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How Big is the Renewable Energy Certificate Market? | AltEnergyMag

The global renewable energy certificate market will exceed a value of about $ 100.96 billion by 2030. The current value of the market was valued at $12.72 billion in 2021. 

The growth of the global renewable energy certificate market is driven by rising demand for the various types of power and the government policies that mandate a company to meet the required targets to use of renewable energy.

According to forecasts Precedence Research, the global renewable energy certificate market will exceed a value of about $ 100.96 billion by 2030. The current value of the market was valued at $12.72 billion in 2021. The CAGR in the years 2022-2030 will be up to 25.9 percent.

The increased pollution levels and deteriorating environmental conditions owing to the rapid industrialization and extensive carbon emission has now mandated the use of the green energy across the industries all over the globe. The burgeoning sales of the solar panels, micro hydro-power plants, and micro wind turbines are supplementing the growth of the renewable energy certificate market.The stringent government regulations regarding the use of renewable energy sources is a significant factor that is expected to drive the growth of the global renewable energy certificate market. The rising investments in the development of hydro power plant that produces electricity of around 100 KW using flowing water sources is supplementing the market growth. The rising preference of the green energy is fostering the revenue generation through the trade of the renewable energy certificates across the globe.

Renewable Energy Certificate Market Report Scope

➢ Market Size in 2030 – USD 100.96 Billion
➢ Market Size in 2022 –  USD 12.72 Billion
➢ Growth Rate – CAGR of 25.9% From 2022 to 2030
➢ Largest Market – North America
➢ Fastest Growing Market – Europe
➢ Companies Mentioned – Central Electricity Regulatory Commission, Green-e Energy, Environmental Tracking Network of North America, Western Area Power Administration, General Services Administration, US Environment Protection Agency, and Defense Logistics Agency Energy
Segments Covered – Energy Type, Energy Type, Capacity, Geography

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Report Highlights

👉 Based on the energy type, the solar energy segment dominated the global renewable certificate market in 2020. This is attributed to the increased adoption of the solar energy across the globe. Further, the rising government initiatives and government investments to develop solar panels and increase its adoption across the globe has fueled the growth of this segment. The rising investments from the private sector to develop the solar power plants on large scale is expected to further foster the growth of the solar energy renewable energy certificate market across the globe.

👉 Based on the capacity, the 5000 KWH segment dominated the global renewable certificate market in 2020.The rapidly growing number of wind and solar farms across the globe owing the rising demand for the renewable energy and rising government and corporate investments is driving the growth of this segment.

👉 Based on the end use, the compliance segment dominated the global renewable certificate market in 2020. The increased government initiatives and stringent norms that compels the various sectors to increasingly adopt the renewable energy sources in an attempt to minimize the carbon emission, acts as a major drive of this segment.

Regional Snapshot

North America dominated the global renewable energy certificate market in 2020. This is mainly attributed to the implantation of stricter government regulations regarding the carbon emissions and development of the renewable energy sources across the North America. The increased demand for the renewable or green power in the region has significantly boosted the market growth in the region. The region is characterized by the presence of several technologically advanced companies that has huge energy requirements that fosters the development of the renewable energy sources. The trade of renewable energy certificate in the nations like US and Canada is gaining traction, which is anticipated to further fuel the growth of the renewable energy certificate market during the forecast period.

Europe is expected to be the fastest-growing market during the forecast period, owing to the burgeoning demand for the green energy across different industries. The rising focus and investments in Europe on achieving sustainability and reducing carbon footprint is perfectly supplementing the growth of the renewable certificate market in Europe.

Market Dynamics

Driver: The rising demand for the green energy

The extensive usage of the fossil fuel has depleted this energy source. Therefore, the need for sustainable and renewable energy sources has increased in the past few years. Moreover, rising concerns regarding the drowning health of the environment owing to the pollution has necessitated the adoption of the green energy across the globe. Hence, the increased demand for the green energy and development of the renewable energy sources is projected to drive the growth of the global renewable energy certificate market during the forecast period.

Restraints: Lack of awareness in underdeveloped nations

There is a lack of awareness regarding the renewable energy certificate in the underdeveloped countries. Moreover, lack of sufficient funds in the underdeveloped nations is restricting the development of various renewable energy sources like hydro power plants and other source of flowing water. This may hamper the market growth in the upcoming years.

