What is a dREC?

One of the key features of our environmental platform, Allinfra Climate, is the ability to create digital environmental financial products. Using the underlying energy data captured by the platform, users are able to easily create, sell or retire a digital Renewable Energy Certificate, or a dREC™.

In this article, we will explain the meaning behind the term dREC. But first, it is important to first understand what renewable energy is and why certificates are created.

What is renewable energy?

Renewable energy comes from natural processes that are constantly replenished, such as wind power and solar power. Compare this to non-renewable sources of energy like coal and oil. These sources of energy are typically not replenished, or take a very long time to replenish and can endanger the environment and human health, and are a contributor to climate change.

What are RECs?

In many parts of the world, a certificate is created when a certain amount of electricity is generated by a renewable source of energy. This certificate is called a Renewable Energy Certificate (REC). It represents the green benefits associated with that renewable energy generation. RECs can also be called Renewable Energy Credits, Green Tags or Tradable Renewable Certificates (TRCs).

Typically, 1 REC is equivalent to 1 kWh or 1 MWh — these are units of energy consumption. For context, according to the U.S. Energy Information Administration, the average annual electricity consumption for a U.S. residential utility customer was 10,649 kilowatt hours (kWh) in 2019, an average of about 877 kWh per month.

How do renewable energy certificates work?

RECs allow for significant flexibility in the climate and energy markets, as those without direct access to renewable energy sources can purchase these certificates and fund environmentally-friendly sources of energy.

For producers of green energy: when they sell a REC, they are essentially selling the “green bragging rights” to the renewable energy they produced, but they get to keep and use the actual energy — either for their own consumption or to sell to the grid.

For buyers of RECs: they are buying the green or environmental attributes — essentially they can claim that they have funded and used renewable energy equal to the amount of RECs purchased and retired.

What are dRECs and what do they represent?

A dREC is simply a digital representation of a REC that is permanently tied to verifiable digitally-captured data. That means, unlike traditional RECs, dRECs increase efficiency and transparency because they:

• Can be referenced right back to a specific smart meter, time period and meter reading.
• Require no intermediary involvement between energy generation at the asset level and dREC creation.

To learn more about why RECs and other environmental financial products are going digital, please see The Future of Environmental Financial Products is Digital.

Why use blockchain technology to create RECs?

The team at Allinfra believes that blockchain is a great technological solution for what has typically been an administratively heavy, manual process. Blockchain technology is a way to track and store information without having to worry about it being compromised. It is a distributed ledger technology — recording transactions and information that cannot be updated without mutual agreement. This record is shared across a network, with each point in the network validating the authenticity of changes.

Significant amounts of information need to be stored and tracked when generating RECs, such as:

• When the REC is produced
• Where it is produced and using what equipment
• The amount of energy represented
• Who owns the REC
• When the REC is claimed (i.e. “retired”)

Our scalable blockchain-based solution, Allinfra Climate, has created digital versions of RECs — taking all of the rights and attributes of traditional RECs and, through a suite of smart contracts, creating dRECs that track and store all relevant asset, underlying power and certificate information.

Every buyer of a dREC can confirm the energy source of the dREC and that only one person has claimed the “green” benefits of that dREC. It creates a completely transparent and verifiable record for all to see. Once that dREC is retired you can be certain that both it, and the underlying data, cannot be claimed again or by another party, avoiding fraud like double counting.

Additionally, blockchain technology allows for the real-time tracking of energy data without significant manpower or frequent manual periodic checks. Not only is this more efficient and less expensive, but more frequently captured and tagged data also allows an electricity consumer to easily match electricity consumption with dRECs over the same time interval, for true emission free electricity consumption.

This post originally appeared on Allinfra’s website at https://allinfra.com/blog/post/11

Learn more about what Allinfra Climate can do for your organisation.