REC
Renewable energy certificates (also known as renewable energy credits, or RECs) are a tradable market-based instrument that represents the legal property rights to energy generated by renewable energy sources, such as solar or wind power or hydropower facilities. Buying RECs is not equivalent to buying electricity. Instead, when the electricity is generated by a renewable generator, the energy is unbundled into the kilowatt hours and into the green data associated with the generation of the kilowatt hours. RECs represent the clean energy attributes or green data of renewable electricity.
How Renewable Energy Certificates Work
Electrons enter the electricity grid from many different sources, ranging from wind and solar power to natural gas, coal-fired power stations and nuclear power generation facilities. Because of this, there is no way to know exactly what energy source the electricity that you use, comes from.
To solve this problem, you can purchase RECs along with your electricity. RECs are certificates that transfer the “renewable” aspects of renewable energy to the purchaser or owner. In other words, renewable energy certificates, paired with electricity from the grid, are renewable energy that is being generated on your behalf. Unless you are purchasing your electricity directly from a renewable energy source or solar / wind farm, electricity cannot be considered renewable without a REC to substantiate its renewable-ness.
How RECs Are Generated
A REC is produced when a renewable energy source generates one megawatt-hour (MWh) of electricity and delivers it to the grid. For example, if a wind power facility produces 5 MWh of electricity, they have 5 credits to either keep or sell. If a third party business buys those credits, they are buying the “renewable” aspect of the electricity from the wind farm, and can then say and report that 5 MWh of the electricity used, came from a renewable source.
A REC that has been sold or redeemed once, cannot be purchased again. All renewable energy certificates are uniquely numbered and generally include information such as where they were generated, the type of renewable resource they came from, and the date of generation. The exchange of RECs is carefully verified, tracked and recorded.
Environmental Benefits of Renewable Energy Credits
RECs encourage and support the production of renewable energy, which is energy from any source that produces no fossil fuel-based greenhouse gas emissions (GHG) or other environmental pollutants. Renewable electricity is cleaner and better for the environment than burning natural gas or coal or other forms of fossil fuels.
RECs can be generated via power plants from the following renewable energy sources: wind, solar, moving water (hydropower), organic plant and waste material (biomass), and the earth’s heat (geothermal). Unlike coal or natural gas, renewable energy resources like these promote sustainability, and are readily available and constantly replenish.
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- Unit of Measure: The unit of measure for carbon credit is typically one metric ton of CO2-equivalent emissions. A REC is based on 1 MWh of renewable electricity.
- Purpose: Carbon credits represent emissions reductions, provide support for emissions reduction activities, and may lower costs of GHG emission mitigation. RECs expand consumers’ electricity service choices, convey environmental attributes and renewable electricity use claims, and support renewable electricity development.
- Source: Carbon credits can come from all different kinds of projects that lower, remove or avoid emissions while RECs are only generated from renewable electricity sources (i.e., solar, wind geothermal, biomass, hydropower).
- Claims: A buyer of a carbon credit can claim to have reduced or avoided direct GHG emissions outside their organization’s operations. A buyer of a REC can claim to use 1 MWh of renewable electricity from a low- or zero-emissions resource.
- Accounting Guidance: Carbon credits can be used to negate or “offset” an organization’s scope 1, 2 or 3 emissions. (Emissions from sources controlled by the organisation like manufacturing facility emissions and not controlled by the organisation like the supply chain emissions) or carbon credits are a separate line item intended to define a “net” emissions figure when documenting the achievement of a target. RECs allow an organization to lower their market-based scope 2 emissions from purchased electricity.
- Additionality: Carbon credits must represent real, permanent, verified, and enforceable reductions. And most importantly, they must come from activities or projects that are additional to what would occur under a business-as-usual scenario. This “additionality” requirement for carbon credits projects is central to ensuring that the ton of emissions reductions you use as an offset is fully equivalent to a ton of emissions reductions from your operations. There is no requirement to demonstrate additionality when applying RECs to an organization’s market-based scope 2 emissions.
