US REC tracking systems inch towards hourly trading

PJM's Generation Attribute Tracking System has become the US' first renewable energy certificate tracking system able to have its RECs traded on an hourly basis, with another tracking system, M-RETS, planning on a trading option by 2025. Until now, RECs have only been issued monthly and "procured," or redeemed, annually.

PJM-GATS has had trading functionality for hourly RECs since August, according to spokesperson Jeffrey Shields.

"Advocates for hourly matching are still in the minority, with most market participants favoring the status quo (annual matching) due to lower administrative/transaction costs compared to hourly matching," Shields said in a Sept. 13 email. "Monthly matching isn't being pushed by any particular sector at this time." Monthly matching, he added, should be "be considered an interim step."

Shields was unable to discuss the volume or prices of PJM-GATS hourly trades, citing what he said would be a small sample size of trades, if any, in the few weeks since trading was available and adding that trade prices would be confidential.

M-RETS, formerly known as Midwest Renewable Energy Tracking System, has said that "by 2025 we would have the product that allows for hourly certificates trading."

The tracking system "continues to work collaboratively with partners and industry and has nothing additional to announce at this time," Rob Davis, chief growth officer at M-RETS, told Commodity Insights in an email Sept. 16.

M-RETS is working with EneryTag, a non-profit "defining and promoting Net-Zero alignedelectricity carbon accounting," and has joined its executive advisory committee to support hourly tracking.

"There is an evolution going on, and in some ways it is moving faster than we see in the existing energy industry in things like data standardization and data accessibility," Benjamin Gerber, M-RETS' CEO, said at a Minnesota Public Utilities Commission meeting in August. "Moving towards a more granular process, either emission data or production data or both, is sending the right market signals."

A third tracking system, the North American Renewables Registry, is in a pilot phase for issuing hourly certificates, the Center for Resource Solutions, a policy and marketing organization advocating sustainable energy, had said in June 2023. The registry could not be reached for comment on the current status of its pilot phase.

Hydrogen producers, big tech eye hourly trading

While there is movement towards hourly REC trading, the global corporate renewable energy initiative that gathers together businesses committed to 100% renewable electricity, RE100, still consider temporary matching of RECs to businesses' power needs on a yearly basis appropriate.

"The vintage of renewable electricity generation should be 'reasonably close' to the consumption it is being applied," RE100 has said.

But the ability to trade RECs on an hourly basis is attractive to a number of market participants, including renewable hydrogen producers, tech companies and data centers. For example, under the US Inflation Reduction Act's Clean Hydrogen Production (45V) Tax Credit, draft rules require hydrogen developers to match renewable energy consumption hourly.

"Some large power consumers have started to voluntarily procure power with conditions similar to what is being discussed for hydrogen with the motivation of reaching their environmental goals," global renewables developer EDP Renewables told Commodity Insights Sept. 11 via email.

Most US REC tracking systems anticipate one- to two-year phase-in periods once a decision is made to implement hourly tracking, the Center for Resource Solutions said. The pathways to this are "passing state legislature, or required by state public utility commission, stakeholder process," it said. The center sees full hourly functionality as "having tradeable certificates with an hourly vintage."

In Texas, the US' top wind-producing state and No. 2 solar energy producer, grid operator The Electric Reliability Council of Texas has no expected timeline for the implementation of hourly tracking nor any regulatory requirement to move to it. But ERCOT is working with a group of stakeholders on this topic, it also told Commodity Insights. If ERCOT decides to move forward with tracking, it could take six months to have protocols approved and another 12 to implement, depending on the agreement of stakeholders, it said.

In the US Congress, meanwhile, several dozen members of the House of Representatives and the Senate have recently advocated for hourly matching to support clean hydrogen production under the 45V tax credit.

"Monthly matching is similarly a poor substitute for hourly matching," the 58 House members and eight US senators wrote to the departments of Treasury and Energy, the Office of Management and Budget, the Environmental Protection Agency and the White House. "Even weekly matching fails to safeguard against indirect emissions remotely."