New Procurement Challenges in the I-REC Market

As the global push for renewable energy intensifies, businesses are increasingly turning to Energy Attribute Certificates (EACs) like the International Renewable Energy Certificate (I-REC) to document their green energy usage. An I-REC is an exchangeable certificate that provides detailed information about the production of a unit of electricity, such as the location of production, the capacity of the production facility, and the energy source. While I-RECs are instrumental in promoting transparency and accountability in renewable energy consumption, they also present unique procurement challenges for customers navigating this dynamic market.

The Growing I-REC Market

As of 2023, the I-REC market has seen substantial growth:

- 55 active countries

- 6,286 power plants registered

- 552.1 million I-RECs issued

This expansion underscores the increasing global commitment to renewable energy. However, this growth also brings a set of challenges that customers must address to effectively procure and utilize I-RECs.

Key Procurement Challenges

National and Regional Electricity Market ConditionsElectricity markets vary significantly across different regions and countries. These variations can affect the availability and pricing of I-RECs, making it essential for customers to understand the specific market conditions where they intend to procure these certificates.

Availability of Volumes and High CostsThe availability of I-RECs can be limited, and costs can be high depending on the market. Customers need to anticipate these factors and develop strategies to secure the necessary volumes at acceptable prices.

Changes in RegulationsRegulatory environments are continually evolving. Changes in local, national, or international regulations can impact the I-REC market, influencing both supply and demand. Staying informed and agile in response to regulatory changes is crucial for successful procurement.

Climate ConditionsWeather and climate conditions can affect renewable energy production, thereby influencing the availability of I-RECs. Customers must consider these factors, particularly when sourcing I-RECs from regions susceptible to significant climate variability.

Full Recognition When ReportingAchieving full recognition of I-RECs in sustainability reporting can be challenging. Customers must ensure that their I-REC procurement and reporting practices align with recognized standards and frameworks to accurately reflect their renewable energy consumption.

Market Dynamics and Price Stability

While I-REC prices are generally stable, there are notable exceptions influenced by market dynamics. Some markets, like Egypt, Singapore, and Malaysia, exhibit stability, whereas others, such as China, Brazil, and India, are more volatile. Understanding these market dynamics is essential for making informed procurement decisions.

Strategies for Mitigating Procurement Risks

To navigate the complexities of the I-REC market, customers can adopt several strategies:

1. Navigate the Market: Develop a deep understanding of market conditions and dynamics in the regions of interest. Stay informed about changes and trends that could impact I-REC availability and pricing.

2. Adapt the Buying Process: Tailor the procurement process to align with market conditions. This may involve adjusting procurement timelines, diversifying sources, and being flexible with purchasing strategies.

3. Be Prepared and Act Quickly: Market opportunities can arise unexpectedly. Being prepared to act swiftly can help secure favorable I-REC deals before they disappear.

4. Report Transparently: Ensure that I-REC procurement and reporting practices are transparent and align with recognized standards. Clear and accurate reporting enhances credibility and supports sustainability goals.

Conclusion

The I-REC market is a vital component of the global renewable energy landscape, offering a mechanism for tracking and verifying renewable energy usage. However, it presents significant procurement challenges that require careful navigation and strategic planning. By understanding market conditions, adapting procurement processes, and maintaining transparent reporting, customers can effectively manage these challenges and contribute to a sustainable energy future.

Source: ECOHS webinar