REC Prices Set To Plummet: A 76% Decline By 2050 Driven By Renewable Energy Growth In Asia Pacific – Report

Renewable Energy Certificate (REC) prices are expected to drop by 76% by 2050 due to an increase in renewable energy generation in the Asia Pacific region. According to a report by Wood Mackenzie, the average price of RECs will decrease from US$46 per megawatt-hour (MWh) in 2023 to US$11 per MWh by 2050. This price drop is a result of an oversupply of RECs caused by a fourfold increase in renewable power generation during this time.

The report, which looked at the impact of growing renewable energy on REC prices in six Asia Pacific markets (Taiwan, South Korea, Australia, India, China, and Japan), predicts that the share of renewable energy in these markets will grow significantly, rising from 14% of the energy mix in 2023 to 55% by 2050. The cost of generating electricity from new solar and wind projects is also expected to fall by at least 40%, contributing to the lower REC prices.

RECs are important for supporting new investments in renewable energy, as they provide incentives and allow consumers to buy green energy credits. In Asia Pacific, RECs make up 21-31% of the total revenue in solar and wind energy markets. However, due to the expected oversupply of RECs, prices will continue to drop until 2050.

The report also highlights that the decreasing use of fossil fuels in some markets may slow down the demand for RECs. This is because REC requirements are often tied to fossil fuel generators. The oversupply of RECs is predicted to increase in the five markets outside China, growing from 13 Terawatt-hours (TWh) in 2023 to 241 TWh by 2050.

Currently, Taiwan and South Korea have the highest REC prices, but these are expected to drop by at least 70% by 2050. On average, REC prices in the six markets are projected to decrease by 76% over this period.

China is an exception, as its REC prices are expected to rise starting in the late 2020s due to government policies that will increase REC purchase requirements for various industries. In Japan, REC prices are low, at US$4-5 per MWh, and may not be enough to support new solar or wind projects. Developers may find other options, such as feed-in tariffs or corporate power purchase agreements, more appealing.