How to Use Renewable Energy Certificates?

Renewable energy certificates are one of the fundamental tools of the market-based method in Scope 2 emission reporting. GHG Protocol Scope 2 Guidance defines in detail how certificates should be used. Proper use ensures the reliability of emission claims.

Certificate Types

Different certificate systems are used in different regions around the world.

I-REC (International Renewable Energy Certificate)

An internationally valid certificate system that can be used worldwide. Managed by the I-REC Standard Foundation.

Scope: Valid in more than 50 countries. Used in Turkey and many other developing countries.

Unit: 1 I-REC = 1 MWh renewable electricity

Technologies: Solar, wind, hydroelectric, geothermal, biomass, ocean energy

GO (Guarantee of Origin)

Certificate system used in the European Union. Regulated under the EU Renewable Energy Directive.

Scope: EU member countries and European Economic Area (EEA) countries

Unit: 1 GO = 1 MWh electricity (can be for renewable or other sources)

Feature: GOs can be issued not only for renewable but also for nuclear and fossil sources, but renewable GOs are tracked separately.

REC (Renewable Energy Certificate) - North America

Certificate system used in the United States and Canada.

Scope: USA and Canada

Unit: 1 REC = 1 MWh renewable electricity

Registry systems: WREGIS, M-RETS, PJM-GATS, NEPOOL GIS and others

TIGR (Tradable Instruments for Global Renewables)

Global certificate system managed by APX. Can be used as an alternative to I-REC.

Scope: Global

Feature: Can be used in some regions not covered by I-REC

Temporal Matching Requirements

Matching certificates with consumption includes important rules in the time dimension.

Annual matching

The most common practice is annual-based matching. Consumption in the reporting year is matched with certificates produced in the same year or very close period.

GHG Protocol requirements:

Certificate must be produced at most 12 months before or after consumption period
If reporting year is 2024, 2023-2025 vintage certificates are acceptable

Monthly or quarterly matching

Stricter matching strengthens timing alignment. Some companies and standards prefer this approach.

Application: Consumption in each month or quarter is matched with production in that period.

RE100 direction: RE100 initiative has set a roadmap for transition to hourly matching by 2030.

Hourly matching (24/7 CFE)

The strictest type of matching. Consumption in each hour is matched with renewable production in that hour.

Challenge: Since there is no solar energy at night, storage or different source combinations are required.

Trend: Companies like Google and Microsoft have set 24/7 Carbon-Free Energy (CFE) targets.

Geographic Market Boundaries

Geographic validity of certificates is a critical dimension of market-based reporting.

Same market rule

GHG Protocol requires the certificate to be within the "same market" as consumption. Market definition relates to the electricity grid or certificate trading region.

Europe example: GOs have free circulation across the EU. Consumption in France can be matched with GO from Spain.

US example: There may be restrictions between regional grids. Consumption in the western grid may not be matched with eastern grid REC.

Market definition for Turkey

Turkey is covered by I-REC. For consumption in Turkey:

Turkish-sourced I-REC is preferred
Neighboring country I-RECs should be evaluated according to market connection
Distant country I-RECs may not meet GHG Protocol criteria

Retirement Procedure

Certificate retirement prevents double counting and secures the claim.

What is retirement?

Retirement is the recording that the certificate has been permanently used. Retired certificates cannot be resold or transferred.

Retirement steps

Certificates are transferred to the buyer's account in the registry system
Buyer requests retirement
Retirement reason is specified (e.g., "for 2024 Scope 2 reporting")
Registry system retires certificates and issues document

Retirement evidence

The following documents should be kept for verification and reporting:

Retirement certificate or declaration
Certificate serial numbers
Production period and location
Retirement date
For which consumption it was retired

Residual Mix Concept

Residual mix is the emission factor of electricity remaining in the grid after certificate sales.

Why is residual mix important?

Certificates represent the "green attribute" of renewable electricity. When this attribute is sold, electricity remaining in the grid has higher carbon intensity.

