims to transform 80% of Singapore’s buildings into green, energy-efficient structures by 2030, offers financial incentives of up to $1.2 million or 50% of qualifying costs for energy-efficient retrofits in buildings meeting high performance standards.

Consumer Choice

Although still emerging, the availability of RECs to individual consumers is a progressive step by some Singaporean electricity retailers. This initiative empowers residents to choose renewable energy sources actively, facilitating a personal stake in the country’s shift toward cleaner energy solutions. As consumer awareness and demand increase, this segment is poised to grow, enabling more individuals to shape the renewable energy landscape.

Common Reporting Frameworks for RECs in SG

In Singapore, several reporting frameworks recognise and accept the use of Renewable Energy Certificates (RECs) to demonstrate commitment to renewable energy and sustainability goals.

Building & Construction Authority (BCA) Green Mark

The Green Mark Scheme enhances building sustainability by setting stringent criteria for energy efficiency and indoor environmental quality, promoting the adoption of sustainable and innovative building solutions. Under this scheme, Renewable Energy Certificates (RECs) must meet the requirements of the Singapore Standard 673:2021 to verify the environmental attributes of the electricity used, ensuring it either comes from local sources or is contracted from within Southeast Asia. Achieving Green Mark certification not only differentiates buildings in the real estate market, enhancing their appeal to tenants and investors, but also improves operational efficiency with significant reductions in energy and water use. Additionally, it enhances an organisation's environmental reputation and contributes to pollution reduction. The scheme also improves the health and well-being of building occupants by ensuring better indoor environments.

RE100

RE100 is a global initiative uniting some of the world's most influential businesses around a singular and ambitious goal: to transition to 100% renewable electricity. Companies that commit to the RE100 pledge to source all their global electricity needs from renewable sources by a specified target year. As part of their commitment, these companies are required to annually report their progress, ensuring transparency and accountability in their journey toward sustainability.

Carbon Disclosure Project (CDP)

The Carbon Disclosure Project (CDP) provides a comprehensive platform enabling businesses to disclose their environmental efforts comprehensively. By participating in the CDP Climate Change questionnaire, companies highlight their transition to renewable energy, including their REC purchases. CDP's extensive data collection supports investors and financial institutions, helping them consider environmental, social, and governance (ESG) criteria effectively. Collaborating with initiatives like Project Greenprint and the Monetary Authority of Singapore (MAS), CDP aids in integrating sustainable finance, allowing financial decision-makers to rely on robust ESG data for a more sustainable economic future.

Global Reporting Initiative (GRI) Standards

The Global Reporting Initiative (GRI) sets the benchmark for ESG reporting, providing a comprehensive framework for companies to transparently assess and communicate their sustainability efforts. By employing GRI Standards, businesses can use RECs to accurately report their renewable energy usage and advancement towards sustainability objectives, affirming their dedication to reducing carbon emissions and promoting renewable projects. Since launching its initial guidelines in 2000, GRI has evolved, introducing global standards in 2016 and expanding to sector-specific standards, thus remaining essential for ESG reporting globally.

Singapore Exchange (SGX) Sustainability Reporting Guide

The Singapore Exchange (SGX) actively encourages listed companies to adopt comprehensive sustainability reporting that complements traditional financial disclosures and includes critical environmental, social, and governance (ESG) factors. The SGX Sustainability Reporting Guide directs companies to detail their energy consumption, carbon emissions, and climate-related risks. RECs are a crucial element of these reports, allowing companies to showcase their commitment to renewable energy. By including RECs, companies can transparently demonstrate their efforts to reduce their carbon footprint and support the transition to a greener economy.

Company-Specific Sustainability Reports

In Singapore, an increasing number of companies are taking the initiative to publish their own sustainability reports. These documents, often produced voluntarily, serve as a platform for companies to demonstrate their commitment to sustainable practices and outline their strategic environmental efforts.

RECs play a significant role in these sustainability reports by providing tangible proof of a company's investment in renewable energy. By purchasing and reporting on RECs, companies can effectively showcase their efforts to not only offset their energy consumption with renewable sources but also support the broader adoption of clean energy technologies. This practice underscores a company’s proactive role in reducing their environmental impact and contributing to the global fight against climate change.

Using RECs For Your Business

In this section, we'll explore how you can unlock the potential of Renewable Energy Certificates (RECs) to enhance your business's energy strategy and sustainability credentials.

