On this page
- What is REC trade settlement?
- Why isn't an agreed REC trade a settled one?
- How does REC trade settlement work, step by step?
- How should partial and failed deliveries be handled?
- When should certificates move relative to payment?
- How does Innovo handle REC trade settlement?
- FAQ
What is REC trade settlement?
REC trade settlement is everything that happens between "we have a deal" and "this trade is closed." One renewable energy certificate represents 1 MWh of renewable generation, so a trade's volume in MWh is also its certificate count.
Exchange-traded REC futures settle through a clearing house. For physically delivered contracts, the exchange tells the clearing house who has delivery obligations, and the certificates move through the registry (Nodal Exchange, Environmental Contract Specifications). Most broker and bilateral trades have no clearing house. The two counterparties do the settlement themselves, usually over email.
A bilateral REC trade settles across three legs:
| Leg | Where it happens | Done when |
|---|---|---|
| Contract | Email, PDF, broker confirm | Both parties accept the same terms |
| Delivery | The registry (M-RETS, PJM-GATS, WREGIS, NEPOOL GIS and others) | Full contracted MWh arrives in the buyer's account |
| Payment | Bank, card or wire | Cash clears against the invoice |
Why isn't an agreed REC trade a settled one?
A trade is settled once the registry shows the certificates in the buyer's account and the bank shows the cash cleared. Until then, brokers carry the risk of losing time, margin and sometimes the counterparty.
The gap exists because each leg has its own system and its own clock: registry transfers sit pending until the buyer accepts, and invoices sit unpaid until someone notices. Contract changes agreed on a call often never reach the invoice at all.
A REC trade is done when the last MWh lands and the last dollar clears.
Suppose a broker arranges a 5,000 MWh deal: 3,000 MWh of Texas wind and 2,000 MWh of PJM solar, each with its own vintage and price. That's two registry transfers, one or two invoice lines and a confirmation thread for each. Any change to one product means updating the confirm, the invoice and the transfer instructions separately.
How does REC trade settlement work, step by step?
A clean REC trade settles in six steps, and skipping any one of them stalls the trade.
- Agree terms both sides can see. Product, vintage, registry, volume, price per MWh, payment due date and delivery due date. On a multi-product trade, each product carries its own price and volume.
- Get internal approval. Large trades usually need sign-off before anything goes to the counterparty. Set a dollar threshold and name the approvers.
- Exchange and accept the contract. Either side can start: the seller issues an invoice, or the buyer sends a bill for the seller to accept. Nothing should be payable until the other side accepts.
- Deliver the certificates. The seller transfers certificates in the registry to the buyer's account. Some registries require the buyer to accept an incoming transfer.
- Collect payment. The buyer pays against the accepted invoice. Payment and delivery order depends on the deal's terms (see below).
- Close with documents. Purchase order, contract, attestation and, if the certificates were retired on the buyer's behalf, the retirement certificate.
Record delivery due dates in step 1. If a trade doesn't record when certificates are owed, nobody can tell it's late. For more on running inventory across several registries before you trade it, see our guide to managing REC inventory across multiple registries.
How should partial and failed deliveries be handled?
Count delivery in MWh, not in transfers. A trade is delivered when completed transfers add up to the contracted volume. Pending and failed transfers don't count.
A seller transfers 1,000 MWh of a 5,000 MWh trade, the transfer completes, and someone marks the trade delivered. The buyer is short 4,000 certificates and nobody knows until their compliance filing.
Large deliveries often move in several pieces: certificates from several generators, several vintages, or batches split to fit registry limits. Each piece can succeed, sit pending or fail on its own.
| Delivery state | Counts toward delivered volume? | Action |
|---|---|---|
| Completed | Yes | None |
| Pending buyer acceptance | No | Chase the buyer to accept |
| In transfer | No | Wait, then check status |
| Failed or rejected | No | Retry, or log a delivery made another way |
A failed transfer needs an owner. Either the seller retries it, or the desk records that the certificates moved another way.
When should certificates move relative to payment?
It depends on the terms. On a prepay deal, the seller shouldn't deliver until the buyer's payment has cleared. On a credit deal, the seller delivers first and invoices against a due date.
Bilateral REC trades have no clearing house standing between the two legs. The seller who delivers first carries the buyer's credit risk. The buyer who pays first carries the seller's delivery risk. Delivery-versus-payment, where both legs settle together, is standard in securities but uncommon in bilateral REC trades.
| Term | Certificates move | Cash moves | Who carries the risk |
|---|---|---|---|
| Prepay | After payment clears | First | Buyer (delivery risk) |
| Net 30 / credit | First | By due date | Seller (credit risk) |
| Split | After deposit | Deposit, then balance | Shared |
Whatever the terms, build them into the process. If the deal says prepay, the delivery step should stay locked until the cash leg is complete, and payment reminders should go out ahead of the due date.
How does Innovo handle REC trade settlement?
Innovo Solas keeps each REC trade on one shared record that both counterparties see and work from.
- Buyer and seller see the same terms and accept them in the app. Either side can start the trade as an invoice or a bill, and multi-product trades carry separate price and volume per product.
- Approval policies route trades above a threshold to named approvers before anything goes out.
- Solas follows each transfer's registry status and shows a trade as delivered only when the full contracted MWh has arrived. It flags failed transfers for retry.
- The payment leg and the delivery leg are tracked side by side. On prepay deals, delivery waits for payment, and notifications state the quantity and due date.
Documents, from purchase order to retirement certificate, stay on the trade. Solas connects to 10 U.S. and international registries.
See how Solas tracks RECs across every registry → Solutions
Closing
Brokers lose REC trades in the handoffs after the negotiation. Put the contract, the certificates and the cash on one record, and both counterparties can see exactly what's still owed.
Related reading
- How to manage REC inventory across multiple registries: keep certificates visible before you sell them.
- How Solas replaces registry logins: one place to run transfers and retirements.
- Solutions for brokers: how Innovo supports REC brokers and traders.
FAQ
How long does REC trade settlement take?
It depends on the registry, the payment terms and how fast the buyer accepts transfers. Registry transfers themselves can complete quickly, but bilateral trades often take weeks because contract, delivery and payment are chased separately.
Is REC trade settlement the same as delivery versus payment (DVP)?
No. DVP settles the asset and the cash together, so neither side carries the other's risk. Most bilateral REC trades settle the two legs separately, under prepay or credit terms agreed in the contract.
Does the buyer need to accept a REC transfer?
In some registries, yes. The transfer stays pending until the buyer accepts it in their account. Others complete the transfer without buyer action. Check the rules of the registry the trade uses.
What happens if a REC transfer fails?
The certificates stay in the seller's account and the trade is still owed. The seller should retry the transfer or record a delivery made another way. A failed transfer should never count toward delivered volume.
Who retires RECs in a bilateral trade?
Either party, as agreed in the contract. The buyer may take delivery and retire the certificates themselves, or the seller retires them on the buyer's behalf and provides the retirement certificate.