As the largest pure renewable energy (RE) platform in the Philippines, we expect ACEN to be one of the top beneficiaries of REC trading. Management has previously signaled their intention to participate in REC trading, which we estimate can initially generate around P180-230-Million annually in additional revenues for ACEN. <\/p>\n\n\n\n
As the second largest RE developer, we also expect CREC to benefit albeit to a lesser extent as most of their future capacity is already contracted under FIT\/GEA programs. <\/p>\n\n\n\n
Given this positive development in the REC space, we reiterate our BUY rating on both ACEN (with Target Price of P6.31) and CREC (with Target Price of P3.56).<\/p>\n\n\n\n
REM to go full blast after Christmas<\/strong><\/p>\n\n\n\n The Department of Energy is targeting full operations of the Renewable Energy Market (REM) by December 26, which will finally allow the trading of Renewable Energy Certificates (RECs). The REM launched interim commercial operations in 2022, but no actual trading and settlement can occur during the interim period as regulators fine-tune the registration and pricing mechanisms.<\/p>\n\n\n\n What are RECs? <\/strong><\/p>\n\n\n\n The DOE\u2019s Renewable Portfolio Standards (RPS) currently requires power suppliers to source at least 11% of their energy from eligible RE facilities, with the goal of reaching 35% RE utilization by 2030. When distribution utilities (DU) or direct This allows them to claim that the power they purchased or used was generated from renewable sources. However, renewable energy can also be sold in unbundled form which means that the REC can be sold separately from the underlying power. <\/p>\n\n\n\n If a DU or end-user purchases unbundled RE without the accompanying REC, the use of that power will not count towards RPS or ESG compliance. The unbundled REC can then be sold by the RE operator, through the REM, to qualified buyers who need them for RPS or ESG compliance.<\/p>\n\n\n\n It\u2019s a potentially lucrative market<\/strong><\/p>\n\n\n\n The ability to separate RECs from the underlying power will likely put a premium on the price of bundled RE contracted under future deals. At the same time, the sale of unbundled RECs on the REM can provide a much-needed alternative revenue stream for RE companies. The ERC currently caps the price of RECs at P241.56\/MWh, but dynamic pricing and rising demand in response to escalating RPS requirements opens the possibility of higher prices in the future. <\/p>\n\n\n\n For context, the REC market in Australia is estimated to be valued at around $3.5-Bn and REC issuances in Southeast Asia has grown exponentially in recent years despite still being in the nascent stages of development.<\/p>\n\n\n\n
buyers purchase power from an RE facility, it usually comes in bundled form, which means that the DU or end-user buys the REC along with the underlying power. <\/p>\n\n\n\n