T-REC – Brief introduction of Renewable Energy Certificate and Quality Label

Taiwan Renewable Energy Certificate (hereinafter referred to as T-REC) has been issued the first batch of certificate in May this year (2017), it marked a new milestone for Taiwan to promote the renewable energy. To establish the REC system is to prove the use of renewable energy and the environmental benefit thereof via certificate after verifying the equipment of renewable energy and the electricity generation capacity. At current stage, the government encourages the use of renewable energy by Feed-in Tariff (FIT) policy, offers a policy inducement through a higher subsidy amount in order to encourage the non-governmental enterprises to invest in the construction of renewable energy power generation plant; such a concept is clear and easy to understand and people have a high degree of awareness as well as acceptability. The subsidy policy has its necessity toward the establishment of renewable energy market in the beginning stage; however, for a long-term consideration, it still needs to go back to the competitive mechanism of market, and takes the certificate system to substitute the subsidy policy. Taking the Germany for example, the government has successfully sold the offshore wind turbine power generator with zero subsidies by tender.

Concerning the REC system, such a system can prove the use of renewable energy and the environmental benefit created thereof via certificate; as for the subsequently environmental benefit to be the subject matter for trade, although such a trade has been putting into practice in various countries in Europe and America for many years, it is still a brand new and comparatively unfamiliar concept to Taiwan. And therefore, it is further vague and unfamiliar of another certificate-related system – Renewable Energy Quality Label. Both systems are the strategic tools for promoting the renewable energy. Owing to the lack of understanding about these two tools in our country, the writers have paid a special visit to EKOenergy (Renewable Energy Quality Label) Association at Finland in North Europe that has been well developed and mature in EU, and discussed with the Secretary General Steven Vanholme about the current situation of development and the faced challenge of REC and EKOenergy label in Europe. It is hoped that the introduction in this text can let the industrial/governmental/academic circles and the public have a better familiarity and understanding about the REC and Quality Label; and then assist the government in promoting the policy.

REC can be used to provide the identity information mainly focusing on a specific unit quantity of regenerated electricity and guarantee that electricity is generated from a certain specific source that uses renewable energy to generate electricity. The available information include: location of electricity generation facility, facility owner, electricity generation mode, electricity generation capacity, date starting the operation of electricity generation facility, and the time generating the electricity, etc. Therefore, REC can be regarded as the proof of identity for the product item of regenerated electricity; meanwhile, it also points out clearly that this renewable energy is able to provide the environmental benefit with zero carbon emission. The renewable energy power generation plant can provide everyone with the needed electricity (the basic function for all power plants) and the identification given from the certificate system; moreover, since this identification also includes the authentication of the environmental benefit, therefore, REC can be unbundled from the electricity itself and proceeded the certificate trade (that is, to use the environmental benefit to trade the carbon reduction) singly in EU. Several items of REC are briefly introduced below:

• 1. T-REC (Taiwan-Renewable Energy Certificate)
  Refers to the REC system in Taiwan promoted by the National Renewable Energy Certificate Center with its pilot implementation started this year (2017); the renewable energy equipment and its electricity generation capacity will be verified by a third-party unit as the proof of identity for green electricity; and its purpose is to increase the use of renewable energy and facilitate the greenhouse gas reduction.
• 2. REC(Renewable Energy Certificate)
  Refers to the REC system adopted by American renewable energy market; the certificate represents the environmental benefit of electricity and the non-electricity attributes. One unit of REC stands for the environmental benefit of 1MWh regenerated electricity, and the certificate can be used to track the mode to generate electricity and the source of electricity generation.
• 3. Guarantee of Origin (GoO)
  Refers to a voluntary system applied to European Union, it provides the green electricity in specific unit quantity with guaranty for its power generation source of regenerated electricity. GoO is enacted by the EU Directive 2001/77/EC that specifies that EU members can follow this Directive to establish their respective GoO system and provide the evidence related to the regenerated electricity, such as the electricity source, electricity generation date and location, etc.
• 4. I-REC(International Renewable Energy Certificate)
  Refers to a tradable contract-type tool used in an area where lack of REC and GoO. One unit of I-REC stands for the environmental benefit of every 1MWh regenerated electricity, and it is the tool for electricity consumers to declare their using of the regenerated electricity. The electricity generation and the use information of the regenerated electricity can be traced and verified from an open system.

For renewable energy quality label, it is to be attached to the REC as a derivative tool for explaining the additionality of renewable energy itself. Likewise to the concept of Carbon Credit, no matter they are CDM, Gold Standard, or VCS, etc., contributions made by each unit of them are identical; nevertheless, as differentiated from their additionality, there will be high & low price differential. Currently there are many kinds of renewable energy quality labels internationally; including the Green-e (schemed and managed by American Center for Resource Solutions), OK Power (managed by Hamburg Institute), and EKOenergy, etc. The Renewable Energy Quality Label will be formulated the Criteria for Issuance (that is, to add its additionality) by the label- issuing institution; only the certificate eligible to the standards and Criteria can be granted the use of the label. Taking the EKOenergy quality label promoted by Secretary General Steven Vanholme for example, to obtain the EKOenergy quality label from the Association, besides obtaining the GoO firstly, the certificate shall be further reviewed by am Association-approved Non- Governmental Organization in Environmental Protection category so the EKOenergy quality label can be granted provided that certificate passes the review. In another word, the additionality thereof is derived from the review against the certificate by the NGO. Consequently, the renewable energy label must be attached to the REC; it cannot exist alone as illustrated in the following figure:

Let’s take an example of our daily life for conceptual comparison. For instance, when we are going to purchase a family car, the laws & regulations demand the driver seat should be installed an air bag; therefore, no matter what model it will be, the air bag at the driver seat is a standard equipment; however, it is not that every car will have 6 pieces of air bag, they are optional equipments; and no matter what it will be, the optional equipment still have to be installed in the car, otherwise, the air bag has nothing different from the general balloon. In other words, REC can be deemed as the standard equipment to the regenerated electricity market to let the users understand the information about the detailed identity and source of regenerated electricity and provide the proof for facilitating the proceeding of trade. And the renewable energy quality label can be regarded as the optional equipment to the regenerated electricity; it can be opted for addition to prove that regenerated electricity complies with the label-tightened standard of additionality according to the need of user. Therefore, it is not really necessary just like purchasing the optional equipment, the Renewable Energy Quality Label is not the necessary condition to the environmental benefit of regenerated electricity or the REC; on the contrary, REC is the necessary condition to the Quality Label.

The comparison between the REC and the Quality Label is briefly introduced in the table below:

	Renewable Energy Certificate	Renewable Energy Quality Label
Property	Objective fact	Subjective recognition (determined by the additionality)
Existing way	Exist alone	Has to attach to certificate
Time point to appear in the electricity market	Appear at beginning stage of market	Produced to cope with the differentiated demand
Existing quantity	Large quantity	Small quantity
Price	Lower price	Certificate price is increased after being attached the Label
Issuing cost	Inexpensive issuing cost	Expensive issuing cost

During the process of electricity market liberalization and regenerated electricity development, it needs REC to stimulate the market; therefore, at the development stage for the liberalization of electricity market in our country, it should let the foundation of REC market be well established, preferentially achieve two basic functions established for certificate: To prove the use of renewable energy and the environmental benefit thereof. After having well-established REC market, subsequently lead in the Renewable Energy Quality Label System to supplement the certificate with more additionality to the environmental requirements, enhance the differentiation of certificate market and environmental attribute in order to accomplish the ultimate objectives of electricity market liberalization and environmental quality enhancement.”