International RECs: A reliable way to go 100% Renewable

Introduction: Sustainability Goals and Commitments

The Race to Zero campaign was launched by the UNFCCC’s Climate Ambition Alliance with a goal of achieving net zero carbon emissions by 2050. As of February 2021, 1,397 businesses have pledged to join the Race to Zero campaign and achieve net zero carbon emissions by 2050. These include the likes of Amazon, Unilever, Reckitt Benckiser, Atos, Infosys, Uber, Siemens, Schneider Electric to name a few.

In addition, 288 companies across the world have pledged to the RE100 initiative committed to 100% renewable electricity.

Firms have also been setting ambitious goals targeted at reducing their carbon emissions. For example, under The Climate Pledge which include Microsoft, Amazon, Unilever, Reckitt Benckiser, firms have committed to achieving net zero carbon emissions by 2040.This strategy shall include reducing their current energy consumption, procuring energy from renewable energy sources and, off-setting fossil-fuel based energy consumption through energy attribute certificates.

Procurement of energy from Renewable Sources

• One of the important means for a company to reduce their carbon emissions is to procure power from renewable energy (RE) sources like solar, wind, hydro, etc. This can be achieved by:

• Setting up own renewable energy plants within their premises and use the generated energy for their consumption

• Procuring electricity from renewable energy plants through an Open Access mechanism where in the plant is not located within the consumer’s premises

• However, procurement of renewable energy may not be possible in several cases. Some of them are listed below:

• There may not be sufficient/suitable space within the company’s premises to set up a renewable energy plant (Ex: Solar plant)

• Some/all of the facilities of the company may not qualify for the Open Access mechanism due to the minimum load restrictions

• RE generators may not be available to supply power through the Open Access mechanism depending on the facility’s location

• The company’s facilities are spread across many locations and setting up RE plants may not be feasible in terms of costs or finding RE developers

• The company’s energy consumption is high and the RE power procured is not sufficient to meet all of the energy demand

In such cases, there is a need for an alternate instrument to reduce the carbon emissions which can keep the companies on track towards achieving their sustainability goals. International Renewable Energy Certificates (I-RECs) are one of the effective instruments available in the market which aim to bridge this gap and help companies meet their sustainability goals.

International Renewable Energy Certificates (I-RECs)

International Renewable Energy Certificates or International RECs (I-RECs) are energy attribute certificates which are administered by the International REC Standard (I-REC Standard).

I-RECs are generated from an underlying RE asset. Each RE plant is registered as an asset on the I-REC Registry after a thorough and rigorous qualification protocol which ensures there is no double counting of the emissions reductions arising out of the generation from the RE asset. The I-Registry, which is the repository of I-REC assets and transactions obtains the energy meter readings from the registered assets at regular intervals and issues I-RECs against the RE generation. Each International REC or I-REC represents 1 MWh of electricity produced by a registered renewable energy asset and has a unique ID associated with it. This ID can be used to track the asset that has generated the renewable energy and enable the purchaser of the certificates to verify the authenticity and quality of the RE generation. The rigorous qualification criteria and the unique certificate IDs also prevent the double counting, double issuing and double claiming of underlying RE attributes.

To ensure the reliability and scalability of I-REC issuances across the world, the I-REC Standard has authorized issuers in major countries who are authorized to issue I-RECs against the RE generation arising from a registered asset. For instance, Green Certificate Company (GCC) is the authorized issuer of I-RECs in China, South Africa, India, Malaysia and many more countries.

How does I-REC mechanism work?

The RE generators register their plants on the I-REC Registry by making an application along with a set of plant documents. The application is then validated by the Registry and they seek clarity (if required). After the validation, an independent audit may also be initiated by the Registry based on their discretion. Once the registration is approved by the Registry, the generator can furnish the meter readings from time to time to get I-RECs issued on the electricity generation from the RE asset. The end-consumer or a trader can then purchase the issued I-RECs and may redeem/retire or trade the certificates respectively. The following chart demonstrates the flow of events described above.

The revenue generated out of the sale of I-RECs can be put back into the system by the RE generator to finance development of new RE projects. In effect, the I-REC mechanism encourages development of new RE projects and reducing the carbon emissions across the world while passing on the benefit to the end-consumers.

Who should go for I-RECs?

1. Companies that have committed to carbon emission reduction initiatives like Race to Zero or RE100 or self declared sustainability goals and are unable to procure sufficient renewable power to reduce their carbon emissions can opt to purchase I-RECs to reduce their emissions and help them achieve their RE targets

2. Companies that have set goals to reduce their carbon emissions from their supply chain including their suppliers’ emissions and find it infeasible to procure RE power for these emissions, such companies can purchase I-RECs for their suppliers and reduce the emissions across their supply chain

3. Companies which want to claim that their products are manufactured using renewable energy from a branding standpoint and cannot physically achieve renewable energy consumption can purchase I-RECs to make claims on the green attributes of the manufacturing of their products. The RE100 guide to make claims based on energy attribute certificates like I-RECs can be found here

How can an end-consumer redeem/retire I-RECs?

The I-RECs can be redeemed/retired either directly from an I-REC registered RE generator or through a trader who purchases the I-RECs from the RE generators and sells them to the end consumer. The end-consumer needs to furnish the following details:

1. Quantum of electricity (in MWh) that needs to be off-set

2. Legal entity name against which the I-RECs must be redeemed/retired

3. Purpose for purchasing the I-RECs

4. These details are recorded in the I-REC Registry as a transaction and will be available for future reference.

Why I-RECs over other carbon mechanisms?

1. International Acceptance: I-RECs are widely accepted and are recognized by international reporting standards including CDP, GHG Scope 2 Protocol and RE100. I-RECs are also recognized by Governments in developing countries.
2. Ease of Quantification: In case of carbon credits, the electricity component (kWh) and the environmental attributes of RE generation are decoupled and the green attributes are quantified in terms of tonnes of carbon dioxide (CO2) avoided.
3. I-REC Standard and I-REC Registry: The I-RECs are transacted and maintained on the I-REC Registry which acts as a repository as well as facilitator of I-REC asset maintenance and transactions.
4. Stricter standards: The I-REC Standard has laid out very strict criteria for registration of the assets on the I-REC Registry as compared to other existing carbon mechanisms. For instance, I-REC Registry does not allow registration of projects which are being utilized for fulfilling Renewable Purchase Obligations (RPO) in India while such projects are allowed in some mechanisms.
5. Flexibility and cost-effectiveness: The end-consumer can choose between the different renewable energy sources available and can purchase the type which is more suitable to them.
6. Tackling double counting: Each International REC comes with a unique certificate ID which can be used for reporting purposes as well as track the source of the renewable energy.
7. Traceability: Each certificate consists a unique ID and the details of the underlying RE asset which has generated the renewable energy and this can also be verified on the I-REC Registry’s website.

Conclusion

In a time when there is increasing emphasis on reducing carbon emissions and with companies setting forward ambitious sustainability goals, procurement of renewable energy sourced electricity becomes an essential means to achieve them. However, procurement of RE generated electricity may not be feasible in several cases. In such circumstances, I-RECs can bridge this problem by enabling the end-consumer to claim the green benefits of RE power even if they are not able to source it physically. With the increased focus towards net-zero carbon emissions through campaigns like Race to Zero, I-RECs become an indispensable instrument to achieve the sustainability goals and help the companies achieve them.