Renewable Energy Certificate (REC) have become increasingly popular in recent years as the demand for clean and sustainable energy sources continues to grow. REC is a market-based instrument that represents the property rights to the environmental, social, and other non-power attributes of renewable electricity generation. When one megawatt-hour (MWh) of electricity is generated and delivered to the electricity grid from a renewable energy resource, a REC is issued to certify the ownership of that renewable energy.

REC contain various data attributes, including certificate data, certificate type, tracking system ID, renewable fuel type, renewable facility location, nameplate capacity of the project, project name, project vintage, certificate vintage, certificate unique identification number, utility to which the project is interconnected, eligibility for certification or renewable portfolio standard (RPS), and emissions rate of the renewable resource. These attributes provide transparency and accountability in the tracking and trading of renewable energy.

How Do REC Work?

REC play a crucial role in accounting, tracking, and assigning ownership to renewable electricity generation and use. As electricity from renewable energy sources is indistinguishable from electricity generated by other sources, REC serve as a mechanism to differentiate and track renewable energy within the electricity grid.

Electricity consumers who want to claim the use of renewable energy can purchase REC to substantiate their claims. This enables consumers to support renewable energy generation even if they are not directly connected to renewable energy sources.

REC can be bought and sold on the open market, allowing entities to meet their renewable energy goals and offset their carbon emissions. By purchasing REC, consumers can ensure that the electricity they consume is backed by renewable energy generation.

The Legal Basis of REC

REC is the accepted legal instrument used to substantiate claims of renewable energy generation and use in the renewable electricity market. They are supported by various levels of government, regional electricity transmission authorities, non-governmental organizations (NGOs), and trade associations.

The legal basis for REC varies by jurisdiction, but they are generally recognized and regulated by governmental bodies to ensure transparency and credibility in renewable energy markets. These regulations help standardize the REC market and provide a framework for monitoring and tracking renewable energy generation.

Understanding the Difference Between REC and Offsets

While both REC and offsets represent the environmental benefits of actions that mitigate greenhouse gas emissions, they are fundamentally different instruments with distinct impacts.

REC represent the attributes of one MWh of renewable electricity generation. They certify the ownership of renewable energy and facilitate the tracking and trading of renewable electricity within the grid. REC are used to substantiate claims of renewable energy use and support the growth of renewable energy markets.

On the other hand, offsets represent a metric ton of emissions avoided or reduced through activities such as reforestation, methane capture, or energy efficiency projects. Offsets are used to compensate for carbon emissions in sectors where it may be challenging to achieve immediate emission reductions. They help entities achieve carbon neutrality by balancing their emissions with equivalent reductions or removals.

Both RECs and offsets have distinct roles in promoting sustainability and mitigating climate change. While RECs support the growth of renewable energy generation, offsets focus on reducing carbon emissions across various sectors.

International Adoption of REC

The concept of REC has gained international recognition and adoption as countries worldwide strive to transition to clean and renewable energy sources. In the United Kingdom, renewable obligation certificates have been used since 2002 to ensure compliance with renewable energy obligations. Across the European Union, guarantees of origin are used to certify the renewable attributes of electricity.

Australia has been utilizing REC since 2001, with the Renewable Energy Target (RET) scheme incentivizing the generation of renewable energy. India has also established a REC market to facilitate compliance with state-mandated renewable energy purchase obligations. While the Indian REC market faces challenges, the establishment of REC exchange platforms has addressed some market issues.

Mexico is in the process of creating a market for Certificados de Energias Limpias (CELs) as part of its electricity market restructuring. CELs will be required to demonstrate compliance with renewable energy obligations in the country. The international adoption of REC reflects global efforts to promote renewable energy adoption, reduce carbon emissions, and transition to a more sustainable energy future.

REC Implementation in Indonesia

In Indonesia, the implementation of Renewable Energy Certificates, known as Sertifikat Energi Terbarukan (REC), is part of a strategic initiative to increase the capacity of new and renewable energy generation. REC serves as a market-based instrument that signifies the use of one MWh of electricity from renewable energy sources.

As of September 2022, a total of 948,152 REC units, equivalent to 948,152 MWh of renewable electricity, have been claimed by 233 companies in Indonesia. These companies include Nike, Danone, Astra, Uniqlo, PT Amerta Indah Otsuka, and many others.

Future Outlook and Expansion of REC Programs

The future outlook for REC programs is promising, with increasing global momentum for renewable energy adoption and decarbonization. As countries strive to meet their climate targets and transition to a low-carbon economy, the demand for REC is expected to grow.

The Indonesian government plans to expand its REC program by registering additional renewable energy generation facilities, including geothermal power plants, as demand for REC increases. This expansion will provide more customers with the opportunity to support renewable energy generation and reduce their carbon footprint.

Internationally, REC programs are likely to evolve and adapt to changing energy landscapes and policy frameworks. The standardization and harmonization of REC systems across countries will facilitate cross-border trading and enhance the transparency and credibility of renewable energy markets.

As technology advances and the cost of renewable energy continues to decline, REC will play a crucial role in incentivizing renewable energy investment, promoting sustainability, and driving the global transition to a clean and renewable energy future.

Conclusion

Renewable Energy Certificate (REC) have emerged as a valuable market-based instrument to promote renewable energy generation and support sustainability goals. They provide a transparent and accountable mechanism for tracking and trading renewable electricity, enabling consumers to claim the use of clean energy and offset their carbon emissions.

REC play a vital role in incentivizing renewable energy investment, reducing reliance on fossil fuels, and mitigating climate change. As countries worldwide adopt REC and expand their renewable energy programs, the global transition to a clean and sustainable energy future becomes increasingly achievable.

By understanding the concept and implementation of REC, consumers and businesses can actively participate in the renewable energy market, support the growth of renewable energy sources, and contribute to a more sustainable and greener world.

Remember, by choosing renewable energy, you're not only reducing your carbon footprint but also supporting the development and expansion of clean energy technologies. Together, we can make a significant impact on the future of our planet.

By: Dilla Savira