I-REC Standard interview with Sherwin Das, Managing Director: Energy Peace Partners on the developments with P-RECs
In November 2020, Microsoft partnered with Energy Peace Partners (EPP), 3 Degrees, and Nuru, an organization committed to the development of solar-based grid construction in the Democratic Republic of Congo (DRC), to complete the first Peace Renewable Energy Credit (P-REC) transaction. Through this, Microsoft was able to purchase P-RECs issued by EPP that directly financed the installation of streetlights in vulnerable areas of the DRC. Solar projects such as this, that generate electricity and are associated with the P-RECs, are defined as a new category of Energy Attribute Certificates (EAC).
The I-REC Standard Foundation recognizes P-RECs as I-RECs with a ‘peace’ label that indicates high-impact social co-benefits and has had the pleasure of interviewing Sherwin Das, the Managing Director of Energy Peace Partners on the developments with P-RECs since the first issuance.
Tell us about how the first Peace Renewable Energy Credit (P-REC) project got off the ground? Where did the initiative start?
When we started Energy Peace Partners (EPP), there were only three I-REC issuing countries in Africa, where half the population still lacks access to electricity. At the same time, we recognized that companies are increasingly interested in playing their part to mitigate climate change and have a positive impact, as evidenced by the growth of initiatives such as RE100, Science-Based Targets, the UN Global Compact as well as ambitious corporate targets set by individual companies.
The idea for the Peace Renewable Energy Credit (P-REC) grew from our initial research, which indicated that conflict-affected countries are some of the least electrified in the world. Our aim with the P-REC was to extend international EAC markets to fragile states – like the Democratic Republic of the Congo, South Sudan, Mali, and Myanmar – where they effectively did not exist until recently and thereby create value for renewable energy generated in those countries that would be recognized in international markets.
We conceived the Peace Renewable Energy Credit (P-REC) as a high-impact EAC or REC (Renewable Energy Credit) that captures both the social and environmental co-benefits of new renewable energy generated in fragile settings. We tested and validated the concept through a series of stakeholder consultations and conducted exploratory market research. In early 2019, we published, jointly with the Center for Resource Solutions, Peace Renewable Energy Credits: Facilitating High Impact Projects in Fragile Regions, which introduced the mechanism to the public.
In practice, you can think of a P-REC as a quality or impact label added to an existing certification standard like I-REC. Guidance and encouragement from the I-REC Standard – which was interested in supporting renewable energy market development in underserved regions – proved invaluable as we developed the instrument. In late 2019, we were authorized as the I-REC Issuer in the DRC. In 2020, we facilitated the first of two P-REC transactions from the DRC and became authorized as the I-REC Issuer in a second country – South Sudan.
Who was the first P-REC buyer? Why did they make the investment in this device?
The first P-REC buyer was Microsoft, a recognized corporate sustainability leader. The P-REC purchase opportunity provided Microsoft with an entry point to support a high-impact renewable energy project in the Democratic Republic of Congo (DRC) – a project which would not otherwise have come to the company’s attention. Microsoft purchased the first-ever P-RECs from a new 1.3MW off-grid solar plant located in the city of Goma in eastern DRC.
The project was built by Congolese solar project developer Nuru. The P-REC transaction provided Nuru an additional way to monetize generation to fund the implementation of a transformative community streetlight project in the neighborhood of Ndosho, 3% of whose residents have access to electricity. The purchase allowed Microsoft to support a project that aligned with its sustainability and climate equity goals. I believe Microsoft also recognized that their inaugural P-REC purchase would encourage other companies to expand how they think about impact when it comes to corporate renewable energy procurement – beyond avoided emissions and gigawatts of generation capacity.
The transaction was groundbreaking in three important ways: first, it was the first-ever P-REC deal, second, it was the first EAC issued ever from the DRC – unlocking an entirely new steam of renewable energy investments in that country, and third, these were one of the first I-RECs issued from a mini-grid renewable energy system anywhere in the world. 3Degrees published a useful case study on this first P-REC transaction.
Have you noticed an increase in interest for P-RECs? Is the increase in interest on the demand or supply side? Is it regionally specific or more global demand?
Following the Microsoft P-REC deal, a second multinational company forward purchased P-RECs from a separate project in the DRC, helping to finance a new renewable energy system. We believe that these initial P-REC transactions represent growing demand among corporate leaders to include higher impact options within their overall renewable energy portfolios.
Over the past year, we have been involved in an increasing number of conversations with interested corporate buyers. We believe that P-REC demand will be greater than supply in the short term, so we are accelerating our efforts to identify and expand the pipeline of P-REC-eligible projects. This involves increasing the number of countries where we will be authorized to issue P-RECs and expanding our network of project developer partners. Beyond DRC and South Sudan, we hope to be authorized as certificate issuers in Chad and Somalia this year, with dozens of projects already in our larger pipeline. We recently opened an office in Nairobi to support project development in the region, and we have also been working to identify the first P-REC projects in Asia, potentially in Myanmar or Bangladesh.
How have local governments responded to your work? Do you have contact with the national authorities in these markets?
We have had some discussions with the national authorities in the DRC, who have expressed support for our efforts and an interest in encouraging more companies to invest in the Congolese renewable energy sector. Our principal interlocutors in each country are the renewable energy project developers for whom we issue P-RECs. As the Congolese REC market matures, national authorities and actors may express interest in taking on a greater role, including as issuers, and we would welcome and support the development of local capacity in this area. In certain cases, we have seen that voluntary REC markets have paved the way for compliance markets, providing a positive example of the public sector leveraging private sector market development. Although it is too early to forecast, this could certainly be one path forward in some of our target countries.
How do you see the next three years of P-REC developments?
We are just getting started, and there is increasing attention on the problems we have been trying to solve. A global call to action was launched in February by the Council on State Fragility – co-chaired by Former UK Prime Minister David Cameron, former Liberian President Ellen Johnson Sirleaf, and Special Envoy of the African Union’s Peace Fund Donald Kaberuka – and the G7+, which brings together countries affected by conflict and fragility. The Council highlighted the critical role that renewable energy investments play in promoting peace and stability and recognized P-RECs as one of several initiatives catalyzing renewable energy investments in energy-poor regions.
The first deals have helped to put P-RECs on the map and on the radar of companies. Our larger ambition is to create a self-sustaining P-REC marketplace that is channeling predictable streams of renewable energy investment into new projects in our target countries. We are currently focused on bringing to market a pipeline of high-quality P-REC projects to meet expected demand. An exciting recent development is the selection of our P-REC Aggregation Fund idea to be part of the Global Climate Finance Lab 2021 acceleration program. With the Lab’s support, we intend to launch the Fund later this year in order to unlock more capital and at better terms for our renewable energy project developer partners, while scaling up the P-REC market.
What can we expect from your organization?
At Energy Peace Partners (EPP), we’ve brought together a team of renewable energy professionals and peacebuilding experts with the aim of identifying ways to support more renewable energy development in fragile states. Our vision is peace and stability for all, powered by renewable energy. EPP’s foundational theory is that renewable energy supports peace, so we have also been working on new research to better understand and quantify the peace benefits of renewable energy.
This stream of work could lead to the development of tools that help companies better integrate social impact criteria into their renewable energy procurement and investment decisions, and thereby enhance the case for purchasing P-RECs. We have also been researching the viability of incorporating water co-benefits into P-RECs, or the creation of a separate instrument altogether focused on water given the links between water, climate change and insecurity, and the funding gaps in this space.
It’s an exciting time for Energy Peace Partners. We are growing, expanding geographically, and focused more than ever on connecting the dots to maximize impact.