PETALING JAYA: Renewable energy certificates (RECs) as a tool to improve profitability of RE projects are gaining importance.
Affin Hwang Investment Bank Research said there is high demand for solar RECs and there are corporations that would lock in the purchase for a three to five-year period to ensure a consistent supply.
“During the event, various developers shared the importance of the role of RECs in the industry. Besides providing options to corporates to offset their Scope 2 emission, RECs also could be used by developers to offset the impact of system marginal price fluctuations.
“With financiers becoming more informed on the dynamic that RECs provide, it helps to improve the bankability and financing rate of the projects as it will smoothen out the revenue generated by solar photovoltaic PV systems, especially those implemented under the New Enhanced Dispatch Arrangement framework,” said the research firm in a report, following its participation in the recent Malaysian Photovoltaic Industry Association’s Solar Roadshow 2024.
More than 200 participants registered for the event, including representatives from solar equipment manufacturers, developers, financiers, and government bodies.
It notes that solar RECs are also trading at four to five times premium compared to bioenergy and hydro RECs, as solar is perceived as a cleaner option among multinational corporations.
To facilitate the RECs trading, it noted that Bursa Carbon Exchange (BCX) had recently launched the RECs trading feature on its continuous trading platform, featuring solar, bioenergy, and hydro RECs.
According to the research firm, BCX also has set a target to offer global RECs on its trading platform by 2025.
“Previously, REC trading was facilitated by third-party agents or developers directly negotiating with corporate consumers.
“BCX is currently waiving the registration fees for developers, traders, and consumers who would like to onboard its RECs trading platform to encourage participation.”
Following the success of its inaugural hydro RECs auction with Sarawak Energy Bhd in June 2024, the research firm said BCX will organise another RECs auction for solar, bioenergy, and small hydro at the end of November this year.
In the report, Affin Hwang reiterates its positive stance on the sector with the view that the local RE sector stands to benefit from various National Energy Transition initiatives.
However, it said the Corporate Renewable Energy Supply Scheme programme’s prohibitive wheeling charges, disclosed at the end of last month, could potentially discourage significant investments in the sector.
That said, it understands the framework could be further fine-tuned after taking into account input from industry players.
The research firm has “buy” calls on Solarvest Holdings Bhd
, Sunview Group Bhd and Samaiden Group Bhd.
Given Solarvest’s track record of securing and executing solar PV projects, Affin Hwang said the company is one of the frontrunners in securing future utility-scale solar jobs and capacity from government-led initiatives as an asset owner.
“Meanwhile, the group’s Powervest Programme helps facilitate the onboarding of new commercial & industrial customers, creating a consistent job pipeline.
“To offset the fluctuations in its engineering, procurement, construction, and commissioning earnings, the company could also monetise its Powervest assets and RECs, generating ancillary income,” added Affin Hwang.
