INFOGRAPHIC: Brazilian I-REC sector grows sharply, risks excess supply

Brazil's supply of International Renewable Energy Certificates has shown significant growth over the last five years, with one of the world's largest renewable energy matrices.

I-RECs are globally used instruments that certify that the generation of 1 megawatt-hour of electricity comes from a renewable source, such as a solar, wind, biomass or hydroelectric power plant. They provide a credible way for companies to demonstrate their use of renewable energy, reduce greenhouse gas emissions and support investments in new renewable power sources.

Over 2020-2025, I-REC issuances in Brazil have increased at a compound annual growth rate of 74%, following and surpassing similar growth in demand, as shown in redemptions. However, supply has been persistently higher than demand: data shows I-REC issuances have consistently exceeded redemptions. As a result, prices have been hovering close to the costs of using these instruments, but market dynamics create volatility that provides opportunities for buyers and sellers.

Also, several energy plants have yet to enter this market, indicating room for additional supply growth, as shown in the charts below.