CO2 emissions from electricity may have already peaked in 2022, according to analysis from think tank Ember earlier this year. This is based on their global electricity review 2023 showing that wind and solar reached a record 12% of global electricity last year. By the end of 2023, the think tank forecasts that more than 100% of the growth in electricity demand will be covered by low-carbon sources.

Solar Energy is Catching Up Rapidly

Solar energy, in particular, has been relatively slow as a key player in the global power mix – it lagged seven years behind wind in reaching the critical milestone of generating 1% of the world’s electricity, only passing that mark in 2015. But it is catching up rapidly, closing critical gaps in terms of total installation costs, operating costs and output efficiency. Incremental improvements in power storage will further alleviate barriers to solar adoption. According to Ember’s report, solar generation rose by 24% during 2022, making it the fastest-growing electricity source for 18 years in a row.

This is extremely encouraging news, on top of the fact that solar energy already has a major advantage: speed of deployment. Technical and commercial feasibility analysis and system design for solar assets, which uses historic solar irradiance data, can be materially accomplished within days to weeks. Once an installation is deemed technically and commercially feasible – and has financing available – buying and installing solar farms can happen in a matter of months (two to twelve months depending on the size).

In comparison, the same process for wind requires site-specific wind measurements and studies can take two years or more. Wind also requires more permissions and has a complex supply chain. For example, permissions are needed to move materials over fifty meters in length and require greater levels of engineering to install foundations, towers, turbines and blades. This makes the overall development, construction and commissioning process lengthier when compared to solar projects.

The Issues That Have Prevented Widespread Use of Solar

However, there are still issues with solar that need to be considered if its usage is to become more widespread. Policies around its implementation are often unclear and unpredictable. Ambiguity surrounding the award of, or delays in the payment of feed-in-tariffs (FiTs) or subsidies is not uncommon and it can become a painful process for assets that have already been built and financed. This, in addition to unpredictable (or predictably high) curtailment, tends to scare developers and investors away.

Inefficiencies with Renewable Energy Certificates

Another major set of issues revolve around its environmental financial products: renewable energy certificates (“RECs”) or energy attribute certificates (“EACs”). These are important incentives for the industry because they provide an incremental revenue stream that helps renewables deliver a reasonable risk-adjusted return. RECs are a means by which renewable asset owners can transfer the rights of the positive environmental claims to a third party who is prepared to finance the environmental impact through the purchase of these instruments.

However, the creation and sale of these certificates has historically been an inefficient process. In multiple markets, there has been a history of double counting and it’s almost impossible to trace RECs back to the asset – in some cases even to a specific type of renewable, especially where RECs from multiple types of renewables are pooled together and sold. With the trend towards digital carbon accounting and the time-matching of power consumed with the production of RECs (in some cases matching on an hourly basis), traditional systems for REC production and procurement fall short.

Without a foolproof, cost-effective and permanently verifiable means to audit the location and timing of REC production, transfer and retirement, organisations that have committed to net zero goals and who purchase RECs to offset their energy consumption are left with a cumbersome zero carbon audit proposition. This leaves the risk that their zero carbon claims become hard to verify and exposed to claims of greenwashing.

In the case of small to medium-sized solar energy assets, the administrative costs and resourcing required to produce RECs and bring them to market can be cost-prohibitive using traditional methods. If small-scale solar assets are unable to realize incremental value from RECs (or carbon credits), then the growth of small-scale solar energy production will continue to be slow, and yet the growth of small-scale distributed solar is an important aspect of potential solar capacity in many regions of the world.

Blockchain Technology as a Solution

The good news is that advanced technologies – specifically a blockchain-based system supported by smart devices and other digital processes – can supplement existing REC processes. Working with traditional issuing bodies to improve the way we create, transfer and digitally tag and trace RECs. By automating and collecting granular data at the asset level and recording it on-chain, stakeholders will have a verifiable, auditable data feed on a near real-time basis, which can be easily accessed at any time in the future in the context of a decarbonization audit.

With power production being recorded on-site, the solar energy producer can then batch this production data, and mint digital versions of RECs referencing the data. This can then be referenced against RECs recorded by entities responsible for registering and issuing RECs on that particular grid. For distributed solar assets that are not connected to a grid with an REC issuing body, the environmental attributes from such assets can be recorded and transferred in digital form, allowing such assets to benefit from the “green premium” that may be available in that region.

With a digital system supplementing traditional REC systems, that buyer now has a digital record of production, transfer and retirement, and can be permanently and directly traced back to its source data – down to specific meters on an asset at a particular point in time. This can help avoid issues like double counting and allow for a carbon audit that is in-line with the trend toward digital audits. These digital certificates are created on a decentralised system which makes them more easily identified and listed on a wider range of marketplaces, from traditional to highly decentralised marketplaces.

Achieving Climate Goals with Technology-enhanced Renewable Energy Certificates

In summary, using blockchain technology to supplement REC production, sale, retirement and audit of solar power assets results in a superior and permanently traceable product, lower costs, more flexibility for producers – and the transparency we need to achieve our overarching climate goals.

While still cutting-edge, this technology is already starting to be utilised in the market. The sooner solar energy producers put their data on “digital rails” the better. The backlog of data can be used to deliver digital environmental attributes to clients, for RE100 claims, representing a better product for corporations to purchase and a more streamlined delivery mechanism for energy producers. With this aspect of solar assets’ cash flow being optimised, with no incremental risk, the asset can therefore deliver a better risk-adjusted return and be more attractive for financiers – accelerating the growth and widespread adoption of solar energy.

Are you an energy company looking for a more efficient way to collect, record and monetise production data? Or are you a corporate looking to meet your climate goals with the most advanced climate product in the market? We can help. Get in touch with our team for a demo of Allinfra Climate.