Renewable Energy SmartPod

Talking RECs with IncubEx

June 08, 2021 Season 1 Episode 7
Renewable Energy SmartPod
Talking RECs with IncubEx
Chapters
2:34
RECs 101
5:03
RECs and renewable portfolio standards
6:19
Who can buy and sell RECs?
8:00
The role of RECs across various US states
9:50
Voluntary versus mandated state renewable energy markets
12:06
Evolution of state renewable portfolio standards
13:33
States/regions with most active REC trading
16:32
What Texas gets right about RECs
18:03
Futures markets and RECs
19:13
Prospects for a federal REC market
20:51
Biden's impact on REC markets
23:27
The role of RECs in meeting GHG emissions reduction targets
25:52
The importance of REC pricing
29:35
Big banks expanding their REC footprint
31:01
Renewable energy project or NOT a renewable energy project
34:48
PodBrief - RECs need to evolve
Renewable Energy SmartPod
Talking RECs with IncubEx
Jun 08, 2021 Season 1 Episode 7

Renewable energy certificates (RECs) are a key financial tool in the renewable energy industry. Steve McComb, senior vice president at IncubEx, joins the podcast to do a deep dive on what RECs are and how they function in the marketplace across different states and regions (2:34). Steve outlines the evolution of states' renewable portfolio standards (12:06), what Texas gets right about RECs (16:32) and how RECs are traded in futures markets (18:03). We also discuss the impact proposals coming out of the Biden administration are having on the market and the role RECs are poised to play in efforts to reduce greenhouse gas emissions (20:51).  And with so many companies looking to green their operations and portfolios, Steve explains how big banks are expanding their footprint in the REC space (29:35).

Learn more about IncubEx




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Show Notes Transcript Chapter Markers

Renewable energy certificates (RECs) are a key financial tool in the renewable energy industry. Steve McComb, senior vice president at IncubEx, joins the podcast to do a deep dive on what RECs are and how they function in the marketplace across different states and regions (2:34). Steve outlines the evolution of states' renewable portfolio standards (12:06), what Texas gets right about RECs (16:32) and how RECs are traded in futures markets (18:03). We also discuss the impact proposals coming out of the Biden administration are having on the market and the role RECs are poised to play in efforts to reduce greenhouse gas emissions (20:51).  And with so many companies looking to green their operations and portfolios, Steve explains how big banks are expanding their footprint in the REC space (29:35).

Learn more about IncubEx




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 Sean McMahon  00:08

What's up everyone and welcome to the renewable energy smart pod. I'm your host Sean McMahon. Joining me on the pod today is Steve McComb, Senior Vice President at IncubEx. And we're gonna be doing a deep dive on the market for renewable energy certificates, which are also known as renewable energy credits, but most commonly referred to by their acronym RECs. Now, I have a bit of a funny confession to make. And I know I might be dating myself here. And definitely sharing too much information about the music I used to listen to back in the day. But every time I hear or say the word RECs, I think the old hip hop group Wreckx-n-Effect, so pardon the turn of phrase when I tell you, Steve and I will be breaking down the effect the trading of RECs has on renewable energy markets. 

 

Every day, there's another headline about more and more renewable energy assets coming online. So coming up in the next few weeks, we've got a pair of episodes that will focus on the people who'll be buying all that renewable energy. Miranda Ballantine is the CEO of the Renewable Energy Buyers Alliance, and she'll be joining me to talk about how large scale energy buyers like Amazon, Google, Microsoft, Walmart, and many, many others are reshaping the renewable energy procurement process. 

 

While Miranda and the members of REBA represent big, big buyers, we've also got an episode coming up that focuses on the plight of people looking to purchase renewable energy on a much much smaller scale. I'm talking about individual homeowners and consumers. Greg Hopkins and the team at RMI have called for changes to the green mortgage market. So we'll be hearing from him about how individuals can leverage that market to increase their renewable energy purchasing power. 

