Hourly RECs may become mainstay of REC trading throughout next decade

The collection and trading of annual Renewable Energy Certificates (RECs) has been a major component of the renewable energy market since its inception. But over the last year, a small company called M-RETS has launched something that may change the face of this market subset forever: a system that tracks and integrates hourly REC data.

M-RETS launched this new system early in 2021 through a partnership with Google when the two successfully completed the first hourly REC transaction. Since then, M-RETS has been working on developing and programming this system, which currently tracks hourly REC markets across North America. The goal according to M-REC President and CEO Benjamin Gerber is to facilitate markets an create 24/7 goal opportunities for companies and policy makers.

Gerber describes RECs as a “necessary pain point” in the market. For years, Gerber argues, the annual REC system has failed to keep pace with the rapid growth and evolution of the renewable energy market and, as a result, has left behind a significant portion of potential REC traders and consumers.

“RECs need to evolve with the market,” Gerber said during a presentation at the Environmental Markets Association’s 25th Annual Meeting in Austin, Texas on Oct. 12. “Utilities, customers and regulators should spend less time figuring out and accessing data and more on solutions.”

Enter the hourly REC system which Gerber says was born out of demand for better systems with more granular data.

Key Sectors

There are a couple of key market areas that Gerber predicts will particularly benefit from the rise of hourly REC markets. He notes that hourly updates are particularly useful for tracking battery storage usage and benefits, which “creates opportunity between traders and providers.”

Gerber is also hopeful that the hourly REC system may “finally” lead to a jumpstart of the energy efficiency market. Hourly tracking will allow C&I customers to shed load during low demand, which can be a dubious prospect without regularly updating information. According to Gerber, current C&I customers would often rather pay penalties than shed load due to the cost of shutting down facilities.

While California SB 67 is already pushing toward the establishment of a 24/7 state RPS, in which hourly tracking information would be critical, Gerber says that new standards must be established for such policies to really take root. In particular, the creation of a universal data standard is critical, Gerber argues, if the potential of hourly markets is to be fully realized.

“If we all have different data standards, it’s going to be impossible for C&I customers to pull all of their data,” Gerber said. “It’s not defensible.”

Meanwhile, M-RETS own system is still being developed with several major upgrades and updates on the way. Gerber says these next steps include an option to layer model information on top of actual REC market data and, critically, to offer fractional increment transactions. This second piece, which Gerber is pushing for by the end of 1Q22, is a particularly key goal for him as he sees it as a launching point for getting new entrants into REC markets.

“For it to be most effective, the REC market has to be approachable by any participants,” Gerber said. “The only way for smaller consumers to engage is to fractionalize the market so they don’t have to retire more load than is necessary.”

Ken Nelson, President and Co-Founder of Blue Delta Energy and active participant in REC markets, likened the launch of hourly RECs to the birth of power trading, predicting that this will become a mainstay of REC trading throughout the next decade.

“This is a big dialogue that affects all of us and will probably be around into the 2030s,” Nelson said. “We see the projects being developed; now we’ve got the data component. We need to develop markets to support this type of program. It’s going to take all of us to move to this future system.”