Renewable Energy Certificates

RECs : RENEWABLE ENERGY CERTIFICATES

What's a REC

Think of it like a “green proof-of-origin sticker.”
Every time a wind or solar farm makes 1 megawatt-hour (MWh) of electricity (that’s 1,000 kWh), it also creates 1 REC. The actual electrons go into the mixed grid, but the REC is the receipt that says, “this much clean power was made.”

i.e A REC is like a green receipt. The electrons mix into the grid, but the REC is the proof that clean power was produced.

What RECs are used for (Scope 2)

Your Scope 2 footprint is the CO₂ from the electricity (and purchased steam/heat/cooling) you buy. The emissions happen at the power plant, but they’re counted to you because you used the energy.

Companies buy RECs to cover their Scope 2 emissions — that’s the CO₂ from the electricity they purchase. When a company buys and retires RECs equal to its electricity use, it can credibly say, “our power is matched with renewable energy,” even though it’s still plugged into the normal grid.

You don’t file RECs to a government office—you retire them in a recognised registry and then use that evidence in your normal reporting.

Who you report to (and why)

Your annual reports (Integrated/Sustainability/ESG): to show progress on renewable electricity and Scope 2 reductions (credibility with customers, investors, lenders).
Disclosure platforms: e.g., CDP (Carbon Disclosure Project) and similar supplier scorecards your customers send you.
Accounting frameworks: you report Scope 2 two ways per the GHG Protocol—location-based (grid average) and market-based (using your RECs/PPAs).
Assurance/auditors: they check the paper trail behind your claims (REC serials, vintage, retirement certificates, MWh matching).
Export compliance (if relevant): for things like EU CBAM, your embedded-emissions files include electricity data; RECs help lower your market-based factor.

How it works (simple steps)

How RECs are issued and used:

A wind/solar plant generates 1 MWh and injected into the grid. → creates 1 REC
Each REC is time-stamped; the generator receives it and can sell it to a buyer.
You use electricity from the grid.
You buy and retire enough RECs to match your use. Retiring that REC symbolises that the buyer matched their electricity use with renewable energy produced during that specific period.
You can report that portion of electricity as renewable to reduce your Scope 2 footprint.

Where a REC can be used:

RECs can only be used where there’s a transmission link to renewable sources (e.g., a national or interconnected grid). In practice, that means RECs should be produced and retired in the same recognised geographic/market region.

Quick example: Use 10 MWh this year → buy 10 time-stamped RECs from a wind or solar project on your grid → retire them → you can report that electricity as renewable (market-based Scope 2).

How South Africa monitors Scope 2

Reporting: Certain facilities must report greenhouse gases to government; purchased electricity (Scope 2) is standard in corporate inventories.
Carbon price pass-through: Carbon tax is charged at generation and reflected in electricity tariffs, so high-carbon power becomes more expensive over time.
Climate planning: The Climate Change Act brings carbon budgets and mitigation plans; failing administrative requirements can trigger penalties.
Disclosure pressure: JSE/ISSB-style reporting expects clear Scope 2 data—investors and banks increasingly reward credible plans and penalise inaction.
Incentive: Section 12L (energy-efficiency tax deduction) encourages kWh savings, reducing Scope 2.

Key Difference between Carbon Credits & RECs?

Difference between a Carbon Credit and a REC.png

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