An overview of Renewable Energy Certificates (RECs) and their role in sustainability.
Renewable Energy Certificates [RECs] are tradable assets/certificates representing environmental benefits of every 1 megawatt-hour (MWh) of electricity generated by a renewable energy source (solar, hydro, wind etc.) that is able to feed to the grid. A REC is issued once they have been certified and tracked by credible independent organisations to prevent double-counting and ensure transparency. Such certificates allow buyers, usually corporations and companies, to claim environmental benefits and renewable energy use even if they don't directly consume the electricity or own a renewable energy system. This is due to the fact that when electricity from such renewable energy sources enters the grid, it mixes with all sources.
Each Renewable Energy Certificate includes details such as vintage (the year which the energy for the RECs was generated) and generation source type. Once the RECs are used to make a sustainability claim, they are retired in tracking systems to prevent double counting.
To ensure transparency and legitimacy of REC transactions, various regional tracking systems have been established and are referred to as registries. These registries verify the issuance, ownership, and retirement of RECs, preventing fraudulent claims or double-counting.
Each REC is assigned a unique identification number that records details such as the generation date, energy source type and location of the source.
In the Asia region, I-REC (International REC Standard) is the common registry used for verifying and issuing RECs. I-REC is internationally recognised, supporting RECs transactions in over 50 countries and emerging markets.
RECs can be categorised into two markets. The compliance market and voluntary market.
The compliance market is when the government imposes a Renewable Portfolio Standard (RPS) or similar regulations that require electricity providers to source a specific percentage of power from renewable sources. This is when utilities can choose to buy RECs from renewable projects to legally prove that theyve met RPS quotas to avoid penalties.
The voluntary market on the other hand, enables corporations, businesses and individuals to voluntarily offset their carbon footprint. In contrast to the compliance market, there is no legal obligation when it comes to the voluntary market. Purchases of RECs are motivated by ESG (Environmental, Social and Governance) or to meet self-set sustainability goals (Carbon neutrality).
RECs can be sold as part of an electricity contract (bundled) or separately from electricity (unbundled).
Bundled RECs means that both the renewable electricity and its environmental attributes are purchased together. The most common method which this is done is through Power Purchase Agreements (PPAs) or green energy tariffs offered by utilities. Since bundled RECs support direct investment in renewable energy projects, they are considered more impactful for sustainability efforts.
Unbundled RECs are sold separately from the renewable electricity that is produced. This is beneficial as it allows companies to buy RECs without changing their energy provider.
The price of RECs depends on the market, demand and supply. However, for homeowners in Singapore with on-grid solar energy systems, SOLARGAGA is able to fetch and payout homeowners $SGD50-60 per MWh (per REC) as of early 2025.
It is important to note that the price of RECs will continue to fluctuate in accordance to supply-demand dynamics, regulatory changes and the growth of renewable energy projects.
1. Issuance: A renewable energy facility generates 1 MWh of electricity.
2. Identification: The REC is assigned a unique ID after verification.
3. Selling: The REC is sold, with ownership updated in the registry.
4. Retirement: The buyer retires the REC to claim sustainability benefits.