Loved the 99%/1% framing haha! I felt like I was in the 1% but I learned a TON from this piece. Lots of nuance and great table setting for how complicated it is to move the titanic on standard setting.
It does sound like transparency is the key here. While there seem to be a lot of reasons not to go 24/7 on the GHG Protocol, hopefully transparency will help with the consumer / branding side where it's all about clout / bragging rights.
Thinking about the many stickers on EV chargers that say "powered by 100% clean energy" and community solar programs that just repackage RECs. As shown in this piece, that can still be a huge funding mechanism and could sometimes cause additionality, but it's also not necessarily what consumers think they're paying for
This was really interesting, but it seems that sometimes we get lost in the weeds of accuracy and forget why we are doing this in the first place. In the case of RECs, the world is not made a better place by increasing the accuracy of corporate emissions reporting. The world is made better by more renewable generation going up faster. So the most important aspect of improving RECs would be to make them an even more potent force for increasing renewables. So if bundled RECS and VPPs are a more potent form of credits, they should be worth more as a corporate tool for emissions reporting - the accuracy is not as critical as the need to get more corporations to buy RECs and more corporations to buy the most potent form of RECs. Perhaps Bundled and unbundled RECs should have different carbon value in order to provide that incentive. The quest for accuracy is often a waste of time - for example - it makes no difference if a households gas furnace emissions are 4.2 Tons of CO2e/year or 1.2 Tons. The action - to replace the furnace with a heat pump is exactly the same. In the case of RECS, we need to reward the players that take the actions that are the most transformative to the grid, and that is not necessarily the same as being more accurate.
I would have liked the episode to dive a little into residential REC's and how any of this conversation ties into them or how they are a different beast.
I didn't understand this episode. I'll describe my model, and maybe that will help someone figure out how to explain this episode to me.
Here in the SF Bay Area, we have Peninsula Clean Energy (PCE) and PG&E. It's one distribution system with more or less two tiers of electricity you can buy. I imagine that there is a local distribution system and PG&E knows exactly which generators are supplying how much electricity every five minutes throughout the day. The generator supplies PG&E with information as to the carbon emissions they generated to supply their electricity. PG&E can thus bucket that into two buckets: total zero-carbon electricity put onto the grid during a five minute interval and total carbon emitting electricity with total emissions for that electricity.
PG&E also knows exactly how much electricity it is supplying to each source of demand. PG&E knows whether the demander is paying for zero carbon electricity or otherwise, and they can aggregate that. If you sum total demand for zero carbon electricity during a five minute interval across a local distribution system, it should be no more than the total supply of zero carbon electricity. All the rest of the supply matches all the rest of the demand and you can calculate the average emissions of that electricity.
So now you have an "impact" measurement. If I paid for zero carbon electricity, I have zero emissions. If I don't pay for zero carbon electricity, I have the average emissions of the other electricity.
PG&E is supposed to make sure that it has sufficient generators and/or batteries or whatever so that aggregate supplied zero carbon electricity is always at least as large as demand. The shoud have forecasting in place to make sure they are procuring new generation fast enough and throughout the year and day to meet contracted demand. They should rebate something to consumers if they can't meet demand, but they might be able to play games with carbon offsets or cap and trade to pay some other distribution area that had excess supply. To the extent that distribution areas are linked, you can pay other distribution areas for the zero-carbon supply.
PG&E (or PCE) aggregates power purchase agreements. Obviously, my agreement with PCE isn't a 20 year agreement, but PCE can pretty will know that I'm unlikely to change my agreement, or, if I do, another customer will likely replace me. So PCE can easily create 20 year power purchase agreements.
It's not clear to me why Google would need to buy RECs on the spot market or have special power purchase agreements as opposed to just going to the local version of PCE and entering an agreement with them. Google is big enough I could certainly imagine a three-way agreement where Google works with PCE and a particular supplier. And google could certainly install batteries at its datacenter so that PCE wouldn't need to worry about expanding the local distribution system to support a new higher peak demand.
Question: If states with RPS such as WA result in nearly all new renewable RECs being compliance-based, does this mean that developers in states without RPS can grab more cash by also selling voluntary RECs? Is this a perverse incentive to drive renewables development away from states that have a RPS? Or is there a defined way to avoid this (or did I misunderstand)?
Love the episode, thanks for taking on this topic. Note that EPDs do not accept RECs alone to count as renewable energy but do allow PPA as they are more credible. Background: about half of the carbon pollution from the built environment is operational energy, and the other half is embodied carbon. EPDs are the accounting mechanism for embodied carbon of construction products. The rules for EPDs do not allow counting RECs in reducing energy pollution generally, but do allow PPAs.