 

So lots of great content on the way but before we start talking RX with Steve McComb from IncubEx, I want to say a quick thank you to the sponsor of today's episode: Info. Infor is a global leader in industry specific cloud applications to support critical business needs. Infor solutions are tailored to meet the needs of solar and wind generation asset owners. More than 350 utilities organizations rely on enforce cloud based ERP solution to ensure their assets and infrastructure are safe and reliable. 

 

Hello, everyone. And joining me today is Steve McComb, the senior vice president from IncubEx and today we're gonna be talking about renewable energy certificates. Steve, how you doing today?

 

Steve McComb  02:31

Really good. Yeah. Thank you for having me on.

 

Sean McMahon  02:34

Glad to come on here to share some of the knowledge the team at Beck's has about RECs. So let's get right into it walk me through what renewable energy certificates are, how they work, who generates them, and so forth?

 

Steve McComb  02:45

Yeah, absolutely. Um, it's really a pleasure to be here. So. So effectively, renewable energy certificates, RECs are certificates that are generated along with electrical power, when it's generated, they're tracked, they're created an electronic registries. There are seven or so registries across the country, generally speaking, sort of the the power grids as we know them. A good example has been in the news a lot recently is are caught, you know, Texas has their own sort of renewable energy registry. And so these certificates are generated at the same time as the power is generated. And it's the unit of trade and measure is one megawatt hour, in the same way that electricity is measured in that way. They are transferred and bought and sold in these registries. And they typically are used to represent either the renewable pneus of energy or the claim on the consumption. A good example here would be, say, a Google who's looking to make sure that the energy they use to power their searches is renewable and say they would buy these renewable energy certificates to do that. Typically speaking, that major demand side of this is either voluntary or commercial demand. Or the other one is sort of a regulatory mandate where folks are required to do this by by Fiat.

 

Sean McMahon  04:10

And so real quick, what kind of pricing are we talking about here? So if Google doesn't want to go buy a certificate, what's the price variance?

 

Steve McComb  04:17

You know, it's a really good question. It typically sort of varies by region and by sort of demand type, you have, you know, various programs run by various states, where if if the requirements that they've set up under what we call a renewable portfolio standard, which is a state mandate for certain amounts of renewable energy to put into the grid, if those requirements are fairly stiff, you'll see some very high pricing as renewable energy generators try to meet that high demand. So so you can have prices for a megawatt hour as high as $200. And as low as earlier. You know, this year we saw, you know, 90 cents. So it really depends on what the supply demand dynamic is in that region. And Sort of the difficulty of putting in certain types of technologies.

 

Sean McMahon  05:03

Alright, and just real quick, let's back up a second. So what are the essentials of a renewable portfolio standard?

 

Steve McComb  05:09

Typically, what you've seen is states mandating certain types of renewable energy. So they would mandate, you know, a certain amount of wind a certain amount of solar production from certain regions that qualify into their programs. And they would, generally speaking, classify them in groups. So you'd have class one, which would be your sort of more industrial or more more fluid type of criteria, which would be wind and other high volume renewables. And then you'd have segregated classes for solar, and others that are typically harder to develop, or at least were at the time that these things is started. So you, the politicians tend to stratify it into into groups maybe based on their regional attributes as well. So in states and regions that have larger forestry components, you very often see a biomass element to the renewable portfolio standard. In others, where you you're close to the ocean or whatnot, you'd see offshore demand offshore programs as well. And so those are the ones are just getting going. So they're they're very often trying to incentivize jobs, renewable jobs in those regions. And so they will tailor the design of the regulation to meet those requirements.

 

Sean McMahon  06:20

And now, when we're talking about who can buy and sell renewable energy certificates, who are we talking about? And this isn't the the wall street gang on Reddit, right? We're not GameStop in this thing, right? Who can participate in these markets?

