Malaysian solar I-REC demand rises on AFA expectations, Singapore preference

Demand for Malaysian solar International Renewable Energy Certificates has increased in recent weeks, supported by expectations of higher domestic power costs under the Automatic Fuel Adjustment mechanism and rising interest from Singapore-based buyers, market participants told Platts, part of S&P Global Energy, at the Renewable Energy Markets Asia 2026 event held April 21-22.

A potentially higher AFA rate has encouraged Malaysian companies to explore renewable certificates as a hedge against rising costs of brown power -- generated from non-renewable fossil fuel sources, they said.

"We have started to see increased inquiries from Malaysia-based companies due to expectations that the Automatic Fuel Adjustment rate may rise," a Kuala Lumpur-based trader said.

The recent increases in global gas and oil prices, partly linked to geopolitical tensions involving the US and Iran, have increased the likelihood of higher fuel-related electricity charges, the participant added.

Another Singapore-based trader said a higher AFA rate could drive additional Malaysian demand for I-RECs.

The Automatic Fuel Adjustment is a monthly mechanism that adjusts power tariffs in response to movements in global fuel prices and foreign exchange rates. It is administered by Malaysia's utility Tenaga Nasional Berhad.

Platts assessed Malaysia I-RECs solar vintage 2026 at $3.45/megawatt-hour April 24, up 8 cents from the previous session but down from $3.90/MWh at the beginning of the year on Jan. 2.

Singapore buyers turn to Malaysian supply

Singapore-based participants have shown keen interest in Malaysian I-RECs from local companies, particularly those seeking compliance-aligned products under SS673.

"A number of buyers that previously purchased Vietnamese I-RECs under SS673 are now starting to shift toward Malaysian supply," a second Singapore-based trader said.

Some buyers were happy to buy Malaysian certificates because the Malaysian and Singaporean power grids are interconnected, which may offer stronger optics when disclosing sourcing strategies, the trader added.

Malaysian certificates traded at a premium of over $3/MWh to Vietnam. Platts assessed Vietnam I-RECs solar vintage 2026 at 32 cents/MWh April 23.

Singapore domestic market illiquid

Singapore's domestic I-RECs have been thinly traded in recent months as some buyers shift toward power purchase agreements and virtual PPAs, according to participants.

"We have seen very thin liquidity in recent weeks, with only one trade for 2026 vintage solar at about 300 gigawatt-hours," a Singapore-based generator said.

The participant added that buyer preferences have increasingly shifted toward longer-term procurement structures, such as PPAs and vPPAs.

"For renewable energy procurement, our main priority is buying through PPAs and green tariffs; unbundled RECs are our last choice," said a corporate buyer source.

The available supply was ample across unbundled I-RECs, PPAs and vPPAs, while spot buyer activity had been limited, a third Singapore-based trader said.

Singapore I-RECs prices declined week over week due to limited demand. Platts assessed Singapore solar I-RECs vintage 2026 at S$26/MWh ($19.30/MWh) April 23.

When signing PPAs in Singapore, it is increasingly difficult to obtain bundled Singapore I-RECs with the trade, sources told Platts.

Despite lower demand, Singapore I-RECs continue to hold a much higher value in the spot market than other I-RECs in Asia. This means sellers have been more inclined to hold back the REC and offer vPPAs with other certificates instead.

"I always ask for the Singapore I-RECs to be bundled with my PPA, but it is very difficult. The sellers don't want to give you the certificates, and it makes the trade more complicated," a buyer said.