Published date: 18 May 2022

More Brazilian companies are seeking information about the I-REC sector and demand is expected to remain firm
Demand for international renewable energy certificates (I-RECs) in Brazil has risen significantly this year, as more local firms seek to reduce their carbon footprints.

I-REC transactions reached 13.2mn from 1 January to 10 May, up by more than 50pc from the 9.2mn transactions in all of 2021, says Fernando Lopes, the director of Instituto Totum, which certifies I-RECs in Brazil. Lopes expects demand to remain strong this year, as companies seek to meet sustainability goals.

“Without I-RECs, a company has to add 100kg of CO2 to its carbon footprint per MWh consumed,” Lopes tells Argus. Demand continues to come from a broad range of sectors, he adds.
Local wholesale power broker Ecom Energia has seen a rise in demand for I-RECs. Many companies still do not understand how I-RECs work, Ecom Energia power generation manager Regis Itikawa tells Argus, but a growing number of businesses are seeking information about them. In the medium term, Itikawa expects demand to increase as more companies understand the benefits of I-RECs.
Itikawa adds that the trading of I-RECs will probably start on local platform BBCE, which hosts wholesale electricity trading.
Demand for I-RECs from local companies, particularly exporters such as meat processors, has been on the rise. “Increasingly, their buyers want to know the carbon footprint of the companies that they buy from,” Itikawa says.
Demand could increase further when Europe starts implementing the carbon border adjustment mechanism, which seeks to mitigate the risk of businesses transferring production to regions with fewer emissions constraints, Lopes says.
There are discussions under way in the European Parliament to allow firms that show the origin of their electricity through I-RECs to lower their carbon tax payments. Lopes sees potential demand from Brazilian steel and aluminum producers if the EU agrees to reduce the carbon tax in the event of renewable power certification being presented.
Because of abundant renewable power in Brazil, companies pay 1-2pc of the total energy costs for an I-REC, or roughly $0.50/MWh, Lopes says. This compares with $10-20/MWh in the US, he says

Generation game

Brazil has 350 power generators certified to issue I-RECs and a growing number are becoming certified to take advantage of the additional revenue stream. Brazil’s largest sugar and ethanol producer Raizen sold 1.54mn I-RECs during its 2021-22 sugarcane harvest, which ended on 31 March. The company has four biomass power plants, a biogas plant and a solar farm certified to issue I-RECs. The company’s goal is to become the largest supplier of I-RECs in Brazil.
The Brazilian subsidiary of French energy company Engie is also investing in I-RECs. The company earlier this month launched a digital platform, named Energy Place, that allows companies to purchase I-RECs when they buy energy on the wholesale market.
The recovery in Brazil’s hydroelectric reservoirs and higher renewables generation means that emissions probably peaked at 120kg CO2/MWh in 2021, Lopes says. He expects this to decline to 70-80kg CO2/MWh as thermal generation falls.

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