 

Steve McComb  06:32

Yeah, so anybody can participate in the market. I mean, if you're a motivated individual, you could trade it. But you're right. It's not typically traded in that way. Right? It is most often traded by, you know, energy firms, electricity firms. I think you had EDF renewables on your podcast recently. And, you know, they're a large developer in the space. And so that would be sort of along the lines of someone that would be a natural participant in a market like this. That's sort of an example of folks who do the development, but they need to find funding for their projects, very often, that funding comes along with, you know, from a bank, those banks would be typically hedging their exposure to some of these projects. So you'd have banks to hedging there, you might have funds who have gone ahead and funded some of these projects, and you know, funds, and then you have also the the great number of sort of liquidity providers in the market where they have exposure as a result of trades or originated deals that they've done. And so, so that's who's typical in the space, it's not really individuals, you'd get access on an exchange, like the one that we're partner with called nodal exchange, you know, that's not something that you sign up for on Schwab, or, or Reddit or credit, or Robin Hood, Robin, is not something you sign up for on Robin Hood, but it is it is a market that's available, it's just you have to be relatively motivated to try to get into that area. So looks a little bit more like you know, trading wholesale beans and corn than it does GameStop.

 

Sean McMahon  08:00

And now, you mentioned earlier how the different states can can have different pricing in terms of mandates, sorry, how they're different mandates will affect pricing. So walk me through a little bit where those state rec mandates come from, what are the ins and outs of the renewable portfolio standards?

 

Steve McComb  08:13

Yes, good question. So before we go on here, actually searched it up. And it looks like the first state mandate, what came from Iowa, where they wanted to see a certain amount of renewable energy production in their grid. Now you have, you know, 30 states across the US and, and, and the District of Columbia that have programs that mandate a certain amount of renewable energy, whereas in 2006, and seven, we had four futures contracts that serve this market, now we have more than 50 to serve the market. And so it's, it's growing significantly, the the number of states that are participating in it is ever increasing, and the mandates that those states are putting in place is increasing a lot as well. One of the, you know, early on the early days, the targets were very typically sort of, you know, 10% by 2010 20%, by 2020 types of targets like that. Now, you see, you know, 30% by 30 50% by 50, in in certain sort of more aggressive states going to 100% as well,

 

Sean McMahon  09:14

not doesn't California, or daymond, for 100%.

 

Steve McComb  09:17

They're aiming for 100%. Absolutely. And and so, you know, you see that you see that trend happening a lot now. And it looks like, you know, even the Biden administration is looking for service, more zero carbon electricity grid, you know, into the future. And so, what's interesting, I think, as a trend in this space is not necessarily that what the states are mandating. Certainly that's a big big driver, but also it seems like consumer demand has shifted and this should be in order to sort of be a growth company, you have to have a strategy and renewable energy into fuel yourselves.

 

Sean McMahon  09:50

And I mentioned earlier the difference between or how some states have a mandate and others are voluntary. So what are the basic elements of a voluntary renewable energy certificate market and You know, what makes them appealing, as opposed to the state mandated.

 

Steve McComb  10:03

I think the the, the best example of a state that sort of has both is probably Texas, Texas has a requirement for renewable energy in their grid. And they also have a very, very active voluntary market. The main difference is that on the voluntary side, it's it's a little bit harder to find, it's anybody that wants to buy these things for whatever reason they may want to buy them for. But typically, you see the major driver of demand being net zero commitments that these corporations have made. So that that's kind of what what is the primary sort of backstop for, for the voluntary market. You know, what's interesting in that voluntary market is, is you've had sort of a standardization of the standard of what is the voluntary market. So there's a really good organization out of California called the Center for resource solutions, they have a program called Greenie energy. And that has become the de facto national standard for what is a voluntary RAC. And so they've done a very nice job of helping grow this market, they've been around for, you know, 20 years doing the same thing. And it's been very positive. What we've seen recently at being an exchange and certainly measuring or being a partner of an exchange and measuring our success by volumes on the exchange. You know, in the last 18 months, we've seen volumes in renewable energy from Texas, primarily driven by voluntary demand increased significantly, we've gone from zero to 15 million megawatt hours. And that time, just to put that into perspective, that's about enough energy to power 2 million homes for a year. And so that's, that's the growth of forward commitments in renewable energy from that region. And those commitments on their part of exchange nodal extend through 2031. At that same time, we've seen prices increased from sort of 90 cents per megawatt hour to $3.20 per megawatt hour, still, arguably relatively inexpensive on the basis of power costs, but a significant shift and a significant increase in in apparent demand for that product.

