A renewable energy certificate (REC) traces the consumption of one megawatt-hour (MWh) of electricity to a renewable energy source, i.e. one REC is generated for every MWh of renewable electricity generated. As such, organisations may buy RECs to show proof that they have used clean energy and reduced their Scope 2 emissions.
However, RECs are not homogeneous products and there is a wide selection of RECs to choose from. How do companies select the appropriate RECs to purchase and retire from the diverse offerings in the voluntary market? In this blog post, we explore the selection criteria which companies can use to buy RECs.
Renewable Origin (or Technology)
The origin of the renewable energy generated refers to its source. There are five recognised renewable energy sources:
- Solar – Sunlight is converted into electricity via solar photovoltaics
- Wind – Wind turbines harness wind to generate electricity
- Geothermal – Naturally generated steam from below the Earth’s surface is used to generate electricity
- Hydro – The natural flow of moving water is used to generate electricity
- Biomass – Energy is generated by the burning of renewable organic material
Organisations may have preferences on the origin of renewable energy they wish to use and will make their purchases based on these preferences.
Vintage
Vintage refers to the year the REC was generated. As a widely accepted and followed guideline, organisations should purchase RECs generated in the same year as their reporting. For instance, If Company A utilises RECs to claim that it used renewable energy in 2023, the RECs it purchases should be generated in 2023.
Market Boundary
As most companies consume electricity from the grid in markets in which they operate, it makes reporting sense to procure RECs generated from the same markets as the electricity.
For example, if Company B runs factories in Malaysia and Vietnam, Company B should buy RECs that originate from Malaysia for its Malaysian factory and RECs from Vietnam for its Vietnamese factory.
Most market boundaries are based on country borders. There are exceptions such as the US and Canada which form one market and the European Union which comprises EU countries as a single market.
For Singapore, a coalition comprising the Singapore Standards Council, Enterprise Singapore, the National Environment Agency and Energy Market Authority launched the Singapore Standard 673 to provide more options for decarbonisation. This Standard allows entities with operations in Singapore to purchase Southeast Asian RECs to reduce Scope 2 carbon emissions.
Delivery timeline
To meet timely reporting and accounting requirements, organisations will have to consider the timing of the delivery of purchased RECs and their retirement. A company should make RECs purchases that align with its timeline.
Co-benefits
Purchase of certain RECs may advance other sustainability goals. For instance, companies may choose to buy RECs generated from impact investing projects. By doing this, companies can demonstrate their support for sustainable development, potentially boosting their sustainability and corporate social responsibility credentials.
As the operator of Asia’s leading REC trading platform, REDEX offers a wide range of RECs to meet your needs. Learn more about our renewable energy solutions at www.redex.eco/buyers.
