Peace Renewable Energy Credit (P-REC) – has been selected as an Energy category finalist for Fast Company's 2020 World Changing Ideas Awards! This award highlights the pioneering approach of P-RECs to drive renewable energy investment in the most fragile, and energy poor regions of the world.
There are many reasons why companies take sustainability actions: achieving climate targets, meeting CSR goals, cost savings or simply because it's the right thing to do. At South Pole we are always looking for solutions that meet all four. We interview Sherwin Das, co-founder of Energy Peace Partners, the organisation developing P-RECs, to find out more.
The Peace Renewable Energy Credit (P-REC) is a market-based financing solution that supports new renewable energy projects in fragile, climate-vulnerable and energy poor settings. P-RECs leverage the 1 billion USD global energy attribute certificate (EAC) market, which has helped drive global renewable energy investment, by monetising renewable energy generated in fragile states.
P-RECs are I-RECs with an additional label from EPP certifying the social co-benefits of the project. They are unbundled environmental attributes that monetise new renewable energy generated in some of the most fragile and least electrified regions. P-RECs expand the options available to support new renewable energy projects by creating a new opportunity for consumers interested in pursuing voluntary sustainability commitments and social responsibility objectives. The revenue streams unlocked by P-REC sales support projects in regions with limited infrastructure that lack the traditional economic incentives for supporting renewable energy investment. In this manner, P-RECs are helping to extend the renewable energy revolution to some of the most vulnerable regions.
We are seeing every day that climate change and violent conflict are increasingly intertwined. Yet climate solutions are largely failing to reach the worst affected countries. Our research reveals that the most climate- and conflict-affected countries also face severe energy poverty. In fact, over 850 million people live in the 27 countries - primarily in Africa, the Middle East, and South Asia - most affected by the overlapping challenges of conflict, climate vulnerability, and energy poverty.
While the renewable energy revolution is expanding, many areas remain largely untouched. Only 5% of global climate finance reaches Africa and the Middle East combined; of this, fragile states receive only a fraction. Therefore, little of the roughly 300 billion USD in annual renewable energy (RE) investment reaches these regions. This gap in climate finance flowing to these states means that the communities that could see the most benefit are missing out on the renewable energy boom that is sweeping much of the world. We are trying to address this gap in climate finance, or more specifically, renewable energy investment, in fragile regions.
The revenue from the sales of P-RECs provide either catalytic capital necessary to facilitate financing for a new renewable energy system, or to fund additional community impact projects that add new renewable energy capacity over and above the core project:
Catalytic capital: For example, P-REC revenue from our pilot project in South Sudan will allow our developer partner to put up 10% equity as first loss capital, enabling the remainder of equity investment and debt to be secured. This is particularly impactful in fragile countries that face unique investment challenges, including high interest rates that make project finance difficult.
Community impact: For example, the pilot project in the DRC has already been financed, so the majority of P-REC revenue will allow our developer partner to install solar street lights to enhance safety and security in a neighbourhood where the project is being built. Other community impact projects may include electrifying schools and health facilities, creating local infrastructure to facilitate further solar development, subsidised energy rates, and local capacity building. PREC-supported community impact projects are determined by the developer in consultation with local communities.
More generally, P-REC-supported renewable energy projects can unlock multiple benefits: cheaper and cleaner energy, enhanced public service delivery, improved safety and security, job creation, and increased socio-economic opportunities. Introducing long lasting renewable energy infrastructure in conflict-affected communities also provides new opportunities for peace building.
Firstly, many companies with renewable energy and carbon reduction goals in regions like sub-Saharan Africa have challenges achieving these goals because of the limited range of renewable energy purchase options. P-RECs offer a new renewable energy purchase option in this region and one that can broaden the scope of how consumers assess impactful renewable energy support. P-RECs provide an opportunity for corporates to demonstrate leadership by purchasing high impact EACs that can contribute to unlocking new renewable investment in some of the least electrified countries in the world. Given the limited existing renewable energy infrastructure in these regions, P-REC-supported projects are catalytic in that they will expand the range of corporate renewable energy purchase options in the future.
Secondly, until September of this year, only 3 of the 54 African nations were authorised I-REC issuing countries. We are very proud that due to our efforts to pilot P-RECs in the DRC, the board of the I-REC Standard Foundation, in October, added the DRC to this short list of countries, with EPP as the certificate issuer. See our blog for more details on the significance of this decision. The first P-RECs from DRC will be issued in Q1 2020, and they will be first EACs ever to be issued from the country. In the meantime, we have approved or are developing P-REC projects elsewhere in sub-Saharan Africa, including in South Sudan, Somalia, Uganda and Mali and expansion projects in DRC.
We believe that the introduction of new renewable energy capacity into fragile, energy-poor countries can contribute to sustaining peace. This is an ambitious claim. However, our multidisciplinary team – which brings together experts in international peace building, climate security, and renewable energy finance & development - provides us with a unique perspective and enables us to connect the dots in new ways. The idea for P-REC was borne out of this unique collaboration.