1. Assessment & Planning

Start by auditing your company's energy consumption to figure out how many RECs you'll need to align with your green energy goals or offset your current usage. Before diving into REC purchasing, it's wise to first cut down on energy waste and streamline your energy management. This assessment should also factor in your company's anticipated growth and any likely changes in operations, ensuring you're prepared for future energy needs.

2. Purchasing options

RECs can be acquired through various channels, each offering different advantages:

Direct purchase: Buying directly from generators or developers guarantees transparency and often provides more specific information about the source of electricity. This can come in various forms, from unbundled purchase to bundled purchase through a Power Purchase Agreement (PPA).
Brokers / Retailers: Working with brokers can simplify the purchasing process. Brokers have access to a broader market and can often find the best prices due to their volume of transactions. This will mostly be an unbundled purchase.

3. Reporting and Certification

Maintain detailed records of REC purchases and retirements. Certification through recognised standards can enhance the credibility of your sustainability reports. For businesses in regulated industries or regions, ensuring that REC purchases comply with local or international standards is crucial for the validity and recognition of your environmental efforts.

Common Challenges and Considerations in the REC Market

The REC market is beneficial but faces challenges regarding the quality and credibility of certificates. Not all RECs are equal—factors like the type of renewable source, location, and generation date can impact their environmental value.

Businesses must be vigilant in verifying the RECs they purchase to ensure they are supporting genuinely sustainable projects. Unlike carbon offsets, which require additionality to ensure that the projects funded wouldn't exist without specific investment, RECs don't carry the same requirement. This means that while you can claim the use of renewable electricity with RECs, these certificates do not guarantee the development of new renewable energy projects.

If you aim to maximise your impact on developing new renewable resources, consider the following:

Choose the right type of RECs for your needs: Different reporting criteria might require specific REC attributes, such as the country of origin or the vintage. Double-check your technical specifications and ensure you buy RECs that can fulfil those requirements.
Ensure credibility: Only purchase RECs that are certified and tracked by reputable registries. This ensures the certificates are valid and have verifiable environmental benefits.

The Future of RECs

As the push for sustainability gains momentum globally, Renewable Energy Certificates (RECs) are set to become more integral in the transition to clean energy. They provide a flexible and accessible means for entities at all levels—corporations, small businesses, and individuals—to support renewable energy initiatives, regardless of geographic or financial limitations.

Technological Advancements

The REC market is poised to benefit significantly from technological advancements. Innovations in blockchain and digital ledger technology, for example, can enhance the tracking and verification of RECs, making the market more transparent and trustworthy. These technologies ensure that RECs are not double-counted and that their environmental attributes are clearly communicated and understood. Additionally, advancements in renewable energy technologies themselves may lead to more efficient and cost-effective energy projects, increasing the availability and appeal of RECs.

Policy Changes

Singapore's regulatory framework for Renewable Energy Certificates (RECs) is highlighted by SS673, which established comprehensive guidelines for managing RECs within Singapore and those from Southeast Asia used locally. This standard, a first in the region, enhances the transparency, traceability, and credibility of REC transactions. As the regulatory landscape evolves, potential updates may build on SS673's foundation, possibly introducing stricter certification standards and new mandates for businesses to offset more of their energy use with RECs. Staying informed of these changes is crucial for businesses and individuals looking to effectively leverage RECs and support Singapore’s sustainability goals.

Market Growth

The market for RECs is expected to see significant growth both in Singapore and globally. As awareness of climate change increases and more companies commit to carbon neutrality, the demand for RECs is likely to surge. This growth will be driven by the need for companies to meet not only regulatory requirements but also the expectations of consumers and investors who increasingly favour environmentally responsible businesses.

Quick Recap: The Power of Renewable Energy Certificates (RECs)

What are RECs?

Renewable Energy Certificates (RECs) symbolise proof that electricity has been generated from renewable energy sources like wind, solar, or hydro, contributing directly to the reduction of carbon emissions.

Benefits for All:

RECs offer mutual advantages, enhancing financial viability for producers and providing a straightforward path for consumers and businesses to support sustainable energy initiatives.

Accessibility to Support Green Energy:

With RECs, supporting renewable energy is accessible to everyone, making it easier for individuals and companies alike to contribute to a more sustainable future.