Roger Ballentine is president of Green Strategies.
The clean energy sector is under duress from the phase out of federal tax credits and rollbacks of other supportive federal policies. After the mad rush to build before tax credits expire, what will sustain the growth of clean energy? Certainly, many forms of clean energy, like solar, will continue to have attractive economics, but the indispensable engine of clean electricity growth in an unfavorable policy environment will be voluntary — largely corporate — demand.
But our margin for error is small and the stakes are high. Voluntary markets are, um, voluntary. Leading companies do have strong commitments to purchase clean energy, but they are businesses — market uncertainty and increases in marginal costs will impact demand. The clean energy sector has appropriately been focused on how it will build capital stacks without tax equity and is now also realizing that impending changes to the Greenhouse Gas Protocol (GHGP) could depress demand. Another brewing challenge facing Western clean energy markets has garnered less attention.
Clean energy markets, particularly for renewable energy, depend on regional registries — essential electronic tracking systems that manage the entire lifecycle of energy attribute certificates (such as RECs) from issuance to retirement. These registries are official systems of record that provide transparency, avoid double-counting and provide transactional certainty for buyers and sellers in the clean energy marketplace. In the Western U.S., this critical infrastructure is provided by the Western Renewable Energy Generation Information System (WREGIS), currently managed by the Western Energy Coordinating Council (WECC). But there is potential trouble brewing out West.
WECC has indicated that it plans to spin out WREGIS because it believes that running a registry is not core to its purpose. That is not an unreasonable conclusion. However, how they say they will undertake this process, and what they indicate the new independent body would do pose significant issues for the voluntary clean energy marketplace.
WECC has decided that the soon to be standalone WREGIS needs to rebuild the backbone of its infrastructure — its software system — from scratch. This transition could take several years and adds uncertainty to a fundamental underpinning of the clean energy marketplace. Buyers and sellers that have taken a transparent and reliable registry infrastructure for granted will need to factor new uncertainty into their decision making. One such uncertainty is whether WREGIS will experience an outage during the transition from one software platform to another. The last time it transitioned software platforms in 2023 some customers were unable to issue RECs for months.
Perhaps an even greater risk to the voluntary markets is what WECC has indicated the new registry will offer (and by implication, not offer). The Western states, particularly California, operate some of the country’s strongest and most important mandatory markets created by state renewable portfolio standards. WREGIS at its core was set up to support these mandatory markets and of course it must continue to do so. But that is no longer sufficient.
In support of deeper decarbonization, climate-minded companies are beginning to transact for more clean energy solutions, including nuclear, clean hydrogen, sustainable aviation fuels, fossil generation with carbon capture and sequestration, and more. Just as in the beginning of the growth of wind and solar, transactions and markets for these other clean energy options require the infrastructure of a reliable registry. Unlike wind and solar, however, few of these clean energy options are subject to state mandates. Registries, therefore, must not just focus on legacy compliance markets but also serve the expansion of clean energy technologies being transacted in the voluntary marketplace. Further, proposed changes to the Greenhouse Gas Protocol would require rapid evolution in what products registries offer to the voluntary market, such as time and location granular instruments and instruments with information on the system-level emissions impacts of the underlying clean energy generation and use.
WECC, however, has indicated that a completely rebuilt WREGIS will, at least initially, offer only “minimum viable products” to the marketplace — presumably products focused on existing compliance market needs.
Fortunately, there are other registry options for more complex post-GHGP reform attribute instruments as well as for attributes from the new and expanding types of clean energy investments and transactions. CleanCounts (formerly M-RETS) is perhaps the most innovative registry system in the country and is at the forefront of providing critical registry infrastructure to the rapidly evolving voluntary marketplace. Theoretically, a market player would be able to continue to use WREGIS for its wind and solar compliance market transactions and CleanCounts for its other transactions. But this adds cost and complexity at a time when the voluntary markets can ill afford it.
What the clean energy marketplace needs now is both continuity of core market infrastructure and innovation to meet a changing landscape. The process of rebuilding WREGIS from scratch creates near-term uncertainties and risks. And the islanded and compliance market-only focused WREGIS foreshadowed by WECC seems poised to offer only yesterday’s services for today’s clean energy market needs.
Voluntary clean energy markets have been robust and impactful — most estimates conclude that more than one-third of all wind and solar development over the last decade-plus is due to voluntary corporate offtake. The future, however, is much less clear. Adding uncertainty, costs, and restrictions to the voluntary market at this fraught time is the opposite of how we need to be preparing the clean energy market for that future. Before WECC proceeds, regulators, corporate buyers and public agencies should insist on an alternative path — one that preserves continuity, prevents unnecessary duplication and keeps the West’s voluntary clean energy markets on stable footing.