 

Sean McMahon  12:06

And I mentioned earlier how some states the RPS the renewable portfolio standards are evolving, where, you know, years ago, they were just aiming for 10% and now it's climbing 3040, California at 100. What kind of impact is that having on the market for RECs?

 

Steve McComb  12:20

Yeah, it's interesting. I mean, it you know, ever increasing sort of demand is increasing prices in certain cases. And and also backfilling sort of other things that are happening, the electricity market, so So I think, you know, the trend is bullish in the sense that there will be continued growth policy is pushing for that continued growth. So you see, like we mentioned before California has targets, all the 30 states have fairly aggressive targets, and they're, they're continuing to be satisfied by the good work of EDF, as you had on your show. And so, so that will continue to sort of be on the growth side of it. And that's going to fill in some of the stuff that's, that's, that's out there. So the coal shutting down not necessarily as a policy decision, but it's just shutting down for, because it's not economic anymore. So so you see the new renewables filling that void that's been left by sort of facilities that are just not in the money anymore. But you also see, you know, other other forms of demand that are coming from, you know, the ever increasing trend towards electric vehicles, and so on. So that is a very strong sort of supply side, and also a very strong demand side. So on both cases, a push upwards.

 

Sean McMahon  13:33

Alright, so there's 30 states plus DC, that I have some form of RECs. So are there any states that are more actively traded or where the price is more lucrative than others?

 

Steve McComb  13:43

Absolutely, yeah, I think, you know, it's a really good question. The other states, probably the most liquid market is, is what we call on the market PJM. PJM is the acronym for Pennsylvania, Maryland, and New Jersey. And and those states have rules within them, that are generally aligned with with respect to what is eligible to satisfy the state mandates. And so as a result of that, there's, you know, some standardization in the underlying product, and you can trade the underlying rack and satisfy any one of the three requirements. And so that helps a lot to build a bigger pool of liquidity and a bigger pool of supply that can then be used. So that's a very actively traded market. And for both the class one or let's consider the wind type wreck, and and the solar wreck as well. And New Jersey is the primary and most actively traded solar market. The other one on the voluntary side, if you will, Texas tends to be sort of your benchmark there and it would be the be the most active but even in that example, it's kind of interesting to see because if you if you stack sort of what's most expensive, least expensive, just on a comparative basis. Got $200 solar credits in New Jersey, you got 19 or so dollars in PJM as a class one or a wind credit, and then you have three and a half dollars for wind in Texas. So the markets are not fungible yet, but they're they're very actively traded.

 

Sean McMahon  15:15

Alright, Steve, help me understand how the different markets function. So we've talked about how PJM or market have different pricing and different standards, how does that affect the overall market?

 

Steve McComb  15:29

It's interesting, you know, so, it's also hard to define, in some respects, because the rules in each market are different. So you could kind of classify each market as the state set of rules. So Pennsylvania would have a set, New Jersey would have a set of rules and and, you know, Massachusetts, Connecticut, whatnot, the participants in those markets would then be looking at those rules trying to optimize and and find the best price that they can get for the asset that they have. And so they would be looking to either build in a certain region, or if there was eligible flow electrons to a certain region via transmission, so that they could capture a sort of the highest price for the asset that they're trying to manage. And so you know, depending on the sort of set of criteria that they have the transmission, the rules for the state and whatnot. So they're there, they're constantly looking at those types of things in order to optimize and get the best value for both the rack but I suppose, in combination, the electricity as well.

 

Sean McMahon  16:32

Are there any markets that, you know, for lack of a better word, do it the best or or make it easiest for for traders to operate?

 

Steve McComb  16:40

It's interesting, you know, and it sort of comes at a hard time to say that, you know, Texas does it best, right?

