The Granular Certificate Trading Alliance, Led by LevelTen Energy and in Collaboration with AES, Constellation, Google, and Microsoft, Forms to Build a Critical Solution, with ICE, to Decarbonize the Grid
The Granular Certificate Trading Alliance, Led by LevelTen Energy and in Collaboration with AES, Constellation, Google, and Microsoft, Forms to Build a Critical Solution, with ICE, to Decarbonize the Grid
December 14, 2023
With support from Granular Certificate Trading Alliance members, and from Intercontinental Exchange (ICE), LevelTen Energy intends to develop a first-of-its-kind trading and management platform for time- and location-based energy attribute certificates, which will help incentivize carbon-free energy generation during every hour of the year
Today, LevelTen Energy announced the Granular Certificate Trading Alliance (GC Trading Alliance), a collaboration with AES, Constellation, Google, and Microsoft to develop a first-of-its-kind trading and management platform for “granular certificates” (GCs), a type of energy attribute certificate that verifies the time and location that carbon-free energy (CFE) is generated. This new solution, under development in partnership with the Intercontinental Exchange (ICE), aims to enable energy buyers to easily source CFE generated around the clock, and to incentivize energy sellers to produce clean energy where and when it is most needed, delivering carbon-free grid reliability in all hours. In addition to supporting LevelTen’s development of transaction infrastructure for GCs, Alliance members intend to be among the first group of users when the solution launches. As the solution scales, it will accelerate the energy transition by helping to decarbonize electric grids.
The Next Phase in the Energy Transition Needs Granular Certificates
Corporate clean energy procurements have skyrocketed over the past 10 years, making annual commitments to match consumption with 100% renewable energy commonplace. These goals are largely enabled by energy attribute certificates (EACs) — called Renewable Energy Certificates (RECs) or Emissions-Free Energy Certificates (EFECs) in the U.S., and Guarantees of Origin (GOs) in Europe — which carbon-free energy generators receive for each megawatt hour of clean electricity they deliver to the grid. EACs can be transferred to corporations through bilateral agreements, such as power purchase agreements (PPAs) that support the financing of new projects, or via the direct sale of EACs from existing CFE-generating assets.
EACs have provided the market structure and pathway for corporations to begin to decarbonize their electricity usage and support the rapid buildout of new clean energy projects – and they will continue to play an important role. However, annual EACs come with an inherent challenge: incentivizing carbon-free energy production during dark or windless hours in the absence of an hourly market signal. These production gaps make it difficult for corporations to achieve time and location-based CFE goals. For example, companies with an hourly CFE goal may be aiming to match power consumed at 10:00 p.m. with CFE generated during the same hour. Meanwhile, other companies may have goals to procure CFE from projects and regions that they estimate will have the largest emissions impact.
Today, standards bodies and EAC registries are developing new types of EACs that identify the time and location in which CFE is generated; these are generally referred to as “granular certificates” (GCs). GCs provide more detailed information than annual EACs, which only certify the technology (e.g., wind/solar/hydropower/nuclear), month or year when energy was generated, and energy market. GCs will provide energy buyers with the ability to finetune their procurement strategy, and measure their impact with more specificity – an endeavor that has become more challenging as the EAC market has grown and renewable energy penetration has increased.
The GC Trading Alliance believes that the ability to track and trade GCs will play a critical role in enabling new procurement strategies that will fill the gaps in CFE generation. The Alliance is committed, in partnership with EAC registries, to building the trading platforms and transaction infrastructure that will deliver a carbon-free grid, faster.
A Market for Granular Certificates Will Accelerate Carbon-Free Energy Development
Under LevelTen’s leadership, the GC Trading Alliance will soon deliver a solution that will enable market participants to trade, track, and manage GCs. The solution will include two key components:
- GC Trading Platform: Hosted by ICE, the GC trading platform is expected to launch in 2024. This platform will connect CFE buyers and sellers — including solar, wind, hydropower, and nuclear generators, and battery storage charged by CFE resources — allowing them to trade GCs based on buyers’ preferred technologies, and the time and location electricity is generated.
- GC Management Platform: In addition, LevelTen Energy is developing a centralized hub for market participants to manage GCs before and after trades, which will include access to GC market data, custom reports to inform granular procurement strategies, as well as GC tracking and settlement.
This new integrated GC trading and management platform will deliver a critical solution for all energy market participants, including:
CFE Generators: For CFE generators, a transparent and liquid GC market will make it possible to see where and when demand and prices are highest, incentivizing CFE development and operation where and when it's needed most. In addition, projects that don’t currently generate EACs, like storage projects powered by CFE, will see clearer price signals and have access to a new source of revenue via the GC trading platform. This creates a compelling financial incentive for battery storage developers to construct new projects that extend the hours during which CFE can be dispatched.