Wow! I can always relate more to thermal and mech engineering than financial engineering.
I live in the 40 mile long Roaring Fork Valley in CO. It is all powered from the same couple of transmission lines. My utility, Xcel says it's 45% wind and solar. Aspen and Glenwood munis at either end say they are 100%, 2/3 from a windfarm in Nebraska. Wonderful Holy Cross REA says 80%+. The closest generators besides a bit of local solar are coal plants in Craig and Pueblo and one could say that's where most of our electrons arrive from. A "tangled web" indeed.
I think hourly accounting becomes more important as a grid, or maybe a purchaser, gets closer to 100%. But it should not be the obsession it seems it's become. (It's hard for purchasers to go from 100% annual to 70% hourly, but it lights a fire under their butts for storage.)
They provide hourly marginal savings using WattTime and Cambium:
"For example, using the first method, buying clean power came out on top, with rooftop solar offering the potential to cut CO2 by about 5.7 metric tons per year, while switching to an electric vehicle would cut about 3 metric tons per year. But using the second method, car-related actions won out, showing EVs cutting CO2 by 4.6 metric tons per year, and rooftop solar cutting 1.4 metric tons per year. The truth is probably somewhere in the middle."
Simple immediate marginal calcs like WattTime neglect "agency" in adding EVs and HPs, and IMHO, every panel and turbine contributes to winding down coal in 90% of the country, even if it seems like it's the gas plants that "modulate."
When I first learned about RECs in GHG accounting course, I also thought they sounded fishy. Now I'm just grateful that this is an emissions-lowering strategy that Trump can't wreck. I'm also inspired to learn that the oligarchy is still pursuing this. Maybe because it also makes financial sense? Learning about the challenges and issues directly from Michael and Peggy was also educational. Time for another pod on Scope 3 emissions which are 10X our emissions from energy consumption.
Here in Colorado, my neighbor has been complaining about my dog shitting in his front yard, so I decided to reimburse a dog walker in New York for the costs of picking up his dogs’ shit. Problem solved.
Thank you David for this debate, I really enjoyed it.
Especially the part that just one percent of people know about granularity and all of them are worked up and angry! same here in Europe!
In Europe, we’re already testing granular certificates in practice. Ireland and Denmark have run pilots with hourly Guarantees of Origin, and Switzerland will be next in January next year. Although we already have the monthly matching in France. (which has a lot of advocates instead of hourly matching)
But instead of making hourly matching the only standard, the focus has been on gradual, opt-in rollout. That way you preserve compatibility with the wider European GO market while testing how granularity works in reality. We’ve seen that optionality matters (granular and annual certificates can coexist), and premiums already emerge for more granular products. The challenge we’re dealing with is not just disclosure, but how to make sure these incentives don’t create distortions in the grid ( like oversupply on sunny afternoons).
What I see is that, there is a pragmatical approach to it here to proceed in phases, and always link it back to system needs. Otherwise, you risk market fragmentation and unintended consequences.
Just one point, how I see EACs, they don't clean your local grid today, but they are valid mechanisms to create demand, channel capital, and standardise reporting.
The system isn’t perfect, if you or anyone knows a better way, please speak up, but until then, it’s better than nothing. Plus, it’s moving toward more integrity with 24/7 matching, locational claims, and additionality requirements.
One piece that never seems to get mentioned is what happens to the communities that lose their RECs? An Alaska state agency is currently trying to sell the RECs from Juneau's hydroelectric dam. Ignoring the fact that RECs from a 1970s hydro project are clearly just terrible greenwashing, if it goes through, where does this leave Juneau? It's an isolated and nearly entirely hydro-powered grid. They have a number of projects that rely on the renewable-ness of their grid, including heat pump programs.
The entire city would now be forced to say their electricity comes from nowhere? Mysteriously appearing in their outlets with an unknown carbon footprint, making it impossible for the city, residents, or local industry (a mine filed to challenge the REC sale), to know whether electrifying is a climate positive or negative? And therefore making it impossible to continue with any sort of electrification grants or electrification programs? It just seems so ridiculous.
Flooding the voluntary REC market with RECs from old hydro or nuclear projects hurts just about everyone. If they are sold, the residual emissions factor for the grid would be more based on diesel or any other generation Juneau uses.
