Renewable Energy Certificates

Renewable Energy Certificates (RECs) are taking off in Singapore, but what are they?

In a nutshell:

1. RECs are tradable instruments certifying that the individual or company that bears the REC owns an amount of “green” electricity generated from a renewable energy source, typically denominated in 1 megawatt hour (MWh). A REC usually takes the form of a non-tangible digital statement containing a unique serial number.
2. The life cycle of a REC ends when the end-user of the REC eventually “retires” it as proof of renewable energy consumed (without the need to actually physically consume it), and once “retired”, the REC can no longer be sold again.
3. RECs are distinct from carbon offsets, in that carbon offsets are measured in units of carbon and are used to represent reductions of greenhouse gas emissions, whereas RECs are measured in units of electricity output and are used to validate the consumption of “green” electricity.

Encountering RECs in Singapore’s rooftop solar agreements

Companies in Singapore looking to install rooftop solar facilities at their premises may encounter RECs when negotiating their rooftop solar power purchase agreements (Rooftop Solar PPAs) with solar developers. Under a typical Rooftop Solar PPA in Singapore, the solar developer agrees to install and operate a solar energy generating asset on the customer’s premises, and the customer agrees to purchase electricity generated by that solar energy generating asset from the solar developer at a predetermined price.

Where the solar energy generating asset is compliant with internationally recognised REC standards and duly registered, 1 REC will be credited to the solar energy generating asset for every 1 MWh of electricity generated by that solar energy generating asset. Such RECs can then be sold to third parties or “retired”.

Therefore, RECs serve as additional “green” incentives under Rooftop Solar PPAs which a customer can obtain in addition to the “green” electricity, and ought not to be overlooked in negotiations with the solar developer. While the RECs are usually allocated to solar developers as part of the environmental attributes, it is possible for the customer to negotiate for the RECs to be allocated to the customer.

We explore some salient facts and considerations regarding RECs in Singapore below.

Who issues RECs? How are RECs issued?

RECs are generally issued in Singapore by internationally recognised REC registries (REC Registries) through their authorised local partners. The main REC Registries recognised in Singapore are the International REC Standard (I-REC) registry and the Tradable Instrument for Global Renewables (TIGR) registry, and an example of an authorised local partner is Singapore Power Group, which is the sole authorised issuer of I-REC standard RECs in Singapore.

Authorised local partners administer the local registration process and verification of standards on behalf of the REC Registries. They will, among others, independently verify the information of the registered renewable energy generating asset and subsequently approve the issuance of the requisite RECs if all eligibility requirements are met.

Therefore, in order for RECs to be credited to a renewable energy generating asset in Singapore, the owner of that renewable energy generating asset (Asset Owner) will first have to get the renewable energy generating asset registered with a REC Registry through the support of the REC Registry’s authorised local partners.

Such registration can be done by the Asset Owner on its own behalf, or through an intermediate market player (REC Intermediary) who registers the renewable energy generating asset with the REC Registry on behalf of the Asset Owner as an agent or assignee. The RECs are eventually issued into an account with the REC Registry designated by the Asset Owner or the REC Intermediary.

How to trade RECs?

RECs may be traded directly on the REC Registries between account holders, or on trading platforms such as those provided by some REC Intermediaries for Asset Owners to sell their RECs or for connecting REC sellers with buyers.

Use of REC Intermediaries

Asset Owners often choose to appoint a REC Intermediary to manage RECs credited to its renewable energy generating asset for the following reasons:

1. to avoid the need to navigate the complexities of opening accounts and asset verification at the REC Registries; and
2. to have some assurance that their RECs can be sold after issuance.

Below is a non-exhaustive list of existing REC Intermediaries and/or REC trading platforms operating in Singapore and the capabilities which they purport to have.

Conclusion

In conclusion, although RECs are fairly new instruments in Singapore and the market for trading them in Singapore is very much still developing, companies can make informed decisions on how to allocate the RECs under their Rooftop Solar PPAs in Singapore. To avoid any ambiguity, REC ownership can and should be negotiated between the company and the electricity seller privately, especially where there may be substantial RECs to be credited to the renewable energy generating asset.

A key reason is that legally, the nature of REC as property is still unclear and remains untested by local courts – the basic premise should be that RECs belong to the Asset Owner unless and until they are sold or legally transferred to another party. In the absence of express provisions, a company’s payment for the electricity purchased under a Rooftop Solar PPA may not convey a right to the RECs credited, since the law is not clear if RECs are sold on its own terms separately from the energy and capacity sold.

Furthermore, public records searchable on the REC Registries do not necessarily evidence REC ownership, as they may only evidence the power facility from which the REC originated or the names of account holders entitled to interact within the REC Registries, but do not record the counterparties to or terms of REC transactions (blockchain-powered platforms may be able to track and preserve records of REC transactions but are still not conclusive on the issue of legal ownership).

Unlike countries like the United States with a more developed and regulated REC market, a new industry standard for RECs to be transacted and managed more consistently (the new Singapore Standard 673: Code of Practice for Renewable Energy Certificates) was recently published in Singapore on 26 October 2021. Being voluntary in nature, whether such guidelines will have any force of law remains to be seen.

Notes: 

1. https://rec.spdigital.io
2. https://www.trecs.ai/buy-sell-1
3. https://www.sembcorpenergy.com.sg/business/energy-solutions/renewable-energy-certificates/sembcorp-rec-aggregator-platform
4. https://www.powerselect.sg/buy-rec-s