A renewable energy certificate (REC) is one tool companies can use to support credible renewable electricity claims and reduce reported Scope 2 greenhouse gas (GHG) emissions, or indirect emissions generated by energy production. However, as scrutiny of claim integrity increases, what role should RECs play in a credible energy procurement strategy? We sat down with carbon and sustainability specialist and Trialogue Associate Consultant Marco Lotz to unpack where RECs fit in a credible energy procurement strategy.
For readers new to this, what exactly is a REC and why are they used by companies pursuing renewable energy and net-zero targets?
A REC represents the clean energy attribute of one megawatt-hour of renewable energy generation. It can be bundled with the electricity, often through a power purchase agreement (PPA), or sold separately as an unbundled certificate. Companies use RECs for Scope 2 market-based accounting and RE100 claims because they are quicker and easier to procure than on-site generation or long-term PPAs, and much easier to generate compared to most internationally accepted carbon credit standards. The International Renewable Energy Certificate (I-REC) market is now well established in South Africa and across the continent.
The central criticism is additionality: whether the certificates are purchased from existing or new renewable energy facilities. What does that mean and why does it sit at the heart of the credibility debate?
Additionality comes down to a simple question: Did the renewable generation happen because someone bought the certificate, or would it have happened anyway? If a wind farm was already planned or built and profitable, buying its certificates does not add new capacity. The risk is that poorly constructed RECs do not truly incentivise the construction of additional renewable energy capacity, but simply pay more to generate capacity that would have existed anyway. That gap between claim and physical reality is exactly what auditors and standard setters are now scrutinising, and poorly constructed claims are starting to be qualified.
Where do RECs genuinely add value and where should companies be cautious?
Not all RECs are equal. Bundled certificates sold with the electricity, long-term contracts that underwrite project financing and certificates from genuinely new builds can carry real additionality. They can help fund projects in early or marginal markets. The main concern is cheap, unbundled certificates from existing assets in oversupplied markets, especially where there is poor geographic or temporal matching of supply and demand. Transparency about what was bought matters as much as the volume claimed.
Some commentators argue that RECs should be replaced altogether by high-integrity carbon credits. What is your take on that framing?
RECs, as proof of purchase of the underlying additional renewable energy capacity and the resulting generation, are of great value. Carbon credits carry their own additionality, permanence and verification questions. One should ensure that only real and verified carbon credits are supported. Unlike most forms of RECs, high-quality carbon credits under established international standards already meet additionality and other quality requirements, as verified through rigorous external audits. The lesson is to apply the same integrity lens whichever instrument you choose.
What is specific about the South African and broader African context that companies should keep front of mind in this discussion?
South Africa is a particular case because the Eskom grid is roughly 80% coal-fired, so the carbon intensity of grid electricity is high. Electricity wheeling, corporate PPAs and a maturing local REC market can support new renewable build, but companies should avoid relying on certificates that do little for the local grid or a just transition to the low-carbon economy. Buyers of RECs should also ensure that the double-counting risk, where green attributes from the same generation are claimed by both a municipality, for example, and a corporate tenant, is contractually addressed.
Practically, how should a company be thinking about RECs as part of a credible decarbonisation and disclosure strategy?
RECs have a role to play, but they should not be the centrepiece of a credible decarbonisation strategy. Companies should prioritise measures that change the electricity they use, starting with on-site clean generation and additional PPAs that help bring new renewable capacity onto the grid. Where direct procurement is not possible, bundled, high-quality RECs with clear additionality and strong geographic and temporal matching are more defensible. Unbundled certificates from existing projects should be treated as a last resort and disclosed transparently. They may not create an immediate compliance problem, but they do create future risk as standards, assurance expectations and stakeholder scrutiny tighten. Defensible, evidence-based claims are now the price of entry.
For more information, contact David Krone