That said, some of these older projects may need to make more money to stay operational and/or make needed upgrades. I'm not familiar with hydro in Juneau but generally speaking, if there is a real need, you could close the gap via (A) tax dollars → government funding, (B) charge rate-payers more for electricity, or (C) try to monetize the RECs. There are a lot of variables but generally speaking, I doubt monetizing the RECs will do much to close the gap which is why I say selling RECs off of these projects hurts just about everyone.
But for new solar and wind, RECs bundled with power or unbundled CAN be very material to enabling more projects when sold via long-term forward contracts that de-risk the project for investors, owners, and lenders. It makes more sense to me to maintain focus here where the voluntary market can do more to accelerate the transition to renewable energy where the aim is to make electricity clean, abundant, and reliable.
Juneau doesn't particularly need the money to run its hydro project, nor will it likely get it. It's a state entity trying to make the sale, based on the state's participation in the original bonds. This is one of three separate "sell old hydro" REC plans I know of in Alaska, all running through a company called Greenlight energy, all of which popped up in the last yer. And they're even trying to sell years back to 2019. I can see that the company sold RECs to the government in 2024. Two of the plans are tied up in contract disputes (because there were no RECs decades ago, so it's not agreed who owns them), while in the third case the utility just kind of saw it as free money so why not. I suspect even if they're sold, actual humans and businesses in the communities will illegally say that their power comes from hydro, because almost no one will realize that fact can be or has been sold, it's confusing, and unenforceable. I find it hard to see how the potential good of RECs for new projects can be preserved without leading to the proliferation of this kind of useless money shuffling.
That certainly sounds problematic to say the least. Any RECs that are Green-e certified must match a 21-month vintage window (from the same year, 6 months before, or 3 months after). Greenhouse Gas Protocol and programs like SBTi are looking at tightening matching requirements in space and time further. Required or not, greater transparency about the source of each RECs (both the project and the original method of purchase) and their impact could go a long way to better inform buyers and the market at large.
Loved the 99%/1% framing haha! I felt like I was in the 1% but I learned a TON from this piece. Lots of nuance and great table setting for how complicated it is to move the titanic on standard setting.
It does sound like transparency is the key here. While there seem to be a lot of reasons not to go 24/7 on the GHG Protocol, hopefully transparency will help with the consumer / branding side where it's all about clout / bragging rights.
Thinking about the many stickers on EV chargers that say "powered by 100% clean energy" and community solar programs that just repackage RECs. As shown in this piece, that can still be a huge funding mechanism and could sometimes cause additionality, but it's also not necessarily what consumers think they're paying for
This was really interesting, but it seems that sometimes we get lost in the weeds of accuracy and forget why we are doing this in the first place. In the case of RECs, the world is not made a better place by increasing the accuracy of corporate emissions reporting. The world is made better by more renewable generation going up faster. So the most important aspect of improving RECs would be to make them an even more potent force for increasing renewables. So if bundled RECS and VPPs are a more potent form of credits, they should be worth more as a corporate tool for emissions reporting - the accuracy is not as critical as the need to get more corporations to buy RECs and more corporations to buy the most potent form of RECs. Perhaps Bundled and unbundled RECs should have different carbon value in order to provide that incentive. The quest for accuracy is often a waste of time - for example - it makes no difference if a households gas furnace emissions are 4.2 Tons of CO2e/year or 1.2 Tons. The action - to replace the furnace with a heat pump is exactly the same. In the case of RECS, we need to reward the players that take the actions that are the most transformative to the grid, and that is not necessarily the same as being more accurate.
I would have liked the episode to dive a little into residential REC's and how any of this conversation ties into them or how they are a different beast.
I didn't understand this episode. I'll describe my model, and maybe that will help someone figure out how to explain this episode to me.
Here in the SF Bay Area, we have Peninsula Clean Energy (PCE) and PG&E. It's one distribution system with more or less two tiers of electricity you can buy. I imagine that there is a local distribution system and PG&E knows exactly which generators are supplying how much electricity every five minutes throughout the day. The generator supplies PG&E with information as to the carbon emissions they generated to supply their electricity. PG&E can thus bucket that into two buckets: total zero-carbon electricity put onto the grid during a five minute interval and total carbon emitting electricity with total emissions for that electricity.
PG&E also knows exactly how much electricity it is supplying to each source of demand. PG&E knows whether the demander is paying for zero carbon electricity or otherwise, and they can aggregate that. If you sum total demand for zero carbon electricity during a five minute interval across a local distribution system, it should be no more than the total supply of zero carbon electricity. All the rest of the supply matches all the rest of the demand and you can calculate the average emissions of that electricity.
