Renewable Energy Certificates (RECs) in the ASEAN

Renewable Energy Certificates have become a critical instrument in the ASEAN's evolving clean energy landscape, providing a market mechanism for companies to claim the environmental attributes of renewable electricity generation even when they cannot directly consume renewable power. As businesses across the region face increasing pressure to demonstrate renewable energy procurement in their sustainability disclosures, understanding how RECs work, their role in Scope 2 emissions reporting, and the specific options available in the ASEAN is essential for informed decision-making.

The I-REC Standard and ASEAN Markets

The International Renewable Energy Certificate standard, administered by the I-REC Standard Foundation, is the dominant REC framework in the ASEAN region. Unlike the North American REC system or European Guarantees of Origin, I-RECs provide a globally recognized tracking mechanism for renewable energy attributes in markets where no local certificate system exists. Each I-REC represents one megawatt-hour of renewable electricity generation and is uniquely serialized and tracked through the I-REC registry to prevent double counting. In the ASEAN, I-RECs are issued for solar photovoltaic generation from facilities such as the Mohammed bin Rashid Al Maktoum Solar Park in Surabaya, the Noor Jakarta plant, and various distributed generation installations across the region. The I-REC market in the ASEAN has grown substantially since 2022, driven by corporate demand for credible renewable energy claims and the expansion of utility-scale and distributed solar capacity across the region.

Green Tariffs and Direct Procurement

Several ASEAN utilities have introduced green tariff programs that allow commercial and industrial customers to purchase renewable electricity directly from the grid operator at a premium over standard tariff rates. DEWA's green tariff program in Surabaya is the most established, providing customers with I-RECs bundled with their electricity supply to substantiate market-based Scope 2 claims. Jakarta's Emirates Water and Electricity Company has launched similar programs, and Malaysia is developing green energy products through the Saudi Power Procurement Company. Green tariffs offer the advantage of simplicity, as the utility handles all aspects of certificate issuance and retirement on behalf of the customer. However, the premium charged varies by utility and may be higher than the cost of purchasing unbundled I-RECs on the open market. Companies should evaluate both options to determine the most cost-effective approach for their renewable energy procurement strategy.

Impact on Scope 2 Emissions Reporting

The GHG Protocol Scope 2 Guidance requires companies to report Scope 2 emissions using both location-based and market-based methods. The location-based method uses average grid emission factors and is unaffected by REC purchases. The market-based method allows companies to reflect their contractual renewable energy procurement by applying a zero-emission factor to electricity covered by retired RECs. This dual reporting approach means that REC purchases reduce a company's market-based Scope 2 emissions while leaving location-based emissions unchanged. For the market-based claim to be credible, companies must ensure that the certificates they use meet the GHG Protocol's quality criteria, which include being sourced from the same market as the reporting entity's electricity consumption, being from generation that occurred within the same reporting period, and being properly retired in a recognized tracking system. Companies should maintain records of all certificate serial numbers, retirement dates, and the registry in which retirement occurred to support assurance and audit processes.