The renewable energy certificate (REC) market enables businesses to support clean energy by procuring renewable rnergy certificates (RECs) which serve as proof that one megawatt-hour (MWh) of electricity was generated from a renewable source, fostering transparency and investment in renewables.

Why RECs Matter

RECs are more than just financial instruments. They validate green energy claims, encourage renewable energy certificate trading, and drive renewable adoption. By purchasing RECs, businesses contribute to expanding renewable infrastructure, helping meet green power targets.

How the REC Market Works

The renewable energy certificate market operates through issuance, trading, and retirement:

• Issuance: When a renewable facility generates electricity, it receives RECs.
• Trading: Buyers such as corporations procure renewable energy certificates from voluntary or compliance markets and support their ESG goals. 
• Retirement: Once used, RECs are retired to prevent double counting, ensuring credibility.

Types of REC Attributes

In the renewable energy certificate (REC) market, understanding what defines a REC is essential for effective trading and sustainability claims. Each REC is characterized by three key attributes: vintage, eligibility/certifications, and fuel type.

• Vintage: The year the renewable energy was generated, affecting its market relevance and compliance.
  
• Eligibility/Certifications: Determines if a REC meets regulatory or voluntary standards (e.g., Green-e, RE100), impacting its acceptance.
  
• Fuel Type: Specifies the renewable energy source (solar, wind, hydro, biomass), ensuring transparency in environmental impact.

These attributes influence the dynamics of renewable energy certificate trading and shape the REC market by ensuring credibility in sustainability efforts.

The Traditional REC selling process in OTC Market

The traditional REC sales process involves several manual steps, including:

• Finding buyers: Reaching out to prospective buyers directly or through brokerage firms and negotiating terms of the sale.
• Buyer credit checks & Know Your Customer (KYC): Assessing financial stability and creditworthiness of the buyer and obtaining company and controller identity documents to validate the buyer’s identity.
• Contract drafting and revisions: Drafting, reviewing, negotiating contract language and revising contracts with legal teams.
• Invoicing: Manually creating and sending invoices as well as record keeping.
• Payment verification: Ensuring the buyer has paid, and chasing payment when funds are delayed.
• REC deliveries: Transferring or retiring RECs utilizing a renewable energy tracking system

The Traditional REC buying Process in OTC Market

The traditional REC buying process is often manual and involves third-parties for procurement.

• Identifying suppliers: Buyers must research and connect with renewable energy producers, brokers, or marketplaces to find available RECs that meet their sustainability goals.
• Supplier due diligence & verification: Buyers conduct due diligence on the seller, ensuring legitimacy, REC authenticity, and compliance with relevant renewable energy certificate trading regulations.
• Negotiating pricing & terms: Buyers engage in price negotiations, contract discussions, and volume agreements, often involving lengthy back-and-forth exchanges.
• Contract review & execution: Legal teams review, negotiate, and finalize contracts to ensure compliance with corporate procurement policies and REC market regulations.
• Payment processing: Buyers must arrange and verify payments, which may include currency conversions, transaction fees, and payment delays.
• Certificate transfer & retirement: Once payment is verified, RECs are transferred to the buyer’s registry account and retired if they are used for sustainability reporting or compliance.

Challenges for Buyers in the Renewable Energy Certificate Market

• Lack of transparency: Buyers struggle to access clear data on REC pricing, sourcing, and environmental impact, making decision-making uncertain.
  

• Complex procurement processes: Multiple intermediaries, lengthy contract negotiations, and invasive credit checks create barriers to participation.
• Limited customization: Many REC platforms do not allow buyers to align purchases with specific ESG goals, such as sourcing from particular regions or renewable technologies.
• Market access barriers: Most REC exchanges cater only to wholesale participants, forcing smaller businesses to rely on intermediaries.
• Greenwashing Concerns: Without robust tracking and verification, buyers risk accusations of greenwashing, as the actual environmental impact of RECs remains unclear.
• REC price volatility: Over-the-counter (OTC) transactions dominate the REC market, leaving buyers with unpredictable pricing and making long-term planning difficult.

REC trading reimagined with TraceX

The REC market needs smarter tech, better efficiency, and simpler processes. That’s exactly what TraceX brings to the table. Trusted by many, it streamlines renewable energy certificate trading, cutting admin costs by 72% and making the whole process faster, efficient and more transparent.

Take the next step in simplifying your renewable energy certificate trading.
Experience the future of REC trading with TraceX. Book a demo.