What are RECs?

A Renewable Energy Certificate (REC) represents the environmental attributes of one megawatt-hour (MWh) of electricity generated from a renewable energy source. When a generator produces renewable electricity, it receives one REC for every MWh delivered to the grid. That REC can be sold with the electricity itself (bundled) or traded separately (unbundled).

Note: Other energy sources may also generate environmental attribute certificates, such as a ZEC/EFEC for nuclear energy. This article refers to these all as RECs for simplicity.

Why are RECs important?

Because the environmental attribute is separated from the physical electricity, a REC is what allows claims on clean energy. These claims are often used in carbon accounting and corporate sustainability frameworks.

In order to lay claim to the MWh of electricity generated, you must retire that REC. Once a REC is retired, it’s removed from circulation and can’t be resold or claimed again. This is what prevents two parties from claiming the same MWh, or “double counting” a REC, and is why they are used to credibly measure progress toward clean energy commitments. Organizations use RECs for two broad purposes:

• Compliance: Many U.S. states operate a Renewable Portfolio Standard (RPS), sometimes called a Renewable Energy Standard (RES), that requires utilities and retail energy suppliers to source a minimum percentage of their electricity from carbon-free generation. RECs are used to demonstrate compliance with these mandates.
• Voluntary claims: Corporations pursuing sustainability goals use RECs to back voluntary renewable energy claims. These can come via PPAs, through a utility-managed green tariff, or as ad-hoc purchases of unbundled RECs. REC claims are incorporated into the market-based emissions metric in the GHG Protocol Scope 2 framework. They may also be part of reporting for other voluntary initiatives, such as RE100. Corporates may directly retire RECs themselves or request that their supplier perform retirements on their behalf.

Both use cases require holding the right RECs and assigning and retiring them correctly, which is where portfolio management starts to get difficult.

Understanding the challenges of REC management

For many teams, REC portfolio management still runs on spreadsheets, manual lookups in registries, and institutional knowledge held by one or two people. That approach breaks down as the size and complexity of a portfolio increase.

Manual validations in disparate systems

Tracking REC inventory across multiple registries can be a cumbersome process. Manually cross-referencing REC class, geography, and expiration to match demand-side requirements leaves room for error.

Even with a correct match, manual allocations make it difficult to find the most efficient assignment of RECs to your obligations. A common approach is to follow a simple-to-execute rule: for example, allocating the oldest eligible REC. However, with differing rules and REC classifications across states and markets, there could be multiple ways to assign a single REC. This misses the opportunity to optimize REC usage based on your organization’s and customers’ goals.

Managing REC deliveries

Inbound and outbound REC deliveries pose their own unique challenges.

On the inbound (supply) side, REC contracts specify expected delivery volumes and timing, but actual deliveries don’t always match or can be late. Without a systematic way to compare expected versus actual REC deliveries, discrepancies, such as short quantities or a missing Green-E designation, can go unnoticed.

On the outbound (demand) side, large C&I customers often require retirements in their own name in the registry to attribute REC ownership to them. Managing retirements individually for each customer in the correct quantities adds another layer of manual work and risk.

How a tool like Granular Energy can help

Granular Energy’s portfolio management platform is built to remove the guesswork from REC management, giving teams a single system for tracking, allocating, and reporting on their REC portfolio.

A unified view of your REC portfolio

The Granular Energy platform consolidates your supply and demand pictures in one place and gives you the tools to make informed decisions on how to manage your position. On the demand side, manage one view of load-serving demand and unbundled REC sales together or group them as you see fit. On the supply side, bring together owned generation, PPAs, and short-term purchases for a complete view of available supply.

Rather than requiring manual data entry, Granular Energy can pull in data from the necessary data sources, such as registries or your ETRM.

Bringing all of this information to one system simplifies tasks such as REC delivery monitoring and reconciliation, with smart-matching features proactively flagging discrepancies before they become issues.

Automated, customizable allocations

Granular Energy lets you define allocation rules that reflect your priorities. Work with our team to define allocation requirements that translate to an automated process you can run independently. Examples include:

• Decide how to best apply a REC that is multi-class qualified
• Automate requirements for different programs, such as technology, asset age, and location restrictions, and define priorities where needed
• Optimize allocation based on the factors that matter most: minimizing expired and discarded RECs, considering REC value, and more

Once you’re ready to lock in your allocations, Granular Energy simplifies the REC delivery process for settlements teams. Choose what you want to deliver, whether it’s a bulk retirement for retail load or individualized retirements per customer. The software then provides clear instructions for which RECs to transact. These transactions can be carried out manually in the registries or initiated directly from the Granular Energy platform.

Allocations are validated against actual REC inventory in the delivery process so that customers have trust in the integrity of their clean energy claims.

With the effort saved on manual processes, teams can spend more time on testing and defining the optimal allocation strategy.

Reporting that scales with you

Granular Energy helps to meet growing customer demand for increased transparency around their energy mix with branded usage reports. Reports include market and location-based emissions for Scope 2 calculations and certificate-level traceability of customers’ attributed energy.

Generate reports for your own usage or in bulk for customers at the right time intervals: calendar year, fiscal year, or compliance period. For customers that are looking for even more transparency, provide them with interactive, self-serve dashboards that meet their needs.

Get in touch

Granular Energy helps energy teams spend less time chasing data and more time on the decisions that matter. Get in touch with our team to see how we can support your REC portfolio management.