Investing and trading in Renewable Energy Certificates is a direct investment in the support, development in expansion and production of energy from clean, renewable energy sources. In the context of the South African energy market and the inability of the South African Government, through Eskom to deliver sufficient, reliable electricity to its citizens, an investment in renewable energy is essential and critical in the building of a stable economy for our country.
zaRECs is the South African voluntary registry, mandated by the Department of Minerals and Energy. zaRECs was established in 2004. zaRECs (Pty) Ltd. administers the South African voluntary REC market along the lines of the European Energy Certificate System specifications (EECs) on behalf of members of the South African Voluntary Renewable Energy Certificate market participant’s Association (RECSA).
To be able to trade in RECs in South Africa, a trader must be registered with the registry. Only RECs originated and generated in South Africa can be traded within South Africa and currently, there is no mechanism to trade with South African RECs internationally or purchase international RECs and report on them within the South African market.
The registry was established and set up to issue RECs on large utility-scale devices. A registered and certified device that generates 1MWh of green renewable energy can have a 1x renewable energy certificate issued, that contains the following information:
- Certificate data
- Certificate type
- Tracking System ID
- Renewable fuel type
- Renewable facility location
- Nameplate capacity of project/device
- Project / Device name
- Project vintage (build date)
- Certificate (generation) vintage/date stamp
- Certificate unique identification number
Before a device is registered with zaRECs, the device is inspected, certified and verified by the registry to ensure compliance with the ECCs specifications, standards and requirements A registration fee to register each device is payable to the registry. As each 1MWh REC is generated by the registered device, a transaction and certification fee is payable to list each of the RECs with the registry. Once sufficient RECs have been accumulated, the RECs are traded on an open market economy space and traders place the RECs with willing buyers, who wish to purchase and report on the renewable energy consumed, hoping to achieve the best possible price.
The generation and trading in RECs in South Africa are cumbersome and require expertise, administration to facilitate the registration and management to issue and sell the RECs. the trading of RECs is not set up and geared towards micro & mini installations.
Carbon Zero Solar collaborated with a registered REC trader to create a unique REC certificate class to register, enrol and manage micro and mini devices smaller than 1MWp. A solution that uses blockchain technology to establish an audit trail to verify the origin and redemption of RECs was created. By collating and grouping smaller device installations together, we manage to extract value to support and help develop a portion of the energy transition from fossil fuels to renewable energies in South Africa and encourage the installation and production of renewable energy.
We have designed a structure and registration mechanism that significantly reduce the inputs costs required to have a device registered, verified and inspected to ensure the REC generated complies with the ECCs standard and specifications.
Carbon Zero Solar is on a national drive to include as many already installed micro and mini solar installations across South Africa to:
- Promote the use of Solar PV solutions as a means to alleviate the current energy crisis
in South Africa. - Promote the use of renewable energy in South Africa to reduce our environmental impact and carbon footprint and collectively reduce South Africa’s contribution to greenhouse gasses (GHG), which currently is amongst the highest in the world.
- Finally promote the Renewable Energy Certificate market as a best practice market where companies can procure and report on RECs with the knowledge that the RECs are supported by international standards of the trade.
How do I enrol my device and participate in RECs ?
Step 1 – Information required from owner
Carbon Zero Solar require the detail of your PV Solar installation, detailing the location, address, contact details, details of the installation including the size and number of panels installed, inverter size and brand and serial number, inverter communication app and data sets where applicable and the contractor’s details that installed your system.
Step 2 – Register device
The owner signs the attached letter permitting Carbon Zero to trade the green attributes generated by your renewable energy solution. Carbon Zero Solar will then register your device with zaREC and facilitate the verification and certification on the zaREC registry and block chain system.
Step 3 – Input and verify data
Carbon Zero Solar will administer, input and register the meter reading data from your device periodically with zaREC’s portal and facilitate verification and certification of the data.