Opportunities: Rising government and private investments in the development of renewable power plants

The rising investments of the government and the private sector to develop and build the various renewable power plants is expected to drive the market growth in the foreseeable future. Moreover, the government initiatives in promoting the renewable energy certificates is offering lucrative growth opportunities.

Challenges: Lack of regulation

Lack of proper regulations in the developing and underdeveloped markets is a major challenge that may potentially restrict the market growth in the future.

Renewable Energy Certificate Markets: Institutional framework and Current Performance

In this section, we first examine the institutional structure of  REC markets as well as the main driver—the RPO targets, followed by an estimation of the size of the REC markets, and finally present an analysis of the performance of the REC markets in the first year of operation.

Renewable energy certificate Markets in India—A review

The institutional structure for REC markets

India has a federal structure, where concurrent subjects such as electricity (and hence RECs) are under the jurisdiction of state governments. Thus, though the center can influence policy design and implementation, the final implementation is in the hands of state governments. The REC mechanism involves existing and new institutions from state as well as from the central level. Renewable energy generators undergo an “accreditation” process by the state agencies and a “registration” process with central agencies. The central agencies then “issues” certificates and also oversee the trading activity in power exchanges.

Central Agencies

Central electricity regulatory commission (CERC). CERC is the central regulatory authority driving the REC market mechanism in India. It has developed the institutional and regulatory framework.

Renewable portfolio obligation: The driver of REC markets

The level of RPO target, which specifies a target share of renewables in the electricity mix, is typically driven by the broad policy goals of the nation (emission reduction, energy security, job creation, etc.) as well as the potential for development in the country/state. The use of RPO targets has been widespread around the world. Australia was the first country to introduce mandatory renewable energy targets. The European Commission has adopted
a target of deriving 20% of the final energy consumption from renewable source by 2020 and has established targets for each member state. Sweden has been a forerunner – their quota obligation system aims to reach 49% of by 2020. The US is not far behind – 29 states have RPO targets in place and seven major tracking systems are in operation in seven regions for managing and retiring RECs.

As mentioned earlier, under the 2003 Electricity Act, the implementation of RPO in India is guided by the regulatory provisions, terms and conditions issued by respective SERCs. Pursuant to provisions of section 86(1)(e) of the Electricity Act, each SERC has to fix a minimum percentage for purchase of energy from renewable sources taking into account availability of such resources in the region and its impact on retail tariffs. Several states had earlier specified RPO targets – the RPO limits ranged from as low as 0.8% for Madhya Pradesh to as high as 10%
for Tamil Nadu – but enforcement was not stringent. Also, only instate generation was allowed for compliance purposes.

With the launch of the REC market scheme in 2011, many states made meeting RPO targets mandatory and scaled down their ambitions to more realistic renewable energy addition goals. 8 states – Bihar, Chhattisgarh, Himachal Pradesh, Haryana, Karnataka, Madhya Pradesh Uttar Pradesh and Tamil Nadu – issued notifications that reduced RPO targets from 2011. For example, Madhya Pradesh reduced its target to less than 1% from the previous 10% limit owing to low target achievement in previous years. Table 1 shows the pre- and post- REC market RPO standards in different states as of January, 2012.

Some key points to note are (see the description of obligated entities in the sub-section below):

➢ All states except Sikkim and Arunachal Pradesh had declared their RPO targets.
➢ While some SERCs have specified separate RPOs for different sources, others had chosen to specify a common RPO target
➢ 16 of the 27 states had RPO targets declared only up to 3 years. As we discuss later, long term targets are essential for effective functioning of REC markets.
➢ Andhra Pradesh had declared an RPO of 5% for all distribution companies and captive consumers, but the obligation wouldn’t start till 2014-15.
➢ Only Karnataka has separate targets for distribution companies, captive consumers, and open access consumers

Obligated entities

In India, generally distribution licensees (e.g., public and private  distribution companies), captive consumers and any open access users are obligated by RPO in all the states. These entities can purchase RECs in the power exchanges to meet the RPO in their  respective states or purchase renewable energy directly from renewable generators. In India, many electricity intensive industries such as Cement, Steel, Ferro Alloys, Paper and Pulp etc., are operating their own power plants run by either thermal generation or generation from other resources including renewable.

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