Energy Buyers: All types of energy buyers, including corporations, municipalities, utilities, and the federal government, will have a more cost-effective way to make progress on their granular CFE targets. The GC trading platform will make it possible to buy GCs to fill gaps, and sell GCs when there is excess, offering a more flexible and cost-effective way to match clean energy supply and demand. It also expands the market by providing an efficient solution that allows a diverse array of energy consumers with varying capabilities to adopt and make progress on granular CFE goals. Finally, enabling buyers to forward purchase GCs further supports additional clean energy development on the grid.
Financiers: To secure financing, CFE projects need to demonstrate reliable long-term revenue sources. A centralized GC trading platform will provide a new potential source of project revenue, and provide GC price transparency that can improve revenue forecasting. With a market for GCs, generators that can produce CFE during high-demand hours will receive higher prices than undifferentiated “annual” EACs.
A New Solution for a New Era of Clean Energy Procurement
AES, Constellation, Google and Microsoft have been pioneers in clean energy development and procurement, helping to set standards for corporate power purchase agreements and pave the way for others to follow. This has already had a major impact on the U.S. grid: in 2022, voluntary renewable energy procurement deals by corporate and institutional customers were equivalent to 70% of CFE capacity additions, according to the Clean Energy Buyers Association (CEBA).
Corporate sustainability leaders are looking for ways to support the next phase in the energy transition, which will require relying on power purchase agreements, while also sourcing CFE during the hours in which it is currently scarce or unavailable. The transaction infrastructure that LevelTen Energy is building with support from the GC Trading Alliance will make it more feasible for other entities to set and achieve granular procurement targets.
Quotes
LevelTen Energy:“The GC Trading Alliance is tackling the next challenge for the energy transition, which is driving carbon-emitting resources off the grid at all hours. To achieve this goal we must, by definition, creatively re-deploy existing resources and creatively incentivize new CFE generation to come online where and when it is needed most. LevelTen Energy’s transaction infrastructure for granular certificates will deliver the practical solutions that carbon-free energy buyers and sellers need to make this a reality.” – Bryce Smith, Chief Executive Officer, LevelTen Energy
AES:“As an early pioneer in developing and advancing 24/7 carbon-free energy solutions, AES celebrates the GC Trading Alliance’s granular certificates trading and management platform. Both customers and energy providers will now have an additional channel to support the development of clean energy when and where it’s needed most, with the right mix of renewables to cost-effectively and reliably serve the grid.” – Erin Eckenrod, Vice President of Environmental Products Trading at AES
Constellation: “As the nation’s largest producer of carbon-free energy, Constellation strongly supports the GC Trading Alliance’s mission to connect customers with clean and reliable energy in every hour of every day. This platform will give businesses the ability to verify they are truly meeting their emissions reduction goals, while sending the right market signals to the new and existing clean energy resources that are critical to maintaining around-the-clock grid reliability as we transition to a carbon-free economy.” – Katherine Ott, Vice President of Sustainability and Climate Strategy, Constellation
Google: “We're excited to participate in this initiative to help develop a new market for hourly clean energy purchasing and trading. This is a critical step in creating the market signals we need to fully decarbonize electric grids, and make it easier for clean energy buyers to maximize the impact of their procurement by purchasing clean energy on a local and hourly basis.” – Maud Texier, Global Director of Clean Energy and Decarbonization Development at Google
ICE:“The GC Trading Alliance’s mission of using market-based tools to decarbonize the grid aligns closely with ICE’s history of providing highly efficient, electronic energy and environmental markets. As a leader in this space, we provide the tools that commodity market participants use for price discovery, hedging and risk management. We look forward to leveraging our deep background in digitizing markets to help support the adoption of granular certificates and development of an active and liquid marketplace.” – Trabue Bland, SVP Global Futures Markets at ICE
Microsoft: “We are excited about the development of an hourly marketplace through the GC Trading Alliance and its potential for accelerating grid-scale decarbonization. This marketplace opens new opportunities for buyers and sellers to access granular carbon-free energy and creates an hourly price signal – important for driving investment in assets that deliver carbon-free energy in the right place, at the right time.” – Adrian Anderson, General Manager, Renewables and Carbon Free Energy at Microsoft
To learn more, visit leveltenenergy.com/alliance, where you can find a fact sheet and join the GC Trading Alliance’s mailing list to receive updates.
About the Granular Certificate Trading Alliance
Convened by LevelTen Energy and in partnership with the Intercontinental Exchange, Inc. (ICE), the Granular Certificate Trading Alliance is a collaborative effort by AES, Constellation, Google, Microsoft, and LevelTen to build transaction infrastructure to buy, sell, and track hourly carbon-free energy (CFE) via granular certificates (GCs).
Working with ICE, The GC Trading Alliance is building a centralized, GC trading and management platform to incentivize new clean energy availability, drive down the cost of that energy, transact quickly, and ultimately, make achieving ambitious clean energy targets possible for a wider number of clean energy buyers and sellers.
The GC Trading Alliance is motivated by the belief that decarbonizing with greater efficiency and granularity cannot wait, and collective action is required to accelerate this evolution. Great progress has been made toward deploying more CFE resources. Now it is time to create market signals that spur the development of new clean energy resources and maximize the emissions impact of CFE procurement.