 

Sean McMahon  16:48

Why don't you want to say that, Steve, I

 

Steve McComb  16:50

don't know, that certainly, you know, it's certainly fraught with, you know, lots of contention, but the, you know, where, where markets, I've always been a fan of maybe, you know, policies, and then and then hands off implementation and so, so, you know, for us, we look at, you know, where the development is happening, and, and where the markets are sort of free to express themselves and Texas is a good example of that. Now, that being said, most of the activity historically, and, and, and through to now is really in the PJM. region. And so, so, you know, it's hard to say that, that they're not doing it best, because they have some minor amount of standardization amongst the rules, which is really helpful. And so that that's a good example of where you're getting pools of liquidity and sort of momentum in a market where folks can be comfortable with making investments because they have various different places to outlet that supply. So maybe a competitive toss up between sort of hands off and and in Texas, and and some sort of tighter but but coordinated management in the PGM. area.

 

Sean McMahon  18:04

So how often do these credits change hands? I mean, if a company buys one, do they just sit on it? Or is it kind of move around periodically?

 

Steve McComb  18:14

It's a Yeah, really good question. I think we're where we sit in the market as a participant in, in offering futures trading for it, we see greater turn frequency in the futures. So you would be trading, you know, one time the underlying crop sort of as as an entry level market, where it's it's not super evolved, if you went to a market like corn or beans, I suspect they would trade sort of 20 times the underlying crop in in some fairly evolved emissions markets, it's sort of at a six times the underlying crop. So the futures trade, the actual transfer of certificates would be probably a fraction of that, because you could trade futures many times, it actually only transfer the underlying once or twice. And in fact, you know, more of the transactions would occur sort of either over the counter bilaterally between parties for forward commitments, or as futures contracts. That then would the underlying sort of bounce around in the

 

Sean McMahon  19:12

registry that much. You mentioned how the markets aren't fungible yet, is that anywhere in the distant future, like a federal rec market?

 

Steve McComb  19:21

Yeah, I think a federal rec market, we certainly hope is on the horizon. I think that one thing you know, the trend that you see is what is acceptable both to you know, politicians is a reflection of what consumers will accept. And renewable energy, you know, certificates or renewable energy markets or incentives for those markets, is relatively well accepted as a way to deal with sustainability. And so I am very, you know, encouraged by a common traded market for renewable energy or at least clean energy in the future under a federal program. I think that would be very positive for the market. And certainly be great to pool a lot of the liquidity that is sort of set up in these pockets of markets that we have today. All right,

 

Sean McMahon  20:08

we're gonna take a quick break. But when we come back, we'll hear Steve take on how some of the big proposals coming out of the Biden administration might affect the market for RECs 

 

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And now, let's get back to our conversation with Steve McComb from a IncubEx. Alright, and then all the renewable energy proposals coming out of the Biden administration lately, do you see those affecting pricing or the shape of these markets?

 

Steve McComb  21:01

I think it would it affects is probably the mood more than anything. You know, we've, you know, there's always been sort of lots of policy proposals and and lots of hope for for different things over time, both on the carbon side and the renewable energy side. And I think what you see here is just sort of a almost, it's a mere reflection of a lot of what consumer demand is, is just that, hey, there's a mood for for more renewables on the grid. I believe there's almost an expectation from consumers today that that minimally, some portion of their electricity is renewable, if not all, and so the federal policies to do that probably are just just more encouraging and create more momentum around the thing rather than being reflected in prices yet.

 

Sean McMahon  21:45

Alright, now, we've been talking a lot about where things are now maybe looking a little bit towards the future with Biden and his team. So what do you see there? If we're looking at these markets, five or 10 years out? What does the rec market look like? We'll start here in the US, and then maybe beyond our borders?