So now you have an "impact" measurement. If I paid for zero carbon electricity, I have zero emissions. If I don't pay for zero carbon electricity, I have the average emissions of the other electricity.
PG&E is supposed to make sure that it has sufficient generators and/or batteries or whatever so that aggregate supplied zero carbon electricity is always at least as large as demand. The shoud have forecasting in place to make sure they are procuring new generation fast enough and throughout the year and day to meet contracted demand. They should rebate something to consumers if they can't meet demand, but they might be able to play games with carbon offsets or cap and trade to pay some other distribution area that had excess supply. To the extent that distribution areas are linked, you can pay other distribution areas for the zero-carbon supply.
PG&E (or PCE) aggregates power purchase agreements. Obviously, my agreement with PCE isn't a 20 year agreement, but PCE can pretty will know that I'm unlikely to change my agreement, or, if I do, another customer will likely replace me. So PCE can easily create 20 year power purchase agreements.
It's not clear to me why Google would need to buy RECs on the spot market or have special power purchase agreements as opposed to just going to the local version of PCE and entering an agreement with them. Google is big enough I could certainly imagine a three-way agreement where Google works with PCE and a particular supplier. And google could certainly install batteries at its datacenter so that PCE wouldn't need to worry about expanding the local distribution system to support a new higher peak demand.
Question: If states with RPS such as WA result in nearly all new renewable RECs being compliance-based, does this mean that developers in states without RPS can grab more cash by also selling voluntary RECs? Is this a perverse incentive to drive renewables development away from states that have a RPS? Or is there a defined way to avoid this (or did I misunderstand)?
Love the episode, thanks for taking on this topic. Note that EPDs do not accept RECs alone to count as renewable energy but do allow PPA as they are more credible. Background: about half of the carbon pollution from the built environment is operational energy, and the other half is embodied carbon. EPDs are the accounting mechanism for embodied carbon of construction products. The rules for EPDs do not allow counting RECs in reducing energy pollution generally, but do allow PPAs.
Wow! I can always relate more to thermal and mech engineering than financial engineering.
I live in the 40 mile long Roaring Fork Valley in CO. It is all powered from the same couple of transmission lines. My utility, Xcel says it's 45% wind and solar. Aspen and Glenwood munis at either end say they are 100%, 2/3 from a windfarm in Nebraska. Wonderful Holy Cross REA says 80%+. The closest generators besides a bit of local solar are coal plants in Craig and Pueblo and one could say that's where most of our electrons arrive from. A "tangled web" indeed.
I think hourly accounting becomes more important as a grid, or maybe a purchaser, gets closer to 100%. But it should not be the obsession it seems it's become. (It's hard for purchasers to go from 100% annual to 70% hourly, but it lights a fire under their butts for storage.)
I say, beware "emissionality;" the whole "marginal" generation calculation is fraught with more assumptions. For an example go to Heatmap and their https://heatmap.news/decarbonize-your-life/methodology
They provide hourly marginal savings using WattTime and Cambium:
"For example, using the first method, buying clean power came out on top, with rooftop solar offering the potential to cut CO2 by about 5.7 metric tons per year, while switching to an electric vehicle would cut about 3 metric tons per year. But using the second method, car-related actions won out, showing EVs cutting CO2 by 4.6 metric tons per year, and rooftop solar cutting 1.4 metric tons per year. The truth is probably somewhere in the middle."
Simple immediate marginal calcs like WattTime neglect "agency" in adding EVs and HPs, and IMHO, every panel and turbine contributes to winding down coal in 90% of the country, even if it seems like it's the gas plants that "modulate."
When I first learned about RECs in GHG accounting course, I also thought they sounded fishy. Now I'm just grateful that this is an emissions-lowering strategy that Trump can't wreck. I'm also inspired to learn that the oligarchy is still pursuing this. Maybe because it also makes financial sense? Learning about the challenges and issues directly from Michael and Peggy was also educational. Time for another pod on Scope 3 emissions which are 10X our emissions from energy consumption.
Three points.
1) What you’re doing at Volts on the policy side is important, whether or not I find it compelling.
2) Never trust accounting systems unless you fully understand what the system is measuring.
3) Those two big noises everyone heard were first my head exploding followed quickly by my eyes slamming shut for an unscheduled nap.
Here in Colorado, my neighbor has been complaining about my dog shitting in his front yard, so I decided to reimburse a dog walker in New York for the costs of picking up his dogs’ shit. Problem solved.
