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How RECs Can Benefit Your Business

Updated: Apr 13, 2023

If you are a business looking for a way to reduce your carbon footprint and gain recognition for your sustainability efforts, Renewable Energy Certificates (RECs) may be the answer. RECs provide an innovative and cost-effective way to make your business more sustainable by offsetting the carbon emissions associated with your energy use. By purchasing RECs, you can demonstrate your commitment to reducing your environmental impact and improving your company’s bottom line.


This article provides an in-depth exploration of the fundamental principles underlying Renewable Energy Certificates (RECs), which includes defining what they are and how they work. We will also delve into the potential benefits they offer to businesses and take a closer look at the RECs market in Malaysia.


What is a Renewable Energy Certificate (REC)?

A Renewable Energy Certificate (REC) is a market-based instrument that enables businesses to invest in Renewable Energy (RE) without the need to install RE infrastructure on their premises. It functions as a tradable instrument that represents the environmental and social benefits of renewable energy production. REC can contribute to the achievement of sustainability goals and low-carbon objectives. These certificates are issued by a government-approved agency and can be bought and sold by businesses or any organisations that are committed to reducing their carbon footprint.


One REC represents one megawatt-hour (MWh) of renewable energy generated by solar, wind, or other renewable sources. It can be bought and sold in the same way as commodities, such as oil and gas, in the competitive energy market. RECs serve as an effective mechanism for measuring and tracking the production of renewable energy and can contribute to the advancement and growth of the renewable energy sector by incentivising investments in sustainable, clean energy projects.


How Do RECs Work?

When renewable energy is generated, it is often fed into the electrical grid alongside electricity from non-renewable sources. This means that it is difficult to determine which electrons in the grid come from renewable energy sources and which come from non-renewable sources. RECs provide a way to track and verify the renewable attributes of energy generated from renewable sources and differentiate them from brown energy sources like those from fossil fuels.

1 REC is created for every 1 MWh of energy generated and it gives the owner the right to claim the use of RE resources.​

In general, here's how RECs work:

  1. The generation of renewable energy: Renewable energy is generated from renewable sources such as solar, wind, hydro, geothermal, or biomass.

  2. Verification: An independent third party verifies that the energy was generated from a renewable source and that the energy meets certain environmental and social standards.

  3. Issuance of RECs: The generator of RE is issued a REC for every megawatt-hour (MWh) of renewable energy generated. One REC is equivalent to one MWh of RE generated.

  4. Trading: The RECs can then be sold or traded to individuals, companies, or organisations who are looking to fulfil their environmental goals with renewable energy. By purchasing RECs, the buyer can assert their support for the generation of renewable energy in an amount equal to the quantity of RECs acquired.

  5. Retirement: When a REC is bought, it is retired and cannot be sold or traded again; thereby ensuring that the environmental benefits of renewable energy are not duplicated.

 

Benefits of RECs

The purchase of RECs provides businesses with a number of benefits, including:

Meeting sustainability goals

Many businesses have their own sustainability goals, which may include reducing their Scope 2 emissions and increasing the use of renewable energy. By buying RECs, businesses can show their commitment to sustainability and demonstrate that they are taking steps to reduce their environmental impact.

Flexibility

RECs provide flexibility for businesses that may not have the ability to generate their own renewable energy on-site. By purchasing RECs, businesses can support renewable energy from a variety of sources, including solar, wind and hydro.

Cost-effective

For businesses seeking a cost-effective way to promote renewable energy, RECs offer an attractive option. RE project investments require significant capital expenditures for equipment, installation, and upkeep, but buying RECs enables businesses to support renewable energy without incurring these expenses.

Enhancing brand reputation

These days, many consumers are becoming more aware of environmental issues and are increasingly looking to support businesses that prioritise sustainability. By purchasing RECs, businesses can enhance their brand reputation and attract customers who value sustainability.

Regulatory compliance

Some authorities require businesses to meet certain renewable energy targets. By purchasing RECs, businesses can demonstrate compliance with these regulations without having to generate renewable energy on-site.


