The Role of I-RECs in the Energy Transition

Renewable Energy Certificates (RECs) have been a vital part of electricity markets for more than 25 years. Originally developed in the late 1990s in Europe and North America, they provide trusted ways to track and verify renewable electricity generation. 

What are RECs and how do they work?  

Renewable Energy Certificates (RECs) have been a vital part of electricity markets for more than 25 years. Originally developed in the late 1990s in Europe and North America, they provide trusted ways to track and verify renewable electricity generation.

Because all electricity in a given region flows through the same grid, it’s not possible to trace whether a company physically receives energy generated from renewable sources. RECs are therefore used to show production and ownership of renewable energy attributes, independent of the physical electricity flowing within the grid. Each certificate represents one megawatt hour (MWh) of renewable electricity generated.

Renewable energy generators create RECs – through certificate registries – and sell them either alongside electricity contracts (“bundled”) or on their own (“unbundled”). They can be purchased by companies and other actors to support renewable electricity claims in sustainability and Scope 2 GHG emission reporting. In order for a REC to be claimed and counted in an organization’s GHG emission reporting, it must be “retired” within the registry that issued it – meaning it is permanently removed from circulation and cannot be purchased, traded or claimed again. This prevents double-counting of REC claims.

These certificates can help nations, companies, and organizations around the world meet their sustainability targets, while encouraging the generation of energy from renewable sources. They can have social benefits too, such as helping to support local communities and increasing their access to affordable energy.

RECs help account for renewable energy claims, but how can they encourage renewable energy generation?

RECs provide financial incentives for electricity generation from renewable sources, as generators are not only able to create revenue from the power that they produce, but also from the RECs that they produce. Many national and state/provincial governments also mandate certain levels of renewable electricity use, with RECs serving as evidence and tracking mechanisms for these regulatory programs, further supporting renewable energy development.

As power producers can receive additional revenue from the issuing of RECs, either from voluntary markets or government regulatory/compliance programs, they provide a clear incentive to invest further in renewable energy assets above other energy sources. The revenue from the sale of RECs can help fund the development of new renewable energy capacity, such as wind turbines and solar systems, accelerating the transition away from fossil fuels.

The creation of I-RECs to serve global needs

As demand for renewable energy grew globally, organizations and governments outside of Europe and North America called for a similar system. Rather than replicate existing models, stakeholders developed a framework specifically designed for these markets and their unique contexts. This led to the creation of International Renewable Energy Certificates (I-RECs).

Just like the RECs that came before it, an I-REC represents one megawatt hour (MWh) of renewable electricity generated. An I-REC is a type of REC that has a single governance framework operating across 60+ countries, while recognizing that legislation in each country can be different. Countries that use I-RECs can develop their own regulations that work within their own environment and respect their technology infrastructure, legislative infrastructure, and how they operate their economies.

For instance, the rules in the UAE, one of the fastest growing I-REC markets globally, are different than the rules in Türkiye or South Africa. India has its own unique requirements to ensure that I-RECs are issued to projects that meet specific criteria and do not conflict with the domestic Renewable Purchase Obligation. In the Philippines, I-RECs can only be issued for energy that has not already been issued under the Philippines Renewable Energy Market and the owner of any facility commissioned after 2009 must demonstrate that the facility has not been and will not be registered in the domestic REM registry.

While country-specific rules may vary, the core structure and function of I-RECs remain consistent across all regions. This makes life easier for corporate sustainability teams and certificate traders, as they have a single known certificate they can transact across many different countries. Multinational corporations can use a consistent mechanism across their global operations and supply chains, regardless of country.

Thanks to the growing use of I-RECs, access to renewable energy is improving, as these certificates help make green economy projects financially viable. This enables countries around the world to play a more active role in the clean energy transition.