 

Steve McComb  21:58

Yeah, absolutely. I think the thing that we'll see is probably a continued sort of standardization of what the thing is. And so, you know, a lot of the Biden policies have been not necessarily renewables, but zero carbon. And so you know, there is certainly a play for other types of energy that doesn't have a carbon footprint to it. So I think going forward, there will be a very actively traded certificate, transaction market. And, and renewables will have a big chunk of that. And I think, you know, that with all the technology development that we've seen, and sort of the improvement in the services available to the market, that RECs will continue to be a big feature of it, and that you'll see a lot of new development into those markets. So that that's very positive. I think that all the all the stuff coming out of that administration is good. And, and I also at the same time, as you look at the the various policies, you know, renewable energy and clean energy, that seems to be very socially accepted. And so I think you would have a really, you know, much more palatable policy implementation pathway under a renewable energy plan, then you might under certain other emission reductions programs, globally, you know, probably some of the same stuff, too, I think, you know, they're, they're, you know, Europe is doing much the same, and if not more, and, as we've seen in Asia, China is some of the largest energy production from renewables. And so, you know, I think the trend that we're seeing here is similar across the board.

 

Sean McMahon  23:28

And now in terms of all the talk about greenhouse gas emissions reduction targets, you mentioned earlier how even consumers are, there's almost an expectation that part of their energy will, will come from renewable sources, and it's just more socially the norm, I guess we'd say, then, you know, 510 20 years ago. So how do RECs How do these marketplaces How do they fit into the bigger picture of achieving some of those? I mean, what just call it rather ambitious greenhouse gas emission reduction targets? how critical are these are these RECs to that puzzle?

 

Steve McComb  23:59

Yeah, I think they're, I think they're a really good piece of the puzzle. I mean, everybody, you know, says stuff like, Oh, we need all the tools in the tool belt. And I think that's actually true, you know, so RECs are a very important piece of the of the economics for developers. If we take a look at New England, a record is $45, powers $45. So you know, so that is a huge component of the revenue side for developer. So, you know, that's going to continue to be needed to incentivize new renewables into those regions and across the country. And so I think that you know, that that's a big piece of it. Generally speaking, you know, this is just sort of one of the pieces that will complement an emission reduction program. And so, you know, to the extent to which we can see emission reductions come as a result of only renewables. That's great. There will also have to be some, you know, outright emission reductions, but I think focusing on racks as a growth story, and a nice positive solution as opposed to simply just let's just tamp down all those emissions jobs which which we really can't do in the short term, I think it's a, it's a, it's maybe a the flip side of the same coin, if you will, but maybe a brighter way to look at the issue. And also, you know, one of the things that is always been the case, and we've seen this in markets, historically, when asked under the acid rain program, there was a lot of talk about how this was just gonna kill coal and kill the power industry, and you're gonna be cold and wet, and the lights will be off at home. But that just didn't happen because technology develops, and solutions evolve, and and both costs go down. And the lights stay on. So I think that that's what we're going to find as we push the envelope a little harder in developing, you know, sustainable solutions for for this economy, both for direct emissions, as well as just energy production.

 

Sean McMahon  25:52

And now, just a reminder that some of the some of our listeners are are brand new to this topic, right? And you mentioned a few minutes ago, how in New England, price power is at 45 bucks and the RECs at 45 bucks. So how common is that? You know, where the pricing is, is right on are very similar? And how important is that?

 

Steve McComb  26:08

Yeah, so it depends on on on the area. You know, another example would be New Jersey, where you got solar credits for 200 bucks and power I didn't looked at recently, but let's just call it 50 bucks. So it's, you know, that there's a big spread between them. I think the price of the rack is extremely important to the developer to get these projects done. You know, but for that you wouldn't have solar in New Jersey, right? It's not in Nevada, right. So, so it's, you know, so that was the primary driver for why all that investment flowed to, to that region. And so those types of results will develop in certain regions, as the policy is there to support it. So, so I think the, you know, the RPS those are important policy drivers, and will create the results they're intended to, you know, so it's important to have those things be sort of the right design and have the right blend of different technologies. So for developers, I think the answer would be it's extremely important for us what we see when we deal with our clients who are trading in these markets, that's a lot of their focus, it's, it's a significant piece of the economics that they that they do have to hedge. So they have to hedge both, you know, they have to ensure that they are managing the price risk and electricity and the price risk and renewable energy certificates and, and both are very material to their bottom lines. And and so that's why we're here as as even as a service to make sure that they've got the tools in their tool belt to make sure that they can manage that risk.