Example calculation:

Grid average emission factor: 400 g CO2e/kWh
Renewable share: 30%
Residual mix (after renewable removal): ~570 g CO2e/kWh

Residual mix usage

In market-based Scope 2 calculation:

Certified consumption: Related certificate factor (generally zero)
Uncertified consumption: Residual mix factor

AIB (Association of Issuing Bodies): Publishes residual mix factors in Europe. No official residual mix has been published for Turkey yet.

PPA vs Certificate Differences

Power Purchase Agreement and certificate are different mechanisms.

PPA (Power Purchase Agreement)

Long-term purchase contract with electricity producer.

Types:

Physical PPA: Includes physical electricity delivery
Virtual/Financial PPA: Provides price guarantee, may not include physical delivery

Validity for Scope 2: PPA alone is not sufficient for market-based claims. Certificates (GO, REC, I-REC) must also be obtained and retired under PPA.

Certificate (unbundled)

Certificate traded separately from electricity.

Advantage: Flexibility, can be sourced from different sources.

Criticism: Additionality is questioned. Buying certificates from existing facilities may not trigger new renewable investment.

Additionality Evaluation

Additionality questions whether certificate purchase contributes to creation of new renewable capacity.

Why is additionality debated?

Buying certificates from an existing, fully depreciated hydroelectric plant may not incentivize new investment. In this case, the certificate transfers the "green attribute" but its atmospheric impact is limited.

Additionality criteria

Features sought for high additionality:

New facilities (commissioned within last 5-10 years)
Financed outside incentive mechanisms
Would not be economically viable without certificate revenue

Corporate preferences

Some companies consider additionality criteria beyond reporting requirements:

RE100 supports tools that incentivize new capacity
Some investors request additionality evidence

Cost Considerations

Certificate costs vary according to source, location, and market conditions.

Price ranges (2024 reference)

I-REC (global):

Hydroelectric: 0.5-2 USD/MWh
Wind: 1-4 USD/MWh
Solar: 1-5 USD/MWh

GO (Europe):

Hydroelectric: 0.3-1.5 EUR/MWh
Wind: 1-3 EUR/MWh
Solar: 1-4 EUR/MWh

REC (USA):

Large variation by region
1-50+ USD/MWh range

Factors affecting price

Source type (solar/wind generally more expensive than hydro)
Facility age (new facilities premium priced)
Supply-demand balance
Regulatory requirements

Scope 2 Reporting Integration

Certificates are integrated into Scope 2 market-based calculation.

Dual reporting

GHG Protocol requires both methods to be reported together for Scope 2:

Location-based: Grid average emission factor is used. Certificate effect is not reflected.

Market-based: Certificate, PPA, or supplier-specific factors are used.

Calculation with certificates

In market-based calculation:

Certified MWh × 0 (or certificate factor) = Certified emissions
Uncertified MWh × residual mix factor = Uncertified emissions
Total = Certified + Uncertified

Documentation requirements

Documents to be kept for Scope 2 reporting:

Electricity bills (consumption amount)
Certificate retirement documents
Matching table (which certificate to which consumption)
Emission factor sources
Residual mix reference

Verification Preparation

Preparation recommendations for verification of certificate use:

Documents

All certificate retirement documents available
Serial numbers verifiable
Production periods match consumption
Geographic scope appropriate

Calculation

Market-based and location-based calculated separately
Residual mix factor sourced
Matching table ready

Consistency

Methodology consistent across years
Changes explained

Conclusion

Renewable energy certificates are the fundamental tool of Scope 2 market-based reporting. Proper use requires temporal matching, geographic compatibility, retirement procedure, and documentation.

Certificate type selection should be based on company location and objectives. PPA and certificate differences should be understood. Additionality is increasingly being questioned.

GHG Protocol requirements should be the foundation, dual reporting should be applied, and sufficient documentation should be provided for verification. A systematic approach increases reporting reliability.

How to Use Renewable Energy Certificates?