Work underway to develop a NAESB base contract for voluntary renewable energy certificates
June 17, 2021
by Paul Ciampoli
APPA News Director
June 17, 2021
Wholesale and retail entities have been holding a series of virtual meetings through the North American Energy Standards Board (NAESB) to develop a NAESB base contract for voluntary renewable energy certificates (RECs) and the technical implementation that could lead to the digitization of the contract.
Details of the effort were recently outlined by Elizabeth Mallett, Deputy Director of NAESB, in an Energy Central post and in a Q&A with Public Power Current.
In the May 25 post, Mallett points out that corporations worldwide are increasing their commitments to employ renewable energy in their day-to-day operations by procuring RECs to meet their renewable claims. RECs are market-based instruments that represent the right to one megawatt-hour of renewable generation. RECs are purchased for state renewable portfolio standards to maintain compliance requirements, but there is also a growing market for voluntary RECs that has bloomed over the past decade as corporations strive to demonstrate their claims of renewable electricity usage and meet corporate goals, she noted in her post.
“As this market has grown, the need for standardization has become more apparent, as opportunities to increase efficiency and eliminate redundant terms and processes present appear throughout the industry. For example, standardization decreases the need for administrative staff to learn regional or state-by-state terms and improves the speed of transactions when consumers deal with multiple states or regions,” Mallett said in the post.
May 28 was the deadline to submit early comments regarding the NAESB Draft Base Contract for RECs. After approval of a final draft by the NAESB subcommittee later this year, a subsequent 30-day comment period will be announced.
Mallett told Public Power Current that industry members that suggested the standardization of voluntary RECs provided several reasons, including:
- REC transactions have increased in the recent years and are projected to continue growing
- Processes are not controlled by a single organization or group
- At least eight separate marketplaces/registries for voluntary or state RPS compliance
- Existing registries represent RECs with different data structures
- Utilities may act as their own registrar and may not use the existing markets to track the REC
NAESB REC Contract spurred by recommendation from TVA
The NAESB REC contract was spurred by a recommendation from Tennessee Valley Authority (TVA) that NAESB consider a REC contract for distributed ledger technology, or blockchain technology.
Mallett notes in her post that the proposed development effort is divided into two parts. “First, NAESB considered the development of the contract general terms and conditions. Next, the technical implementation for the contract is under consideration. The participants will identify the data elements and structures needed to execute the contract electronically, including the information needed to develop the terms and conditions for one or more ‘smart contracts’ to be utilized on distributed ledger technology.”
In December 2019, Joint Subcommittees held a kick-off meeting during which participants aimed to first gain consensus on definitions and use cases. Subsequent meetings continued to analyze terms and issues identified through subcommittee conversation, such as tracking through retirement, fundamental requirements of attestation declarations, billing details, etc., Mallett said in her post. “To date, NAESB has hosted nineteen meetings to discuss the NAESB REC Contract and technical implementation and about thirty-seven entities have participated.”
In a June 1 meeting, the participants dived further into the technical implementation, such as common datasets and data dictionaries. “As the technical implementation development proceeds, aspects of the contract may need to be revisited, especially in light of the informal comments received on the contract before the June meeting,” Mallet noted.
NAESB is divided into three quadrants that represent the wholesale and retail gas and electric industries: the Wholesale Electric Quadrant (WEQ), the Wholesale Gas Quadrant (WGQ), and the Retail Gas and Electric Markets Quadrant (RMQ).
The “Joint Subcommittees” refers to the WEQ Business Practices Subcommittee and the RMQ Business Practices Subcommittee — two separate NAESB subcommittees which have been holding joint meetings since December 2019 to draft the NAESB Base Contract for RECs.
Mallett told Public Power Current that during the June 1, 2021 meeting, participants discussed the informal comments received on the draft contract. Informal comments were submitted from Bonneville Power Administration (BPA), J. Weinstein Law and Southern Company. Additionally, work papers from TVA were posted for the meeting. The entirety of the June 1 meeting comprised a review of the informal comments from BPA, she said. These comments suggested modification to the terms and conditions, section number updates, and basic formatting changes.
The Joint Subcommittees held another meeting on June 8, 2021. During this meeting, additional comments were considered and participants continued to discuss the BPA and J. Weinstein informal comments.
“Looking ahead, after the review of informal comments on the draft contract, the subcommittees will focus on the development of technical implementation documents, such as addressing data dictionaries, and data sets for invoicing and other aspects of the transactions to support the contract,” Mallett said. She noted that the technical implementation will be technology neutral, allowing for the use of the contract in its paper form, or electronically — for example, on a distributed ledger, also known as blockchain.
Per the NAESB process, if the subcommittees vote to adopt the NAESB REC Base Contract, then a thirty-day formal comment period will be held to solicit further comments from any interested parties. Next, the RMQ and WEQ Executive Committees will determine whether to adopt, remand, or reject the effort, after reviewing the draft NAESB REC base contract along with any comments received during the thirty-day formal comment period. If approved by the Executive Committees of the RMQ and WEQ, the draft NAESB REC base contract will be posted for ratification by the NAESB WEQ and RMQ membership. Once ratified, it will be made available to the industry.
NAESB is a nonprofit 501(c)(6) standards development organization. NAESB has about 300 member entities whose volunteers develop gas and electric commercial business practice standards to support industry priorities. The NAESB process is accredited by the American National Standards Institute (ANSI) and, therefore, remains an independent body that is open to and inclusive of all interested industry parties.
NAESB follows a balanced voting procedure to reach consensus-based decisions and to maintain a balance of interests within the organization and NAESB has a strict no advocacy policy, Mallett noted.
If ratified by the NAESB membership, NAESB will publish the NAESB REC base contract in the next version of its WEQ and RMQ business practice standards and, as with all NAESB work products, the NAESB REC base contract will be copyrighted, she said.