 

Sean McMahon  27:36

And so if I'm understanding you correctly, when a wreck is priced at, say, 200 bucks, and Solar's at 50, that's good for a developer, or how does that play to the market?

 

Steve McComb  27:47

I think whatever the sum, total is the highest wouldn't be the answer, right? If you're a developer, you usually just want the highest because you're going to, you're going to get the same number of megawatt hours of electricity that you produce is the same number of reps that you get. So you just have two separate attributes, and one being the actual electrons that's all charged up, and the other being this certificate. And so to the extent to which you can add the two together, whichever is higher is the way to go. That's what will get it done. So so it's going to be a balance of what the electricity market will earn for you. And what the rat market warm for you.

 

Sean McMahon  28:24

And are there any other trends out there even beyond, you know, rec trading or things like that just renewable sector stuff that's caught your eye, we can get away from the financial stuff, if you want just cool technologies or things like that. I mean, you're dialed in. So I'm always curious to pick a brain like yours for what catches your eye.

 

Steve McComb  28:42

In many respects, what we think are interesting are the things that we're trying to work on. Right. So so we see, we've been talking this whole time about renewable electricity. There's a huge market, even a national market here in the US for renewable fuels, liquid fuels. And so that to us is, is a very interesting area that has very interesting pricing dynamics and policy dynamics, carbon policy, state carbon policy is interesting for us, too. And I think it's interesting. But I would say I'd step back and say, Well, those things are the market and they will evolve. You know what, what we've sort of hoped to see over the next number of years is the proper evolution of sort of financial services and markets and tools so that those markets can grow in the end. So so we're focused on that we think that's, you know, extremely interesting and important, and we're going to try to help provide them.

 

Sean McMahon  29:36

Are you seeing more the more the big banks get involved these markets? And I asked that because there's been news lately about, I think city and maybe BFA or Goldman was, you know, building out brand new teams just to help their clients decarbonize or you know, get on the path towards decarbonisation. Are you seeing that? I think you vaccinium some of the tier one banks getting more involved.

 

Steve McComb  29:56

Yeah, absolutely. We we certainly are but I would also say that, you know, many of those tier one banks have always been in there, but are probably now trying to grow their teams simply just to respond to the growth of interest from their clients. And so, you know, whereas it might have been a one person team, now it's gonna, they're they're focused on building a six person team or, or 10 or more, you know, others examples of this are where the entire piece of renewables trading might have been half of the gas traders job. And now it's not only half that job, but but three others and four others. And so, you know, it's it, it is a really interesting time in this market, to see, you know, all the demand for employee employment really, of people that know how to trade this market. And so yeah, no, it's absolutely it's fascinating. The banks are getting in funds are getting in, in a bigger way. Like just to say that they've been there already. But but they're, you know, there's there is net new and there's also sort of incremental growth within their participation, which is, which is really positive to see.

 

Sean McMahon  31:02

Alright, so now we get to have some fun. See, waited a little bit here on this show. That's a little bit of a fun poke in the eye of the creative and imaginative names that renewable energy project developers give their projects. So we call it renewable energy project or not a renewable energy project. I'm gonna invite producer Tom in here in a second and he's going to read off five names, I believe, of renewable energy projects. He's done some internet research for the names he's gonna give us. Our real, one of them is not, and I don't have any clue I'm getting back in the game here. I'm ofor. So far on getting these rights. I'm going to get back in and try and guess it with you. So Tom will be testing both of us. So, Tom, take it away.

 

Producer Tom  31:56

Hello, gentlemen, thank you for the introduction. Sean. Great to have you aboard. Steve.

 

Steve McComb  32:01

Thank you.

