Embracing Digital Marketplaces for Renewable Energy Certificates
Calvin Neo
The global adoption of renewable energy is supported by Renewable Energy Certificates (RECs), which incentivise clean energy production and reduce emissions. However, traditional REC trading and management processes face inefficiencies. Digitalisation and ledger-based marketplaces help to address these challenges. This article explores the benefits of RECs, the advantages of digitalising them, and how InterOpera's issuance engine is transforming the sector through a digital platform.

The global push for renewable energy adoption has been significantly bolstered by Renewable Energy Certificates (RECs). These certificates, representing the environmental, social, and economic benefits associated with renewable energy generation, incentivise clean energy production and help reduce greenhouse gas emissions. However, the trading and management of RECs have been plagued by inefficiencies and cumbersome manual processes. For example, China, which is one of Asia’s largest renewable markets, reportedly faces growing uncertainty due to existing liquidity issues, lack of coordination with wider decarbonisation and climate policies. To address these challenges, innovative solutions like digitalisation and digital marketplaces have emerged. This article will discuss the benefits of RECs, the advantages of digitalising RECs, and how InterOpera's issuance engine is revolutionising the sector by creating a digital marketplace for seamless trading.

What Are RECs and What Are the Benefits?

RECs are market-based instruments that certify units of electricity generated by renewable energy sources, such as solar, wind, hydro, and geothermal power. They represent the environmental attributes of one megawatt-hour (MWh) of renewable electricity. For every 1 MWh of electricity produced by a renewable energy facility, 1 REC is created, which can be retained or sold.

RECs facilitate the accounting, tracking, and assignment of ownership for green energy as it enters the power grid. Since electricity comes from various sources like solar and natural gas, it's difficult to determine the exact origin of the energy we use. RECs ensure that the environmental attributes of electricity generated by renewable energy facilities are accurately tracked and accounted for.

Upon purchasing and retiring RECs, individuals and organisations can legitimately claim that 1 MWh of their electricity consumption originates from a renewable source. Once a REC is retired, it cannot be sold again, preventing multiple claims for the same unit of renewable generation.

RECs are part of a broader set of policy tools, including feed-in tariffs, renewable portfolio standards, net metering, and tax incentives. By purchasing RECs, companies can manage their carbon footprint and demonstrate their commitment to sustainability. The revenue from RECs sales offers financial incentives for renewable energy developers to invest in further projects, while also allowing for trading in a marketplace to enhance price transparency and accessibility. RECs enable governments and regulators to establish renewable energy goals, ultimately leading to increased clean energy production, lower carbon emissions, and improved brand reputation for environmentally conscious businesses.

Potential of Digital RECs

Digitalisation involves converting the rights to an asset, in this case, RECs, into digital asset on a ledger. This process offers a myriad of advantages, including:

Improved Traceability: Digitalisation can enable renewable energy producers to provide a more detailed and accurate account of the provenance of their RECs. This can enable buyers to verify the renewable energy source of their certificates and ensure that they are supporting genuine renewable energy development.

Security and Transparency: Ledger technology ensures that digital RECs are secure, tamper-proof, and easily verifiable. This can address issues like double counting and double issuance, and reduces fraud and fosters confidence in the trading process.

Accessibility and Inclusivity: For power companies, one interesting application of decentralised energy systems is in the area of smart grids and microgrids, which can potentially be used in residential, small and medium scale renewable energy  generation. Here, distributed energy systems, power producers,  prosumers,  and  consumers may directly buy and sell power with one another in ledger-based Peer-2-Peer networks.

InterOpera's Marketplace Platform

The emergence of digital REC marketplaces represent a turning point in the renewable energy sector. InterOpera’s Issuance Platform is a SaaS-based marketplace solution that allows corporates to manage and trade digital RECs. It also allows these industry participants to collaborate with financial institutions to create green loans, bonds, funds and  derivative products using physical asset-based REC/carbon credits. This fosters a virtuous cycle of value creation for all stakeholders in the nascent but rapidly growing carbon market.

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