 

Renewable Energy Certificates in Malaysia

The Renewable Energy Certificates market in Malaysia is still relatively new, but it is experiencing rapid growth. This is driven by the government's goal of achieving a 31% share of renewable energy in the country's energy mix by 2025, leading to high demand for RECs among businesses and investors looking to promote renewable energy development and adopt sustainable practices.


Currently, there are several REC registries in Malaysia, including the International REC Standard (I-REC), the Tradable Instrument for Global Renewables (TIGRs) Registry, and the Malaysian Green Technology and Climate Change Centre (MGTC). These registries provide a platform for the issuance, tracking, and trading of RECs, and are responsible for ensuring the integrity and transparency of the market.


Additionally, the market for RECs in Malaysia is primarily driven by large corporations and multinational companies that are seeking to meet their sustainability targets and reduce their carbon footprint. These companies purchase RECs to support the development of new renewable energy projects, such as solar farms, which can help them achieve their sustainability goals and highlight their commitment to environmental and corporate social responsibility.


The RECs market in Malaysia is projected to keep expanding in the future, driven by the country's increasing utilisation of renewable energy sources in its energy mix, as well as the rising interest of businesses and investors in supporting the advancement of RE projects. This growth is expected to create fresh prospects for RE development and investment, which will aid the country's shift towards a more sustainable energy system.


Why are RECs Important?

RECs provide an effective means for businesses to showcase their dedication to sustainability, by enabling them to support the generation of renewable energy without incurring the significant costs associated with on-site renewable energy production. Businesses can also leverage RECs to increase the amount of clean energy in the grid while reducing reliance on fossil fuels, making clean energy more accessible and affordable.


Beyond its environmental benefits, REC offers significant financial benefits as they enable companies to offset the cost of their energy usage and reduce their monthly energy bills. Businesses can also benefit from the stability and predictability of clean energy prices, which can help hedge against the risk of rising energy costs and create more stable energy costs for their operations.


Furthermore, RECs are an important part of the transition to a low-carbon economy. By purchasing RECs, businesses are helping to increase the demand for clean energy, thereby encouraging the development of renewable energy sources and helping to reduce the number of carbon emissions in the atmosphere.


This approach not only contributes to a sustainable energy future but also promotes financially responsible business practices that prioritise long-term cost savings and business resilience.


What to Consider When Buying RECs?

When buying renewable energy certificates (RECs), business owners should consider several factors to ensure that their purchase aligns with their sustainability goals and values. Here are some key considerations:

Verification and certification:

It is important that the RECs are certified and verified by responsibleorganisations. This ensures that the RECs are legitimate and represent actual renewable energy generation.

Type and source of renewable energy:

Business owners should consider the type and source of renewable energy they want to support, as different types of renewable energy have different environmental and social impacts. For example, wind energy may have different impacts than solar energy, and hydropower may have different impacts than geothermal energy.

Price:

RECs can vary in price, depending on the type of certificate and the provider. While it is important to consider price, it is also important not to choose a provider solely based on cost. Look for a provider that offers high-quality, legitimate RECs at a fair price.

Tracking and reporting:

Business owners should ensure that they can track and report the environmental and social benefits associated with the purchase of RECs. This can help them demonstrate their sustainability efforts to customers, investors, and other stakeholders.

Transparency:

It is important to choose a REC provider that is transparent about where the RECs come from and how they are generated. This helps you ensure that your purchase is truly supporting renewable energy and not just a greenwashing tactic.


 

Key Takeaways


For businesses seeking to reduce their carbon footprint, improve their bottom line, and gain a competitive edge, investing in RECs can be a smart choice. With the right supplier and a clear understanding of the legal implications, you can easily leverage RECs for your business and make the world a greener place.


To further understand the potential advantages of RECs, feel free to contact us today. Our team can offer valuable insights into the renewable energy certificate market in Malaysia, as well as provide consultation on how to initiate your RECs journey and take advantage of the financial incentives that are available for your business.

Let’s take the first step towards a cleaner future and unlock the benefits of Renewable Energy Certificates for your business with Progressture Solar today.



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