Argus launches first China international renewable energy certificate prices

London, 20 April 2023

Global energy and commodity price reporting agency Argus has today launched the world’s first international renewable energy certificate (I-REC) prices for China, shedding light on renewable power premiums for the world’s largest certificate issuer and electricity production base.

I-RECs allow energy suppliers and consumers to label the source of their procured energy as the global economy moves towards broader electrification. They can be traded as bundled products, together with power itself, or as detached certificates. Buying certified energy helps consumers — often utilities, corporates, manufacturers and industrials — achieve their net zero targets under various carbon disclosure mechanisms.

Argus chairman and chief executive Adrian Binks said: “Expanding our I-REC coverage to include China, the world’s largest market, introduces essential new pricing transparency that enables energy producers and buyers to use independent price references to index supply agreements, manage risk and plan energy sales and procurements. This new insight plays an important role in driving the transition by helping to identify the source and the cost of decarbonisation efforts.”

Argus’ extension of its I-REC pricing offering to China coincides with the launch of the first local I-REC issuing body in China, after similar developments in Brazil and Turkey drove sharp increases in liquidity in those markets.

I-REC Standard Foundation executive director Jared Braslawsky said: “We are pleased to see Argus support the maturing of an internationally recognised market for I-RECs. With the introduction of CSG Carbon Asset Management as the local issuer we are, as in every jurisdiction, working towards robust and reliable implementation with the relevant local stakeholders and national recognition. Looking towards the future with renewable hydrogen and carbon border mechanisms now being discussed and introduced in the EU, UK, and the US among others, it is more important than ever that we work towards a standardised and internationally accepted mechanism of tracking the origin of power used in these products.”

China is the largest global I-REC market, accounting for nearly 45pc of global certificate supply and almost one-third of global demand last year. Chinese I-REC demand surpassed 30TWh in 2022, up by around 50pc from 2021, and has significant growth potential given the size of China’s power consumption, which was 8,640TWh in 2022, according to government data.

Chinese wind certificates for 2022 vintage were trading at around $0.70/MWh in March, compared with Turkish wind at $0.45/MWh and Brazilian wind at $0.40/MWh. Certificate prices remain a fraction of the cost of total energy supply in most markets.

The addition of China to existing I-REC pricing for the Brazilian and Turkish markets enables Argus to provide transparency for the world’s three largest markets. I-REC markets are growing rapidly, with the number of certificates being issued globally rising to nearly 200TWh in 2022 from just over 70TWh a year earlier. I-REC demand in the first quarter of 2023 increased by nearly two-thirds compared with the same period last year to 60TWh, with Brazil, China and Turkey remaining the largest consumers.