I-RECs are electronic documents certifying renewable power production and associated environmental attributes. The purpose of I-RECs is to incentivize renewable power producers by creating additional cash flows for renewable projects and improving their financial feasibility. Corporates can purchase I-RECs to meet their sustainability goals by supporting renewable energy generation.
Goal Number Seven (GNS) is a non-profit organization authorized to issue I-RECs to Russian renewable energy producers (including hydro projects). Now 14 Russian energy producers have registered in the I-REC system. Some of them have already sold I-RECs to corporate consumers and specialized carbon traders.
Baker McKenzie advised GNS on a pro bono basis on various matters arising in the course of launching the system. In particular, we:
- advised GNS on adapting the I-RECs global template registration and issuance agreement in line with Russian law;
- advised GNS in discussions with power producers on numerous legal and tax issues of the I-RECs, mindful of the voluntary nature of this tool and the lack of directly applicable national regulation;
- advised GNS on a request to the state authorities for clarifications regarding the possible tax treatment of I-RECs;
- provided miscellaneous legal and practical guidance in the course of the project.
The Baker McKenzie team included: Stanislav Sirot, (Partner, Chicago); Maxim Kalinin (Partner, St. Petersburg); Marina Tokunova (Partner, Moscow); Roman Ishmukhametov (Associate, St. Petersburg); and Ekaterina Gladkikh (Associate, St. Petersburg).
Stanislav Sirot said: "We've been delighted to assist GNS with kicking off the Russian I-RECs market. It's a big step for Russia, given the increasingly growing corporate demand for going green in all markets globally. We look forward to seeing how this opens the door not only to energy tracking as such, but also to the introduction onto the Russian market of complex innovative contractual tools such as corporate PPAs, which are currently driving the renewables market in a number of other jurisdictions."
Tatiana Lanshina, CEO of GNS, said: "I-REC is a completely new tool for the Russian market. Baker McKenzie helped GNS and other participants of the project to navigate through the nonconventional legal matters that require creative thinking and broad understanding of the renewables market globally and within Russia."
Russian renewables and cleantech in brief
Russia is incentivizing investments into solar, wind and small hydro power generation on the wholesale market based on power capacity payments under so-called "capacity supply agreements", which ensure a 12% return over the 15-year term. The Russian government is about to extend this program until 2035, subject to new equipment localization and export requirements, as well as new project selection procedures.
The owners of renewable projects in the retail market may be entitled to sell power to local grid companies under the green tariffs. In addition to solar and wind, retail renewable energy generation includes other power sources such as biomass, biogas and landfill gas.
Large hydro power stations with a total installed capacity of about 50 gigawatts are subject to a different set of regulations.
Recently, the debate on the greater use of renewables and the broader decarbonization agenda in Russia have intensified due to the government's plans to lead in the global hydrogen race, the EU's plans to introduce carbon border adjustment mechanism, and increasing "demand for green" coming from institutional investors, global consumers of Russian commodities and other stakeholders.
Russia is running other power, energy efficiency and environmental programs and continues to develop its national greenhouse law and low-carbon development strategy until 2050.