If you dispersed the dog shit in the atmosphere so its effects were shared amongst both locations that would make for a better analogy.
Thank you David for this debate, I really enjoyed it.
Especially the part that just one percent of people know about granularity and all of them are worked up and angry! same here in Europe!
In Europe, we’re already testing granular certificates in practice. Ireland and Denmark have run pilots with hourly Guarantees of Origin, and Switzerland will be next in January next year. Although we already have the monthly matching in France. (which has a lot of advocates instead of hourly matching)
But instead of making hourly matching the only standard, the focus has been on gradual, opt-in rollout. That way you preserve compatibility with the wider European GO market while testing how granularity works in reality. We’ve seen that optionality matters (granular and annual certificates can coexist), and premiums already emerge for more granular products. The challenge we’re dealing with is not just disclosure, but how to make sure these incentives don’t create distortions in the grid ( like oversupply on sunny afternoons).
What I see is that, there is a pragmatical approach to it here to proceed in phases, and always link it back to system needs. Otherwise, you risk market fragmentation and unintended consequences.
Just one point, how I see EACs, they don't clean your local grid today, but they are valid mechanisms to create demand, channel capital, and standardise reporting.
The system isn’t perfect, if you or anyone knows a better way, please speak up, but until then, it’s better than nothing. Plus, it’s moving toward more integrity with 24/7 matching, locational claims, and additionality requirements.
One piece that never seems to get mentioned is what happens to the communities that lose their RECs? An Alaska state agency is currently trying to sell the RECs from Juneau's hydroelectric dam. Ignoring the fact that RECs from a 1970s hydro project are clearly just terrible greenwashing, if it goes through, where does this leave Juneau? It's an isolated and nearly entirely hydro-powered grid. They have a number of projects that rely on the renewable-ness of their grid, including heat pump programs.
The entire city would now be forced to say their electricity comes from nowhere? Mysteriously appearing in their outlets with an unknown carbon footprint, making it impossible for the city, residents, or local industry (a mine filed to challenge the REC sale), to know whether electrifying is a climate positive or negative? And therefore making it impossible to continue with any sort of electrification grants or electrification programs? It just seems so ridiculous.
Flooding the voluntary REC market with RECs from old hydro or nuclear projects hurts just about everyone. If they are sold, the residual emissions factor for the grid would be more based on diesel or any other generation Juneau uses.
That said, some of these older projects may need to make more money to stay operational and/or make needed upgrades. I'm not familiar with hydro in Juneau but generally speaking, if there is a real need, you could close the gap via (A) tax dollars → government funding, (B) charge rate-payers more for electricity, or (C) try to monetize the RECs. There are a lot of variables but generally speaking, I doubt monetizing the RECs will do much to close the gap which is why I say selling RECs off of these projects hurts just about everyone.
But for new solar and wind, RECs bundled with power or unbundled CAN be very material to enabling more projects when sold via long-term forward contracts that de-risk the project for investors, owners, and lenders. It makes more sense to me to maintain focus here where the voluntary market can do more to accelerate the transition to renewable energy where the aim is to make electricity clean, abundant, and reliable.
Juneau doesn't particularly need the money to run its hydro project, nor will it likely get it. It's a state entity trying to make the sale, based on the state's participation in the original bonds. This is one of three separate "sell old hydro" REC plans I know of in Alaska, all running through a company called Greenlight energy, all of which popped up in the last yer. And they're even trying to sell years back to 2019. I can see that the company sold RECs to the government in 2024. Two of the plans are tied up in contract disputes (because there were no RECs decades ago, so it's not agreed who owns them), while in the third case the utility just kind of saw it as free money so why not. I suspect even if they're sold, actual humans and businesses in the communities will illegally say that their power comes from hydro, because almost no one will realize that fact can be or has been sold, it's confusing, and unenforceable. I find it hard to see how the potential good of RECs for new projects can be preserved without leading to the proliferation of this kind of useless money shuffling.
That certainly sounds problematic to say the least. Any RECs that are Green-e certified must match a 21-month vintage window (from the same year, 6 months before, or 3 months after). Greenhouse Gas Protocol and programs like SBTi are looking at tightening matching requirements in space and time further. Required or not, greater transparency about the source of each RECs (both the project and the original method of purchase) and their impact could go a long way to better inform buyers and the market at large.
It's a nice concept, but not realistic with the trump administration taking huge amounts of fossil fuel money.