The Upshot with Kang Jen Wee: Catalysing Asia's Green Transition through Renewable Energy Certificates
The Upshot is a content series by Infrastructure Asia to profile key leaders in the industry. We dive deep into their areas of expertise to present expert opinions and thought-provoking perspectives on the most pertinent aspects of sustainable infrastructure development.
The electricity powering your device right now could come from various sources — a coal plant, a wind farm, or anywhere else — and it can be challenging to determine its origin. Whether generated from renewable sources or coal-fired plants, electrons flow indiscriminately into the grid before reaching end users. Traditionally, energy purchases rarely account for the source of electricity production. Renewable Energy Certificates (RECs) offer a way for businesses to verify if the energy purchased is derived from a credible renewable energy source. But how does this help shape Asia’s green transition?
To explore this question, we spoke with Kang Jen Wee, Founder and Chief Executive Officer of REDEX. With over 15 years of experience in the renewable energy sector, Jen Wee recognised an opportunity to bridge the gap between companies keen to decarbonise and renewable energy providers. This led him to establish REDEX, which offers solutions that connect buyers with sellers of renewable electricity through the exchange of RECs.
RECs as catalysts for renewable energy development
Southeast Asia has been ramping up renewable energy generation, and in line with this, the market for RECs is also gaining traction. Between 2019 and 2023, solar and wind REC issuances from Southeast Asia surged by almost 13 times, outpacing the global average of nine-fold growth. However, Jen Wee pointed out that REC pricing varies considerably across Southeast Asian countries, reflecting differences in market maturity, demand and regulatory environments.
Despite these pricing disparities, the overall trend for renewable energy projects is promising. The increasing urgency of the green transition has boosted the internal rate of return (IRR) for renewable energy projects over the past decade. This improvement, driven by technological advancements, policy incentives and declining costs, has made renewable energy projects more financially viable. As a result, they are a more attractive investment compared to traditional coal power plants, which face rising regulatory, environmental and economic challenges. Jen Wee elaborated on this shift, "In the past, the IRR of renewable energy plants could be at single digits, compared to the more profitable double-digit IRR which coal plants typically offered. However, today, we're seeing IRRs of renewable energy plants far exceeding those of coal power plants — making them much more attractive for investors."
To capitalise on this opportunity, he stressed that governments need to balance their priorities to support local industries while attracting foreign investment and developers. He noted that while local content requirements play a valuable role, they should be carefully managed to create suitable jobs while avoiding unintended impacts on project viability.
In such cases, Jen Wee explained that environmental commodities like RECs can enhance project viability. "RECs help create a separate income stream for renewable energy projects," he explained. "In markets with high REC demand, like Singapore, REC prices can be substantial. This additional income can create other positive impacts such as lowering the cost of power while ensuring that investment return requirements are met. This helps to make marginally bankable renewable projects more financially viable.”
Case study on Malaysia’s approach to RECs
To further illustrate the benefits of RECs, Jen Wee discussed how Malaysia has implemented an innovative system for renewable energy development and REC utilisation. The country’s largest utility company, Tenaga Nasional Berhad (TNB), through its retail subsidiary TNBX, has set in place policies to support the sustainability goals of corporates in Malaysia. Part of their approach includes the national Green Electricity Tariff (GET) programme, launched in November 2021, which offers electricity bundled RECs at a fixed rate to energy consumers.
What makes their approach effective, Jen Wee explained, is the government's tender process for solar projects. By evaluating bids solely based on cost while retaining ownership of the solar plants’ RECs, the government can auction these certificates through TNBX’s Malaysia Green Attribute Tracking System (mGATS). This platform provides open and transparent access to RECs at optimal prices for organisations that need them most.
Through mGATS, organisations can acquire RECs that not only fulfil their environmental, social and governance (ESG) commitments, but also meet the reporting standards of globally recognised establishments such as RE100 and CDP and/or other major reporting standards.
These demonstrate how RECs can be effectively integrated into national energy policies while supporting corporate sustainability objectives.
RECs vs carbon credits
To provide clarity on how RECs fit into the broader sustainability landscape, Jen Wee discussed the key distinctions between RECs and carbon credits. "One of the differentiating factors between carbon credits and RECs is the concept of additionality," he shared.
