Hourly RECs draw interest, raise questions

A new arrangement between US technology company Google and generation registry Midwest Renewable Energy Tracking System (M-RETS) for hourly renewable energy certificates (RECs) could herald changes in the dynamics of the voluntary and compliance markets.

The Midwest Renewable Energy Tracking System (M-RETS) in February logged its first transaction for hourly RECs with Google as part of the internet search giant’s recent commitment to rely on resources like wind and solar at all times by 2030.

M-RETS chief executive Ben Gerber said Google is not the only large buyer showing interest in the system’s ability to account for when RECs are produced.

“We know that there are others, but I think that one important thing to realize is that what works for Google might not work for everyone else,” Gerber said.

Other corporate renewable energy buyers may not share the same goals, but they “do believe that hourly data is critical because it starts allowing for a more granular look at the emissions impact of renewable procurement decisions.”

“That is what is key there,” Gerber said. “Hourly data is not specific to a 24/7 standard.”

Google’s approach is more complicated than simply offsetting its electricity use with RECs. At present, many companies buy power from renewables to match, rather than directly supply, the electricity needs of their operations. They retire the associated RECs, which represent the environmental attributes of that electricity, to demonstrate their progress toward decarbonization. Those RECs are usually issued on a monthly basis and have to be matched to load over a year or longer period.

But under that approach, companies still receive electricity from coal- or natural gas-fired power plants because of factors such as renewables trailing off during certain times of the day or the lack of sufficient wind or solar capacity on the local grid. The ability to track RECs on an hourly basis moves companies closer to controlling their portfolios at all times of the day, matching RECs produced contemporaneous with actual generation — in theory, helping them more effectively eliminate their carbon footprints.

There are still details to work out with voluntary buyers and regulators in compliance markets, as Gerber outlined in a recent white paper. A few of the possible issues illustrate dilemmas with which stakeholders will wrestle as energy markets become more data-driven.

The hourly increments could potentially alter the value of credits according to other fuels feeding the grid. For example, market participants could value a REC generated when coal is on the margin more than on from the same project when natural gas is on the margin, as it would be offsetting a source with higher CO2 emissions.

And tracking RECs on an hourly basis could require M-RETS to issue fractional credits worth less than a megawatt-hour, a “major market change with real consequences.” Those impacts could spill into renewable portfolio standard markets, which do not typically account for partial certificates, drawing the attention of state regulators.

“I think a lot or regulators would probably be OK with that, but that is not really that M-RETS can make on their behalf. It takes engaging with them,” Gerber said.

Source: http://bit.ly/REC_Google