Overview
Peace Renewable Energy Credits (P-RECs) monetize environmental and socio- economic attributes of renewable energy projects to provide developers with an additional revenue stream. These attributes provide developers working in the most difficult markets with access to the growing voluntary market for energy attribute certificates, especially popular among international corporations, including the 300+ corporate members of the RE100 initiative.
However, the existing energy attribute certificate market is shortsighted, based on annual demand and payments upon delivery. In order to truly catalyze the benefits of P-RECs, the P-REC Aggregation Facility was designed to monetize the future yield of these attributes, providing developers with up front payments that can be used to unlock the capital necessary to build projects.
The P-REC Aggregation Facility was one of six innovative instruments selected for the 2021 Global Innovation Lab for Climate Finance accelerator program. The Facility was officially endorsed by the Climate Finance Lab in September 2021. In 2022, the Fund was selected by the International Climate Finance Accelerator Luxembourg to be part of its 2022 cohort.
Impact
A pilot of USD 10.25 million is projected to unlock up to nine times more capital (up to USD 90 million), supporting the addition of 57 megawatts of new renewable energy capacity in high impact countries.
Over the first 10 years of plant operation, this will generate more than 800,000 P-RECs to be sold on global markets, enabling the extension of the renewable energy revolution to underserved communities, and supporting the achievement of UN Agenda 2030, including SDG 7 (energy access), SDG 13 (climate action), and SDG 16 (peace).
This new flow of capital will mean energy access to 325,000 households, 10,000 jobs, and 650,000 tons of greenhouse gas emissions avoided.
Design
The Facility will provide upfront P-REC revenue to project developers equivalent to approximately 10% of the construction costs in exchange for the ownership of the P-RECs generated by the project over a determined period, typically the first ten years of operation. To minimize risks, 50% of the Facility will consist of first loss grant capital.
The transaction is based on a forward purchase commercial agreement concluded before construction, to enable the developer to secure the necessary construction and/or term finance or start repayment of these construction loans. The commercial operation date of the RE system triggers the payment from the Facility before the energy is generated and the associated P-RECs are issued.
Once construction is finalized, the Facility will apply directly for certification and have the P-RECs issued by EPP as energy is generated. Certified P-RECs are then aggregated at the Facility level and traded on voluntary markets via advance or spot purchase agreements directly with buyers or through intermediary energy brokers. The aggregation function of the Facility allows for cross funding of various projects and so operational flexibility.
Investment Opportunities
More information
P-REC Aggregation Facility Overview
The Lab’s P-REC Aggregation Facility Instrument Analysis
Watch the Lab’s 2021 Demo Day, including a presentation on the P-REC Aggregation Facility.
Watch an overview video about the P-REC Aggregation Facility created by the ICFA.
Watch a presentation about the Facility at the Future Leaders in Climate Finance: Dragons Den event at COP27, hosted by the ICFA.