The Challenge: Substantiating Global Renewable Energy Claims

Multinational corporations with sustainability targets often consume electricity in countries where established renewable energy certificate systems (like North American RECs or European GOs) do not exist or are not easily accessible. This creates a challenge in reliably demonstrating that their electricity consumption in these regions comes from renewable sources.

The I-REC Standard provides a solution. It is a global standard for issuing, tracking, and redeeming energy attribute certificates in a robust and transparent manner. Each I-REC represents proof that 1 Megawatt-hour (MWh) of electricity was generated from a renewable energy source and delivered to the grid. This allows companies to make credible claims about their renewable energy usage, supporting their ESG (Environmental, Social, and Governance) reporting and climate goals.

How International Renewable Energy Certificates (I-RECs) Function

The I-REC system operates on a clear set of principles and processes:

1. Step 1: Accreditation of Issuers — The I-REC Standard accredits independent, local Issuers in various countries. These Issuers are responsible for implementing the I-REC system in their respective regions according to the Standard's robust requirements.
2. Step 2: Registration of Renewable Energy Devices — Renewable energy producers (e.g., solar farms, wind turbines, hydro plants) register their generation devices with the local I-REC Issuer. The Issuer verifies the renewable nature and capacity of these devices.
3. Step 3: Issuance of I-RECs — Once a registered device generates renewable electricity and delivers it to the grid, the local Issuer issues I-RECs to the producer based on the metered MWh output. Each certificate has a unique tracking number.
4. Step 4: Trading and Transfer — I-RECs can be traded bilaterally or through brokers. Ownership is tracked through a central registry, ensuring that each MWh is only claimed once.
5. Step 5: Redemption and Claiming — End-users (typically corporations) purchase I-RECs and "redeem" them in the registry. Redemption cancels the certificate, preventing double counting, and allows the end-user to claim the environmental attributes of that specific MWh of renewable energy.

Key Benefits and Applications of I-RECs

• Credible Sustainability Claims: Enables companies to reliably report renewable energy usage for initiatives like RE100, CDP reporting, and corporate sustainability reports.
• Global Coverage: Provides a standardized tracking system in countries where no other robust REC market exists, particularly in Asia, Latin America, Africa, and the Middle East.
• Market-Based Instrument: Supports renewable energy development by providing an additional revenue stream for renewable energy producers, making projects more financially viable.
• Transparency and Avoidance of Double Counting: The I-REC registry ensures that each MWh of renewable energy is tracked and claimed only once.
• Flexibility: Allows companies to source renewable energy attributes from a wide range of projects and locations, matching their operational footprint.

I-REC Market Dynamics and Value Drivers

The value of I-RECs is influenced by several factors:

• Supply and Demand: Driven by corporate renewable energy targets and the availability of renewable energy projects in specific regions.
• Technology Type and Project Attributes: I-RECs from certain technologies (e.g., new solar or wind) or projects with strong co-benefits (e.g., community impact) may command premium prices.
• Vintage: The year in which the renewable energy was generated can affect price and eligibility for certain claims.
• Geographic Location: Prices vary significantly by country, reflecting local renewable energy policies, grid characteristics, and demand.
• Corporate Procurement Strategies: Increasingly sophisticated corporate buyers are entering into long-term offtake agreements for I-RECs, influencing market stability.

For investors, understanding these dynamics is key. While I-RECs themselves are environmental attributes rather than direct financial instruments like stocks or bonds, they play a crucial role in the financial ecosystem of renewable energy projects. Revenue from I-REC sales can enhance the bankability and overall return profile of renewable energy investments.

Frequently Asked Questions About I-RECs

Are I-RECs the same as carbon offsets?
No. I-RECs represent the environmental attributes of 1 MWh of renewable electricity generation. Carbon offsets represent a reduction or removal of 1 tonne of CO2e. They are distinct instruments addressing different environmental claims, though sometimes complementary.

Can any company buy I-RECs?
Yes, any entity can purchase I-RECs. They are most commonly used by corporations with operations in I-REC issuing countries to meet their renewable energy goals.

How does FG Capital Advisors view I-RECs in the investment landscape?
FG Capital Advisors recognizes I-RECs as an important market mechanism that supports the growth of renewable energy globally. For renewable energy projects we may be involved with, I-RECs can represent a valuable additional revenue stream, enhancing project economics. We also see them as a key tool for corporates in achieving their sustainability objectives.

Where are I-RECs most commonly used?
They are prevalent in many countries across Asia (e.g., China, India, Singapore, Vietnam), Latin America (e.g., Brazil, Chile, Mexico), Africa, and the Middle East where national REC systems may not be as developed or internationally recognized for corporate claims.

How does the I-REC Standard ensure credibility?
Through strict rules for device registration, independent local issuers, robust auditing processes, and a central registry that prevents double issuance, double claiming, and double counting.

Disclosures and Important Information

This document is provided by FG Capital Advisors for informational and educational purposes only. It does not constitute investment advice, an offer to sell, or a solicitation of an offer to buy any securities or financial instruments. The I-REC market involves various factors and risks, and market conditions can change.

FG Capital Advisors does not act as an I-REC broker or issuer unless explicitly stated in separate formal agreements. Any discussion of I-RECs in the context of potential investments managed by FG Capital Advisors will be detailed in relevant offering documents, which prospective accredited investors should review carefully. Consult with your own financial, legal, and tax advisors before making any investment decisions.