Market demand for renewable energy continues to grow due to governmental programs, increasing corporate initiatives as well as households voluntarily choosing to purchase ‘green’ energy. Consequently, the volumes of Renewable Energy Certificates (RECs) guaranteeing that the electricity was produced from a renewable energy resource are swelling.
Apart from the management challenge of tracking RECs and monitoring exposure, those types of certificates that are tradable carry a value and must be settled and reported. This calls for automation of the end-to-end process, from generation to expiration or retirement. Pioneer’s RECTracker provides a robust solution from inventory planning to accounting. Time to ‘renew’ your RECs/GOs management system?
The REC or Guarantee of Origin (GO), provides an instrument to indicate that one MW of electricity has been produced from renewable (green) energy sources. Each REC carries a unique number that is issued and tracked by the certification entity. RECs typically have an expiration date and are taken out of inventory once the customer purchases the associated electricity.
In addition, in order to monitor exposure, all unrealized / forecasted REC volumes will need modelling related to 1) the production units and the expected number of REC’s that will be issued, 2) the trades and the position management of buys/sells of future REC delivery, as well as 3) customer sales for REC consumption and cancellation. Moreover, with the tracking of RECs not yet fully harmonized between States or Countries, the management of different jurisdictions may also be applicable.
Managing all these attributes and linkages requires a systematic approach for capturing, inventory management, position and risk management, settlement and (compliance) reporting. Essentially, it needs a ‘renewables’ energy trading and risk management (ETRM) solution.
With 14 years of experience in delivering Environmental Management Information Systems (EMIS), Pioneer Solutions is uniquely positioned as the premier supplier of REC and Emissions management solutions, as well as being an award-winning ETRM vendor. Its RECTracker software application delivers a comprehensive solution that automates end-to-end REC tracking and management processes, from generation to assignment and retirement or expiration.
RECTracker provides robust functionality for the following areas:
- Inventory planning, management and compliance reporting
- Front office support for capturing all REC trades and analysis
- Middle office support for confirmation, risks and reporting
- Back office support for settlement and accounting
Each renewable asset is captured in RECTracker which captures location/origin, technology (i.e., solar, wind etc.) and fuel, certification entity and more. Each REC will be tied to a renewable asset thus technology, fuel, expiration date can be derived. A hierarchical book structure is supported to capture comprehensive assets, purchase and sale trades.
RECTracker offers a flexible book structure that allows segregation of domestic RECs from foreign RECs. All forward transactions can be captured in RECTracker, including 1) forward production forecasts for each renewable asset that will eventually be trued-up with inventory from the certification entity, 2) all spot or forward delivery purchase and sales, forward trades will eventually be trued-up with your account at the certification entity, and 3) obligations (i.e., compliance obligation to surrender or customer off take for green products sold).
RECTracker’s position reporting allows to show realized and forward positions, and can allocate inventory for retirement and sales/transfer such that an accurate position is known. In addition, the Position report can be shown by technology, expiration dates, assets and more.
As the renewable energy market grows, so will the volume of RECs. As a result, it will outgrow current usage of spreadsheet-based systems, relying on the portal with access to the registry of the certification entity or the limitations of functionality included in ETRM systems.
Financial and compliance requirements compel market participants to professionalize the management of RECs in order to properly optimize cost, valuations and risks. Not to mention, accounting for RECs inventory could be complex due to regulatory requirements. Appropriately, it might be time to look for greener pastures and where else to start than Pioneer?