INTERVIEW: Totum Institute leader describes Brazil’s next steps in renewable energy

With one of the world's largest shares of renewables in its energy generation mix, Brazil offers opportunities for companies in the country seeking to reduce their emissions. For example, Brazil is close to implementing a market for carbon certificates that will change the way companies operate, potentially requiring compensation mechanisms for businesses with annual emissions exceeding 25,000 metric tons of CO2.

Increasing technical knowledge to navigate the many regulatory challenges and existing certifications in the country is key to reducing the carbon footprint and meeting low-emission targets. That is the view of Fernando Giachini Lopes, executive director of Totum Institute, the Brazilian organization that issues International Renewable Energy Certificates and also numerous other accreditation initiatives.

Recently, excess electricity generation in Brazil during low-consumption periods has led to curtailments of wind and solar plants, limiting the amount of renewable electricity in the system.

Ongoing discussions to update the Greenhouse Gas Protocol are also a concern for some of the country's power generators, as they fear that hourly matching requirements could dampen demand for I-RECs.

To discuss these topics, Totum has been promoting the I-REC Day annually; this year's event, scheduled for April 7, will focus on key issues in renewable energy markets.

Platts: Over the years, decarbonization instruments have evolved, with the emergence of various certificates. How Totum's annual event, the I-REC Day, kept up with this evolution, and how do I-RECs position themselves today compared to other instruments, such as carbon credits?

Fernando Giachini Lopes: I-REC Day is already in its fourth edition, and I-REC Days are spreading to other countries, such as Mexico, and now there is one being planned in Chile, all following our pioneering approach. In Brazil, we created the renewable energy certificate system, REC Brazil, in 2012. In 2016, the I-REC Standard Foundation (currently the I-Track Foundation) approached us, and we were the first country to have a local issuer using a global registry. I-RECs became more known in 2017 and 2018, with companies seeking to reduce emissions and make reliable public statements about renewable energy use. Today, I-RECs appear explicitly in scope 2 of the GHG protocol. On the other hand, a carbon credit is a compensation: after an emission occurs, the company compensates by buying those certificates, whereas the [I-REC] is based on renewable consumption, in which a company can claim its emission is effectively zero or close to zero when consuming energy. And other instruments with the same concept have emerged: biogas, biomethane, SAF, and renewable CO2. Therefore, the event incorporated more topics beyond electricity.

Platts: How is the REC Brazil certificates market today?

Lopes: The REC Brazil program here already had three to four years when the I-REC Foundation, now I-Track Foundation, was founded in 2015. Today, it's harder to find REC Brazil certificates than I-RECs, but they still have their niche. REC Brazil has become a "sustainability certificate" placed on top of the I-REC: in addition to renewable energy, it includes other sustainability aspects, and these generators can sell I-RECs at higher prices.

Platts: Is the market for certificates uniform, or do you see different niches of companies?

Lopes: At the simplest level, the sustainability department buys at the end of the year any certificate, in the same quantity as the annual consumption. Then the company evolves to purchasing long-term I-REC contracts, still detached from energy purchase. A third tier involves requesting a guarantee of origin for the electricity when renewing contracts. There is also matching by granularity, for example, monthly (instead of annual). And a tier that should grow is hourly matching 24/7, for large consumers who want to ensure that hour-by-hour consumption is renewable. This should take about five-six years to become more stable.

Platts: This is one of the most discussed topics in the GHG Protocol update. Is it feasible to adopt hourly matching in Latin America?

Lopes: I see a maturity leap. Before hourly matching, the market must go through monthly matching and contract processing. Hourly REC is not simple; it requires significant processing. In the GHG protocol update, it is not yet clear when hourly matching will be required. Some texts propose that a company can claim its energy consumption is 100% renewable only if it adheres to hourly matching. If it becomes mandatory, it will create discomfort and increase costs. I think we are in a stage where this should be recommended as a good practice. Technically, we are ready; we have the necessary information about hourly energy generation to do the match, but it will be more complicated. In Latin America, hourly generation and consumption are feasible in several countries, but the question is whether there is a real need for them. More mature companies can request it, but I don't believe everyone is ready for this right now.

Platts: What could arise with the upcoming regulation of the Brazilian Emissions Trading System?

