Singapore – which is exploring 7.35 gigawatts (GW) worth of clean power deals in Southeast Asia to meet its decarbonisation goals – is looking to develop a framework that recognises renewable energy credits (RECs) from these transactions, in a bid to increase the viability of costly cross-border projects for developers.
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If successful, it could serve as a model for other regions to define what sort of cross-border REC transactions are viewed as credible or permissible, industry players told Eco-Business.
“I think Asean will be quite a good place to start, given the proximity of the countries and the fact that they are at similar stages of their sustainability journeys,” said Lim Tsu May, a business development professional from Saxon Renewables, a subsidiary of Malaysia-based clean energy firm Solarvest.
“The Asean member countries also made a big deal out of the Laos-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP). Since they already want to sell the energy, they might as well use it as a case for beginning a cross-border framework,” she said.
In 2022, Singapore began importing hydropower from Laos through Thailand and Malaysia using existing infrastructure, marking the first multilateral power trade involving Asean member states. The two-year power purchase agreement (PPA) under LTMS-PIP ended last June, where a final agreement for the terms of an extension was due to be reached by end-December, according to media reports.
Antonio Beca Pereira, director of energy management and PPA origination of clean energy firm EDP Renewables APAC, said that recognising RECs generated by cross-border energy projects as akin to being produced within the Singapore perimeter is “vital” as the majority of the off-takers who enable the project through PPA commitments are based in Singapore.
“They will be more inclined to purchase green energy if they are permitted to offset it against their in-country consumption,” said Beca Pereira.
EDP Renewables APAC is one of the five Singapore-based companies managing projects to import 2 GW of renewable power from Indonesia to the city-state within the next five years.
Talks to develop the framework began as early as 2022, when the International Tracking Standard Foundation (I-Track Foundation) – which operates the globally recognised I-REC system – formed a working group on cross-border RECs in Asean, where members aim to “be the first non-EU nations to transact cross-border RECs with RE100 recognition.”
RE100 is a global initiative led by non-profit Climate Group and environmental disclosure platform CDP to bring together firms committed to fully using renewable power by 2050.
I-Track Foundation is among the “like-minded partners” that Singapore has been working with “to study potential pathways to ensure high-integrity RECs,” according to Singapore’s second minister for trade and industry (MTI) Tan See Leng at the republic’s annual flagship energy event last October. He added that other partners include countries like Australia as well as groups like the Asia Clean Energy Coalition, RE100 and Semiconductor Equipment & Materials International (SEMI).
But a timeline for establishing the REC framework is “still being worked out and will be announced once finalised,” read MTI’s press release in October. On Tuesday, MTI and the Energy Market Authority issued a joint statement sharing that Malaysia will be working with Singapore on the framework. The announcement was made at a bilateral leaders’ retreat between the prime ministers of the two countries, and on the back of the first cross-border power import from Malaysia into the city-state where renewable power is coupled with RECs. The electricity trade started last month, under the Energy Exchange Malaysia (ENERGEM) pilot project.
At the moment, RECs from overseas renewable projects are already being traded in Asia, albeit in an unbundled state, meaning users can claim environmental benefits without actually using the 1 megawatt-hour (MWh) of renewable electricity they are each meant to represent.
Under the framework provided by the Singapore Standard (SS) 673, renewable energy claims using cross-border RECs are allowed if the clean power is contractually supplied via a physical interconnection to the city-state’s power grid, or “where sourcing within the same geographical or market boundary is not possible”.
Similarly, RE100 – which generally prohibits its members from using cross-border RECs to meet their targets – has made exceptions for those claimed by countries within a “single market”, like the European Union or the United States, or with “little domestic energy production and import much of their electricity”. Southeast Asian countries are currently not covered under these exceptions.
The new regional framework Singapore is mooting, however, is focused on making bundled RECs possible, where the electricity is physically sold together with the green certificates they represent.
Roble Velasco-Rosenheim, regional director of global partnerships and APAC at I-Track Foundation, told Eco-Business that the physical cross-border trade of clean electricity, paired with corresponding RECs, could “provide tremendous benefits to the region”.
“Some of these benefits include more robust energy security, regional decarbonisation and crucially, the ability of wealthy nations and stakeholders to finance clean power generation in emerging economies,” said Velasco-Rosenheim. “In our view, ensuring that RECs are transacted across borders, alongside physical electricity, will be crucial to supporting the financial viability of such exciting projects.”
Andrew Glumac, head of energy, CDP, also stressed the need for cross-border transactions to be backed by the physical transmission of electricity and accounting systems that enable unique claims to ensure transparency.
The key components to ensure the credibility of renewable energy claims to offset Scope 2 emissions – or emissions from a firm’s electricity consumption – from such transactions “include standardised emissions factors, a robust system for REC, verification and reporting mechanisms, and physical power delivery to avoid double counting,” said Glumac.
Cross-border trade challenges
But this has proven to be a challenge in Southeast Asia, where grids are typically controlled by a single national operator, such as Tenaga Nasional Berhad (TNB) in Malaysia and SP Group in Singapore, said Saxon Renewables’ Lim.
“The single grid is the supplier of both the renewable and non-renewable energy,” she said. “This happens to be a bit of a concern to certain standards or organisations, in that even though they’re paying the green premium and the grid is connected to renewable energy sources, they’re potentially getting brown energy electrons because everything is mixed inside the grid.”
Industry participants have cited such uncertainty around the green attributes of energy imports as potential reasons for the muted response in Malaysia’s pilot auction under ENEGEM to export 100 MW of renewable energy to Singapore, which saw just two of 16 eligible entities participating in the bidding last April.
The framework that Singapore and its partners are formulating therefore needs to be “very clear” about what sort of cross-border transactions it can accept and how to calculate the proportion of green and non-green energy used by a certain corporate power, said Lim.
She added that I-REC and RE100, which are currently the “market drivers” of unbundled RECs, would be important players to get on board the new framework.
But established frameworks, like RE100 and Science Based Targets initiative (SBTi), “may have additional criteria for what they will require in order to recognise a cross-border transaction,” said I-Track Foundation’s Velasco-Rosenheim.
“We are in conversation with several of the involved actors to determine if new guidance would require the input of additional data onto the REC itself,” he shared.
So far, CDP is the only major disclosure standard that has released a working paper defining its aspirations for what may be considered a credible cross-border transaction in the future. But Glumac said that incorporating all the requirements and developing an internationally-recognised standard will take time.
“The APAC framework must accommodate diverse regulations, less mature renewable energy markets, and limited grid interconnectivity, focusing on capacity building, infrastructure development, and policy support,” he said.
Amendment note: Paragraph 12 of the story has been updated to reflect the latest developments from the Malaysia-Singapore leaders’ retreat on 7 January 2025.
