Renewable energy has become increasingly important in the fight against global warming and climate change. As a result, countries and corporations worldwide have been investing heavily in renewable energy generation. One of the ways governments encourage investment in renewables is through Renewable Portfolio Standards (RPS), which require a certain percentage of a country’s electricity mix to come from renewable sources.
The RPS is essentially a legally binding contract that sets targets for the renewables sector in a country. The target percentage varies from country to country. For instance, Portugal has set a target of 80% renewable electricity by 2030, while Spain has set a target of 74% by 2030. The United States has set a target of 50% by 2030.
However, meeting these targets can be cheaper for corporations than it is for countries. This is because corporations can use the Renewable Energy Credits (RECs) market to buy renewable energy credits from existing renewable energy plants and use them to meet their RPS targets. RECs are a legal instrument that represents the environmental attributes associated with one MWh of electricity generated from a renewable energy source.
Corporations are focusing on the RPS market because it is filled with potential. A prime example is India, where the market for RECs has grown from around $3.8 million in 2013-2014 to nearly $175 million in 2018-2019. In the United States, companies like Apple Inc., Amazon.com Inc., and Google LLC have been some of the largest buyers of RECs.
However, as corporations take the lead in buying RECs, countries are considering altering legislation around RPS to prevent corporations from using RECs to meet their RPS obligations. For instance, the state of California (United States) has implemented restrictions on the purchase of RECs. The restrictions are designed to ensure that renewable energy projects are built with a direct purchase agreement rather than just over-buying RECs.
Countries are also looking at what they can offer to entice corporations to invest in their renewable energy generation. For instance, in February 2022, Portugal’s Minister of State and Economy announced a package of initiatives to attract investment in renewable energy generation. One such initiative included reducing grid connection costs to zero, making it easier for companies and investors to connect their renewable energy projects to the grid.
In conclusion, while countries’ and corporations’ investment in renewable energy generation is a positive commitment to tackling climate change, the RPS market has highlighted an opportunity for corporations to benefit from existing renewable energy rather than investing in their renewable energy generation. Countries are responding and restructuring their RPS legislation to focus on direct renewable energy purchases, and both countries and corporations are providing incentives to attract investment in renewable energy generation.[ad_2]