Step 4 – Sale of REC’s
Carbon Zero Solar will administer and manage the issue of the RECs and place the RECs in the market with traders to find willing buyers for the RECs’. The current average price for REC’s in South Africa is R 30/MWh.
Additional benefit to the owner
Carbon Zero Solar will collate the sale of the REC and report the sale to the owner of the system 25% to 50% of the nett income earned from the sale of the RECs generated will be used to off set the cost of the added service offered to you. Up to 50% will be directed to the funding of the additional service offering. Services are contracted from third parties and include routine inspection, monitoring and remote performance management of systems and cleaning, washing and inspection of PV panels on the roof and inverter systems on the premises of the owner.
In the event that the maintenance team discover any areas that require attention or issues that require further investigation by the installer or qualified electrician, our team will refer the issue and additional maintenance requirement to the originator of the installation or can but the owner of the system in contact with a qualified electrician.
This provides peace of mind to the owner, that the investment made in a solar system is regularly inspected, cleaned and maintained for optimum performance, ensuring that the life expectance of the investment is prolonged and saving money over the investment period. It further assist to achieve independence from South African electricity supplier and hinderance caused by loadshedding or power interruptions and outages.
As an indication, a typical installation of 150kW will generate approximately 120 – 150 MWh per annum, that translates to a total income of R6500 per installation per annum. Other than providing the information in Step 1, no other effort or ongoing administration is required from the owner, thereby saving you money, time and administration.
Costs
All costs associated with the RECs are covered and paid for by Carbon Zero Solar and no payment is required from the owner of the system. These cost include but are not limited to initial registration fees, annual re-certification costs, REC generation fee, trader fees, transaction and redemption fees and hosting of the REC’s data on the block chain.
For more information contact : Ben van Niekerk on 081 514 6288 or ben@carbonzero.solar
FAQs
Can I trade my own RECs?
Yes! It is definitely possible to trade your own RECs. Follow the steps below:
Log onto the registry’s website at www.zaREC.co.za, and download and fill out the registration forms. Register your device with the registry and pay the R 16,000 renewable registration fee. After your device has been certified and approved, you can start to submit meter readings. Once the system has generated and accumulated 1MWh of renewable energy, request that a REC be issued against the meter readings. A transaction fee is payable for the verification of the metering data to the registry. Once the REC is issued, make contact with and appoint a trader operating in the REC market to sell the REC into the marketplace or search for a willing buyer to purchase the REC. Always ensure that REC fetches a market-related price.
Alternatively, sign the attached letter to allow Carbon Zero Solar to manage and trade your REC on your behalf ensuring we obtain the best possible price for your RECs with the assistance of our pre-approved and selected registered traders and buyers.
What are the cost implications?
There are no payments or registration fees required from the owner of the PV solar, wind or hydro installation. All costs associated with the initial registration, verification, certification and issue of the Renewable Energy Certificates and the trade commission payable when the REC is traded on the open market are carried by Carbon Zero Solar. You share in the net income derived from the sale of the REC.
How will I know a trade has been made?
A monthly statement of accounts is distributed to all customers, detailing the energy generated within the period, meter readings submitted, RECs approved & issued and trades made. The REC sold will include the price fetched for each of the RECs. Each REC issued is identified by a unique number and details associated with the REC that includes the serial number and location of the generation device. All of the above is captured on the blockchain and is auditable at any given time.
How long am I signing the rights to my device over to Carbon Zero Solar?
Due to the upfront costs carried by Carbon Zero Solar to register your device, we request an initial period of 10 years to manage and report on your device.
The contract can be renewed and extended by mutual agreement with Carbon Zero Solar for an additional 10 year period after the first 10 year period.
Who benefits if the price of RECs increases?
You benefit directly. It is to the benefit of everyone, the owner and Carbon Zero Solar, that the price of RECs increases. Any increase in the price of the REC flows directly through to you and is shared with you, the owner of the device when the REC is sold. Pricing of REC is reported monthly.