The International REC Standard Foundation had the opportunity to interview Amy Zhang from Gaia Environment on I-RECs market developments and growth in Southeast Asian countries. Gaia Environment (formerly Ginga Environment (S) Pte Ltd) helps organizations offset their carbon footprint and lower greenhouse gas emissions through carbon credits and RECs. This interview gives the perspective of a local trader in these developing markets.
Tell us about how Gaia got started and where RECs fit into your broader business scheme.
We established our business back in 2007 in the Carbon Offset market, which remains one of the main markets we cover. We originate and trade offsets generated from different types of projects from all over the world, and in 2014 we started to receive inquiries on RECs. Although it took a few more years to see the demand grow, RECs are becoming an invaluable part of our business strategy.
What countries are you seeing the most I-REC activity in and how do you see this evolving over time?
Demands for I-RECs in China, Malaysia, Singapore, Vietnam, Indonesia, and Thailand are always active and strong. Though we have seen a big gap between demand and supply in Singapore, especially in 2020. In the future, we expect the market change to be more driven by the regulations of each country, even though this may cause restrictions to REC transactions or create uncertainty. Without the interruption of national regulations, we foresee the REC market to continue growing. We see the benefit in having standardized tracking best practices as facilitated by the I-REC Standard in supporting governments long-term in their REC market and policy design.
How has the market changed over the past five years and what changes are you anticipating in the next five?
We have seen more countries, more projects, and more participants wanting to get involved in the REC market in the past five years. With more end-buyers approaching their yearly commitments on renewable energy targets, we see an increase in demands, as well. However, we expect that the limited renewable sources and nations’ regulations related to NDC are going to be the key influencers in the market over the next five years. Just like we have seen in the carbon offset market, RECs may turn to a seller’s market in a short time in many countries and it is for this reason we need to support organizations to ensure there are sufficient focus on the procurement of renewable electricity.
A large part of working with I-RECs is connecting with local stakeholders including sellers, buyers, and governments. What sort of developments have you seen among these stakeholders recently?
The I-REC standard has done a good job communicating with stakeholders, especially on building and maintaining an open dialogue with governments, local stakeholders, and industry organizations. Our expectation for the future is that we, as traders and market players, can support the I-REC Standard in coordination with national authorities in potential requirements to procure renewable electricity within the country of operations or abroad.
What buy-side sectors are you seeing the most activity from (tech, clothing, food and beverage, etc.) and what sort of products (bundled, unbundled, PPA, etc.) do you is in the highest demand as of now?
Tech and manufacturing have the highest activity in terms of sourcing renewables. More and more clients are looking for physical PPAs with attributes included – where the market allows – while the majority still end up sourcing attributes alone through short-term or long-term agreements as the PPA markets are not yet available in many I-REC countries.
Are there any unaddressed challenges you see in the I-REC market at the moment?
In the changing and growing market, a challenge could be how I-REC participants maintain their current positions in the market. We recognize that the I- REC Standard Foundation supports the market, but they cannot control all the changes and as such a focus on where individual organizations focus their business will be important.
Are there any other market developments you think readers should be aware of?
Yes, it is very clear that country and national regulations are crucial. My advice is to work with the I-REC Standard Foundation and other market participants to ensure the continued understanding of national authorities and growth.