February 23, 2024

Innovations in the Renewable Energy Certificates (RECs) Market: The TraceX Impact

It's time for the traditional RECs market to embrace innovation, bringing efficiency and transparency to the forefront of REC trading.

According to S&P Global’s projection, US voluntary renewable energy certificates are expected to grow steadily at a 15.9% annual rate from 2024 to 2033.

Behind this projected surge lies a dual force: the growing demand for renewable energy to meet sustainability targets and the steadfast commitment of governments worldwide to enact policies mandating renewable energy utilisation. Despite the massive projected growth in market size, a pressing question looms: Is our current level of innovation sufficient to tackle the existing challenges in the RECs market?

 Let’s explore the challenges of the existing REC market and how innovations like TraceX can change the way we trade RECs.

The need for innovation in the RECs market

The challenges in current systems often spark new innovations, leading to the emergence of new agile markets. This pattern has been seen throughout the history of innovation. Much like the innovation of the printing press in the mid-15th century, which not only simplified the laborious task of copying documents by hand but also laid the cornerstone for the media and publishing industry.

Renewable Energy Certificates (RECs) play a crucial role in incentivising renewable energy generation and achieving sustainability goals. However, traditional REC markets face several challenges that hinder their effectiveness:

Solar panels
  1. Contract Management: The process of trading Renewable Energy Certificates (RECs) in Over-the-Counter (OTC) markets poses a significant challenge due to the meticulous management of contracts. Drafting these contracts requires a lot of time and attention because different counterparties have unique requirements, making customisation essential.
  2. Complexity of Verification:  Verifying the authenticity and environmental attributes of Renewable Energy Certificates (RECs) isn't just a challenge; it's a complex and expensive process. The absence of standardised verification procedures leaves room for fraud and misrepresentation, posing a significant threat to the market's integrity.
  3. Lack of inclusivity: Small commercial and industrial (C&I) customers often face hurdles when navigating the Over-the-Counter (OTC) market. They struggle to find competitive prices and may encounter liquidity constraints, making it challenging to participate effectively in the market.
  4. Price Volatility: REC prices can be volatile due to factors such as fluctuating demand, changes in energy policies, and market speculation. Price volatility can deter long-term investments in renewable energy projects and hinder market stability.
  5. Risk of Double Counting: In some cases, there's a risk of double counting renewable energy attributes, where the same attributes are claimed by multiple parties simultaneously. Double counting undermines the integrity of REC markets and can lead to inaccuracies in tracking renewable energy generation.
  6. Limited Transparency: A well-documented lack of transparency in REC pricing hampers market-based decision making, causing inefficiencies in REC trading. 

TraceX: Technological breakthroughs for market needs 

TraceX is a digital marketplace that uses blockchain technology to efficiently handle the trading of Energy Attribute Certificates (EACs), such as Renewable Energy Certificates (RECs), Guarantees of Origin (GOs), carbon credits and other environmental instruments.

Seamless integration with M-RETS: TraceX is fully integrated with the largest voluntary REC registry in North America, the Midwest Renewable Energy Tracking System (M-RETS). With this, customers can link their M-RETS account, and once the link is established, import EACs to the marketplace to list for sale. Successful purchases in the marketplace are updated directly through buyers' and sellers' M-RETS accounts. This integration streamlines the import and purchase process of RECs through existing registry accounts.

Faster settlement: Unlike the prolonged settlement timelines typical of Over-the-Counter (OTC) trades, TraceX’s  on-platform payments ensure much faster settlement times.

Enhanced accuracy: TraceX prioritises REC exclusivity and integrity by implementing a robust system that encumbers RECs in the registry account before transferring them to TraceX. This preventive measure effectively eliminates the risk of double use, safeguarding the authenticity and value of each REC.

Simplified REC procurement: TraceX's new filtering system offers a holistic view of real-time market prices. It displays both bids and asks cohesively. This transparency allows users to make well-informed decisions, offering efficient price discovery from both buying and selling perspectives.  

CRS integration for REC legitimacy: TraceX’s CRS integration guarantees that RECs are not only legitimate but also align seamlessly with facility expiration dates, assuring companies that their transactions are timely and accurate.

The power of blockchain for audibility:

  • Transparency, Security, and Auditability in REC trading: Storing all transaction metadata on the blockchain ensures unparalleled transparency, security, and ease of auditability for all stakeholders. Each transaction is recorded in a tamper-proof and decentralised ledger, providing a transparent view of the entire transaction history. This level of transparency instils trust among participants and facilitates regulatory compliance.
  • Fighting fraud with blockchain integrity:  Blockchain technology forms the bedrock of the REC trading process on TraceX, offering immutable proof of transactions and REC ownership. By leveraging our highly scalable blockchain, TraceX guarantees the integrity of REC transactions, eliminating the risk of fraud or manipulation. Each transaction is cryptographically secured and timestamped, providing irrefutable evidence of REC ownership and transfer. Blockchain plays a key role in enhancing market confidence and efficiency. 

In a nutshell

By fostering enhanced market efficiency and  transparency, TraceX not only facilitates the seamless trading of RECs but also drives broader adoption of clean energy solutions. Moreover, TraceX's impact extends beyond transactional efficiency to inspire innovation and accelerate progress towards sustainability goals.

Book your TraceX demo.

Let's chat

Get in touch