Lopes: The law was finalized in 2024, and the regulation is lengthy. It may accept part of compliance with "internalized" carbon credits in the Brazilian system. The question is whether the cap, set at above 25,000 metric tons, will include scope 2 emissions. If it does not include scope 2, the demand for I-REC remains voluntary, and the market stays as it is. If it includes scope 2, demand for renewable energy certificates should skyrocket, as it is an easier way to declare zero for a relevant portion of indirect emissions.

Platts: And for gas and biomethane, how could this be linked to the new Brazilian Greenhouse Gas Emissions Trading System (SBCE) framework? And where does the Brazilian decarbonization credit, or CBIO, fit in?

Lopes: For large gas users, there are two options: electrification with guarantees of origin, or use of biogenic gases such as biogas/biomethane. Physical biomethane with a certificate is already used to report lower emissions; there is also a book-and-claim system, in which the company continues consuming fossil gas and purchases a biomethane certificate. Under the Future Fuel law and the National Oil Agency resolutions, it is expected that guarantees of origin will be linked to the system. We currently have voluntary gas-RECs and the regulated CGOBs, and the trend is for them to be interchangeable, depending on the regulation. CBIO, however, is not a consumption allocation instrument: it is a regulatory alignment of the RenovaBIO program; it is bought and immediately redeemed by distributors, then reflected in companies' emissions as biofuel.

Platts: The curtailments occurring in Brazil for wind and solar energy — could they affect the issuance of I-RECs?

Lopes: Brazil has 85%-90 % of its generation capacity renewable, so the supply of I-RECs is practically infinite compared to consumption. Last year, around 64 million certificates were issued, while electricity consumption in Brazil is around 600 million MWh, half residential and public lighting, and the other half businesses. So about 20% of business energy has a guarantee of origin, which is high, given that it is a voluntary market. The curtailments did not affect supply much, but they may require enabling more plants: if an asset generated fewer certificates than it sold, the company can enable another plant to meet the contracted demand. Enabling a plant is simple; it takes only a few weeks. In contrast, issuing carbon credits can take two to three  years to certify a project.

Lopes: It depends on the maturity level. Companies at level 1 of decarbonization look to buy the cheapest option — usually linked to large hydro plants — and Itaipu's entry can affect that niche and price. More mature companies prefer smaller projects, solar projects, or projects with a sustainability footprint, such as REC Brazil certificates. I believe large hydro plants are well-positioned to serve certain niches, such as smart cities and large public consumers who, through tenders, seek lower costs; this tends not to affect the private market much, which already has its preferences.

Platts: How do you assess initiatives like RE100 (a global initiative of companies committed to sourcing 100% of their electricity from renewable sources) in the Brazilian context?

Lopes: It is a movement of large companies (usually multinationals, with consumption above 100,000 MWh/year) committed to being 100 % renewable; in Brazil, there are several of these. The initiative is growing in maturity: it allows acquiring certificates, but requires them to be from recently built plants (at least 15 years old) and, if hydro, to have a sustainability label or certification. There are exceptions for self-production, in which plants' age limit can extend to 25 years. RE100 may gradually move toward adopting a 24/7 hourly match, but this cannot be demanded overnight, as even large companies cannot implement it immediately.

Platts: Should Brazil adopt mandatory renewable energy requirements, as in Mexico's mandatory Clean Energy Certificates (CELs)?

Lopes: In Mexico, there is an obligation for guarantees of origin, a percentage that must be proven via the acquisition of CEL certificates; the rest, up to 100% is voluntary, and companies certify via I-RECs. In Brazil, the system works well without regulation because the mix is already clean, being 85-90 % renewable. A regulatory imposition would hardly move from, say, 90% to 95%. To achieve that, energy storage regulation would be more effective.

Platts: What is the challenge to move forward in the future, given our highly renewable mix?

Lopes: Improving the issue of curtailments and waste: regulatory changes to hourly pricing, including for consumers, can shift consumption to cheaper energy periods and mitigate curtailments; storage technologies are essential (batteries and reversible plants), and all these models are now being studied in Brazil.

Platts: Finally, what can you preview for us about I-REC Day?

Lopes: At the event, we will go deeper into what is happening worldwide, what to expect from the GHG protocol update, we will have an I-REC panel teaching how to leverage it, which technologies are involved, and what other certificates exist. We will discuss the recognition of biomethane, SAF and other certificates, drawing parallels between them. There will be a panel on volumes and prices, followed by another on carbon credits. A technical talk on how to account for certificates in the balance sheet. And a closing on the new Brazilian Trading and Permits System with confirmed government representatives.

Platts is a part of S&P Global Energy.