Latin America sees surging demand for I-RECs amid renewables expansion


In Latin America, high levels of renewable energy have raised demand for International Renewable Certificates (I-RECs), particularly in countries with substantial hydroelectric resources. These certificates are still in early stage in the area. However, the future of I-REC in Mexico is endangered by a power reform plan aimed at stifling private-sector investment.

Chile's I-REC market, on the other hand, is booming, thanks to the country's abundant renewable energy and rising demand from businesses looking to reduce emission. According to Santiago Climate Exchange (SCX), Chile's registry of these certificates began in 2018 with only six renewable energy plants. Since then, the number has risen to 79, including solar, wind, and hydropower projects.

Despite this, I-REC volumes are still low, and the secondary market is limited and opaque, according to SCX. I-RECs were registered for only 7% of the 36 GWh of renewable energy generated in Chile last year. SCX is aiming for a 10% market share by 2022. I-REC registration currently costs €1,000 ($1,131) every five year. The cost is likely to decrease as more businesses sign up

Besides Chile, Brazil and Colombia have all been regional trailblazers in renewable energy.

According to Instituto Totum, the issuer of I-RECs in Brazil, despite the lack of mandated renewable electricity mandates, I-REC sales in the country hit 4 million in 2020 and more than doubled to 9.5 million last year, amid increased demand from enterprises that voluntarily report their carbon emissions and wish to reduce their footprints.

Meanwhile, demand for I-RECs in Colombia has skyrocketed. Colombia sold 2.8 million certificates last year, 2.17 million in 2020, and 600,000 the year before, according to ECSIM, the country's certificate issuing company.

According to ECSIM consultant and researcher Edison Giraldo, ten power stations in the country are selling I-RECs: five big hydroelectric projects, four run-of-river plants, and one wind farm. After the local unit of US business AES recently registered a 1,000 MW hydroelectric facility and is slated to begin selling certificates this year, ECSIM claims it will sell roughly 3.5 million I-RECs this year.

Multinationals and big power consumers with local operations in Colombia, as well as corporations registered in worldwide reporting programs, are the key drivers of I-REC demand.

Colombia also has its own renewable energy certificate, Ecogox, which is managed by grid operator XM. The majority of these certificates are negotiated by Celsia, a local power generator with a total installed capacity of 1,854 MW. Celsia stated that, to encourage the usage of renewable certificates, measures must be developed to assist clients who purchase them in attaining their sustainability goals.

In contrast, given Mexican President Andres Manuel Lopez Obrador's proposed power reform, which threatens private-sector investment and the country's climate action by canceling its own clean energy certificate (CEL) scheme, the future of I-RECs in Mexico remains dubious.

The Renewable Energy Certificate (REC) Foundation authorized revised issuance standards in January 2021, allowing renewable energy plants in Mexico that were built after August 2014 to issue I-RECs if they decided not to participate in the CEL program. However, Lopez Obrador's reform bill would abolish all private-sector generation permits and prioritize power dispatch from the state-owned CFE, putting I-RECs and other renewables certificates in jeopardy.

According to the local wind energy association Amdee, if the law is passed, it will affect an estimated US$28 billion in investment across 17,000 MW of renewable power capacity and up to US$11 billion in investment in renewable power projects being constructed in 19 states.

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