I-REC Standard interview with Can Arslan on the developments of the Turkish I-REC market
While the I-REC Standard has been active in Turkey since 2015, it was not until July 2020 that Turkey gained a local I-REC Issuer, Foton Energy. Now, with a year almost gone by, Can Arslan, the co-founder of Foton Energy, has generously provided insight into the growth and development of the I-REC for the electricity market in Turkey.
What is the status of the REC market implementation in Turkey?
The International IREC Standard has been active in Turkey since 2015. But back then, the renewable energy assets were interested in registering voluntary carbon schemes. But this interest changed to I-REC in 2019 when some voluntary carbon schemes such as Verra and the Gold Standard announced that they would no longer accept new renewable energy projects. Likely, this is because of the growth in attribute tracking certificates around the world, led by I-REC, and the concern related to attribute accounting as part of the grid emissions. Combined with the fact that since 2015, we have seen the demand for RECs steadily increase with multinational companies’ requests from Turkish manufacturers.
Now, the demand and supply for renewables in Turkey are in pushing up the demand side. The result has been an increase in device owners seeing the benefits associated with attribute tracking and adding their devices, new and old, to the I-REC systems we manage locally in Turkey.
What is the role of Foton in the current market movement, and what innovations are being pushed forward?
Foton (Energy) has a clear research question to answer in the current market movement, ‘what is the motivation behind procuring RECs?’ We are developing our internal processes according to how we can motivate the market participants and their clients to make the step towards renewables procurement with the underlying International REC Standard Foundation’s International Attribute Tracking Standard (Standard) as a verification tool.
One way we are innovating here is by attempting to eliminate the barrier for small buyers of renewable electricity. The result is a newly designed Platform, maybe the first in the I-REC Standard, that allows small buyers and sellers to trade I-RECs while substantially lowering the financial risks. As the Issuer, we do this in a very hands-off manner. We are not involved in the buying, selling, or trading of RECs on this platform, we just offer the matching service – in line with the requirements set by the International REC Standard Foundation – and have seen that these types of IT Platforms can make a big difference. Having this be as close as possible to Turkey, but adherent to a global standard has been important for us. We are facilitating a truly Turkish REC; a Turkish REC that adheres to international standards set by I-REC Standard Foundation. In this way, we are quite positive about the future and increased engagement with other national stakeholders, market players, device owners, and the national authorities.
The next step for us is to go beyond supporting buyers and sellers to supporting decentralized power Producers. We would like to develop tools for decentralized power Producers – “license-exempt” power in Turkey – where they can easily and reliably register their distributed energy generators and sell the associated RECs to their clients. A blockchain infrastructure, on and in coordination with the I-REC Standard Foundation’s Standard and Product Code for an electricity infrastructure that already exists, would allow us to build just such a controlled system and allow decentralized service Producers to reach a vast number of clients.
How is the government involved in the development of a national RECs system in Turkey, and how does Foton play a role in its development?
Turkey is an observer in EU Energy Community. And since liberalization in 2001, Turkey has taken impressive steps to support the local energy resources which have supported the growing demand for renewable energy capacity.
The Energy Market Regulatory Authority (EMRA) has passed the Renewable Energy Sources Guarantee (YEKG) System Regulation in November 2020. According to this regulation, the Energy Market Operations Company (EXIST) is responsible for the Issuance, transfer, and Redemption of the Certificates.
Although YEKG is designed to have internationally accepted REC standards, the transfer of the certificates is limited to the companies with electricity generation or an electricity supplier license. Moreover, license-exempt renewable energy generators (which is around 700 MW installed capacity) cannot participate with YEKG. However, one of the flexibility mechanisms in the YEKG regulation is the allowance of renewable asset investors, generators, and the REC buyers to choose other EAC systems, which gives The International REC Standard Foundation room to work with EMRA to develop an I-REC integrated YEKG system.
Our plans are to partner with the national authorities to develop a national EAC database, which would solve any potential for double-counting issues, as well as allow YEKGs to be easily traded and adherent to the International Attribute Tracking Standard rules on a borderless and decentralized Platform.
How do you see the next three years of the REC market developing?
The plan in place now is for each electricity contract traded on the electricity exchange or OTC markets is to have the option to involve I-RECs. This would essentially make the I-REC markets a complementary option to currently physical electricity markets. However, as most stakeholders can imagine, this is a challenging aspect to design due to the registration process associated with any reliable and robust International Attribute Tracking Standard. The rules associated with I-REC Issuer checks are crucial in ensuring there are ways for End-users to fully participate in the market is more than just having an option on the physical contracts. As such, the digital infrastructure that supports facilitation here must be simple, and easy enough to plug in for end-users to report their REC procurement, but strong enough that it adheres to the requirements of the I-REC Standard Foundation’s Standard and the associated Issuer regulations as stated in the Local Working Instructions (LWIs).
The goal, I think, is to involve more entrepreneurs in developing the registration, Issuance, transfer, and Redemption processes of I-RECs. When we do this, we will naturally overcome these challenges which will grow the I-REC markets around the world. This is where we can praise the work of the I-REC Standard Foundation.
The International REC Standard Foundation has taken strategic decisions to allow entrepreneurs to present solutions by building Platforms to facilitate markets, which will serve as a visualization tool for stakeholders, simplify the procurement of I-RECs, and help with the registration of smaller devices among other tools. This decision by the I-REC Standard Foundation will accelerate the procurement of renewable energy by the industries in the next three years and support businesses looking to get involved in the sector.