 

Producer Tom  32:01

So the first potential renewable energy project is sun harvest solar. The second the geysers, geothermal geysers. Alright,

 

Sean McMahon  32:18

keep going. Sorry. that's a that's a good one. That's your vote, I think. No, I'm just saying it's a it's a

 

Producer Tom  32:22

great name. Like Shawn said, great names. Very creative. The third contender, cascade run dam, the fourth, Blue Mountain geothermal. And last but not least, loose, goose Damn. loose. looses names one more time. All right, number one, sun harvest solar. Number two, Sean's favorite. The geysers, geothermal. Number three, cascade run down. Number four, Blue Mountain geothermal. And last but not least, number five, loose goose Damn, Steve, since you're a guest, you get to go first. Alright,

 

Steve McComb  33:09

I'll go with number five.

 

Producer Tom  33:10

I'll go with loose goose. Steve goes with loose goose dam. And Mr. ofor. Shawn. Boy, your choice?

 

Sean McMahon  33:19

Well, I I know that sun harvest is real. Because I spent some time on the EDF renewable site. And I saw it on there before I talked to their CEO. So I know that one is real not going to say that one. I got to go with Yeah, the geysers geothermal, because that is just, I mean, it's like the perfect name for a geothermal project. Right. It's almost too perfect. So I'm going with that one. Someone got some that that can't be real.

 

Producer Tom  33:43

All right, geysers, geothermal for Shawn. So as Sean said, sun harvest solar is a real project. I knew it. The other one not mentioned that's a real project is Blue Mountain geothermal. Shawn, I'm sorry to say the geysers. Geothermal is a real project over the Overstreet contents. And Steve, I'm sorry to say lose is a real project. So the winning fake project for the week is cascade run down. Sorry, gentlemen. It's

 

Sean McMahon  34:17

the perfect name for a dam though. How can that be fake? cascade

 

Producer Tom  34:21

run? All right. Well,

 

Sean McMahon  34:23

thanks for playing along with that, Steve, I appreciate your good sport. I know that can be hard. There's hundreds of these projects all over the place. So it's not like anyone has an encyclopedic knowledge of them, especially me. Thank you very much for your time. I really appreciate it, Steve. It's great to hear more about rec market in general and kind of, you know how you and the team in Quebec see it now and maybe taking shape in the future. So I really appreciate your time.

 

Steve McComb  34:45

I really appreciate being here. Thank you very much. There's a lot of fun.

 

Sean McMahon  34:49

Now it's time for the pod brief portion of our show. And I just want to spend a little bit more time talking about RECs. Steve did an excellent job of laying out how the market functions and the areas where it seems poised for growth. One thing I want to add is just a reminder that wrecks aren't always the perfect solution for everybody. nor were they intended to be. As I mentioned at the top of the show, soon, I'll be talking to Miranda Ballantine from the renewable energy buyers Alliance. And I know she has some insights on when wrecks are and aren't a good fit. With companies shifting their focus from merely greening their operations to deploying new strategies, the target decarbonization, RECs aren't always available, or an ideal match for some of the cutting edge ways companies are investing and leading the energy transition. Now, financial markets have a pretty good track record of developing products to meet market demand. So it will be interesting to watch Steve and the team and cubex as they and the wider renewables market evolve with the rapidly changing needs of energy buyers. Well, that's our show. Thank you for listening. Once again, I'd like to thank the sponsor of today's episode, and for if you like this podcast, please share it with your friends and colleagues. And be sure to follow us on Apple, Google, Spotify, or wherever you get your podcasts. You can also follow us on Twitter, or our handle is at renewables pod. And if you'd like a daily dose of renewable news delivered to your inbox, head to smartbrief.com and sign up for the renewable energy smart pre. The renewable energy smart pod is a production of smartbrief a future company

RECs 101
RECs and renewable portfolio standards
Who can buy and sell RECs?
The role of RECs across various US states
Voluntary versus mandated state renewable energy markets
Evolution of state renewable portfolio standards
States/regions with most active REC trading
What Texas gets right about RECs
Futures markets and RECs
Prospects for a federal REC market
Biden's impact on REC markets
The role of RECs in meeting GHG emissions reduction targets
The importance of REC pricing
Big banks expanding their REC footprint
Renewable energy project or NOT a renewable energy project
PodBrief - RECs need to evolve