Carbon credits are bought to offset an organisation's carbon emissions and must demonstrate that the emission reduction would not have happened without the credit purchase. RECs, on the other hand, help organisations ensure their electricity comes from renewable sources, regardless of whether the project requires REC revenue to operate. This is accompanied by the ability to trace the electrons from the source to the consumption point.
He also highlighted how RECs specifically address Scope 2 emissions, which are indirect emissions resulting from the use of purchased electricity. By purchasing RECs, companies can claim that the electricity they consume is matched by renewable energy generated elsewhere, thereby supporting renewable energy production and reducing the impact of their Scope 2 emissions.
On the other hand, carbon credits have a broader application, allowing companies to offset emissions across Scope 1, 2 and 3. Carbon credits enable companies to invest in projects that reduce or capture carbon elsewhere, helping to mitigate their total carbon footprint across all scopes.
Hence, RECs and carbon credits serve fundamentally different purposes in a company's environmental strategy. Jen Wee noted that the growth of RECs has been largely driven by corporate sustainability initiatives, like the RE100. As such, organisations often turn to RECs as a key mechanism to meet their goals.
The growing potential of distributed solar
Looking ahead to what is in store for the REC space, Jen Wee highlighted how infrastructure constraints are driving a significant shift toward distributed solar photovoltaic (PV) deployment. As countries face challenges in upgrading and expanding their grid infrastructure to accommodate large-scale renewable projects in remote areas, distributed solar installations have seen significant growth in the past few years. The International Energy Agency (IEA) projects that such installations will drive much of global renewable energy growth in the coming decade.
Distributed solar, particularly rooftop installations, offers several advantages in addressing these infrastructure challenges. Jen Wee explained, "Beyond utilising otherwise underutilised rooftop spaces, these installations significantly reduce pressure on the (national) electrical grid by generating power where it's consumed.” This is particularly valuable in urban areas where electricity demand is highest, as it eliminates the need for substantial grid infrastructure investments that would otherwise be required to transport power from remote utility-scale installations. The distributed approach also promotes energy self-sufficiency, providing businesses and communities with more control over their energy supply while enhancing grid resilience.
However, despite these advantages, a key challenge in the distributed solar space is the economics of REC registration. "The small scale of rooftop solar installations makes traditional REC registration economically unfeasible, as the revenue potential often does not justify the high registration costs," Jen Wee noted.
To address this, new technological solutions are being developed to make REC registration more accessible and cost-effective for distributed solar installations. For instance, REDEX enables rooftop solar to be registered (for RECs issuance) at a low cost, enabling more distributed solar installations to generate better returns.
Benefits of cross-border RECs trading
While the current focus of the REC market in Asia is primarily on domestic growth and corporate decarbonisation efforts, Jen Wee also sees opportunities for cross-border trading in the future.
He described a scenario where price disparities between markets might drive renewable energy development across the region. "In Singapore, both electricity and REC prices are higher compared to neighbouring Southeast Asian countries," he shared. Due to the price disparities of RECs between markets, this could create strong incentives for renewable energy development across the region.
This potential dynamic, according to him, "illustrates how RECs, driven by demand from higher-priced markets, can enable more renewable power plants to be built in countries with lower costs and better access to natural resources like wind and water." He believes that this cross-border approach could be crucial for Asia's green transition, allowing countries to leverage their respective strengths and resources in the pursuit of regional sustainability goals.
Progress is already being made in this direction, with Singapore working with like-minded partners to create a pilot framework for recognising RECs associated with cross-border electricity trade. This framework aims to catalyse cross-border demand for green electricity and facilitate investments in electricity trading projects. Supporting these developments, REDEX’s digital trading platform provides a centralised marketplace for buying and selling RECs across different countries. This helps increase transparency, reduces transaction costs and makes it easier for companies to source RECs from various renewable energy projects across Asia.
As the REC market continues to evolve, its role in Asia's green transition becomes increasingly important. These certificates not only provide financial incentives for renewable energy projects but also enable innovative policy approaches and offer companies a tangible way to support renewable energy development. Infrastructure Asia works alongside companies, like REDEX, and other key players to support the region’s green transition. The evolving REC market is one example of how innovative approaches can play a role in this shared journey towards a sustainable energy future. By fostering partnerships and embracing market innovations, we hope to further sustainable development across Asia together.
