Archive for June, 2016

D.C. RPS Bill Passes Unanimously in Second Reading before the Council

Posted June 28th, 2016 by SRECTrade.

Today, the D.C. Council unanimously passed B21-0650, the Renewable Portfolio Standard Expansion Amendment Act of 2016, on its second reading. Now, the bill will pass to Mayor Bowser, who will have ten days to approve or veto the bill. Following the Mayor’s action, the bill will pass to Congress for consideration for thirty days.

The RPS Expansion Amendment Act of 2016 will increase the RPS and solar carve-out requirements to 50 percent and 5 percent by the year 2032, respectively, and increase alternative compliance payments (financial penalties) for electricity suppliers who fail to comply with RPS requirements. The raised RPS will increase demand for Tier 1 RECs and solar-carve out SRECs. In addition, the bill adds new resources to the list of Tier 1 renewable sources and establishes a program within the Department of Energy and the Environment to assist low-income homeowners with installing solar systems on their homes.

You can read our prior posts on the RPS bill here, and subscribe to our blog to stay up to date on the bill’s progress with the Mayor and Congress.

New Jersey SREC Update – June 2016

Posted June 17th, 2016 by SRECTrade.

On Monday evening we received a much anticipated update on the growth of New Jersey’s solar capacity.  Applied Energy Group made their analysis available via New Jersey’s Clean Energy Program website, providing new information on the monthly build rates and overall size of the New Jersey solar market.  

As in most other SREC markets, the beginning of the year has been exceptionally strong for new solar development in New Jersey.  As of May 31st, New Jersey had installed a cumulative total of 1,732.3 MW of nameplate capacity.  88 MW of that capacity was installed just in the last three months since the data was last reported on February 29th.  Also of note, a full 89 MW of the new supply added thus far in 2016 is categorized as Grid Supply, putting this year on track to be the largest year to date for non-behind-the-meter solar development.

The New Jersey SREC market was exceptionally busy on Tuesday and Wednesday as the market digested this new data.  Tuesday morning  the market was predominately offered as sellers attempted to lock in the value that has been available for spot and forward contracts.  As always, we enjoy seizing these opportunities of higher than normal market activity to offer a dose of objective market analysis to the ongoing dialogue.

You can find our updated New Jersey SREC capacity presentation here.

The average rate of new solar construction has indeed increased over the last few months.  88 MW came online in March, April and May of this year, increasing the trailing twelve month average build rate to 20.5 MW/month.  Although this headline number justifiably commands attention, we believe that it is important to evaluate this increase in the context of New Jersey’s equally robust RPS requirements.  In our presentation, we put forward scenario analyses for both the currently adopted RPS percentages as well as the proposed higher RPS percentages contained in Senate Bill 2276 (our previous post on the proposed legislation can be found here).

Our analysis finds that even under the current RPS, a continuous 20.5 MW monthly build rate would not lead to significant oversupply (defined as an imbalance above 25% of the annual requirement) until midway through 2020.  Under either RPS schedule, and even with a build rate that grows to an impressive 30.8 MWs per month, the imbalance of supply and demand would not exceed 20% until 2019 at the earliest.

With that said, passage of SB2276 is critical to the longer term sustainability of the New Jersey solar market.  The proposed demand “pull forward” mechanism central to the bill helps alleviate concerns that the solar market will be able to count on supportive SREC pricing from 2020 onward.  If capacity growth is assumed to remain at a constant rate, but no adjustment is made to the current RPS schedule to match that pace, the SREC market will indeed become increasingly oversupplied from 2020 onward.

As always, please feel free to contact your SRECTrade brokerage team member for any further clarification or discussion of our data.  We will continue to follow the development of the legislative process closely and provide you with updates as they become available.

 

Disclaimer. This document, data, and/or any of its components (collectively, the “Materials”) are for informational purposes only. The Materials are not intended as investment, tax, legal, or financial advice, or as an offer or solicitation for the purpose or sale of any financial instrument. SRECTrade, Inc. does not warranty or guarantee the market data or other information included herein, as to its completeness, accuracy, or fitness for a particular purpose, express or implied, and such market data and information are subject to change without notice. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Any comments or statements made herein do not necessarily reflect those of SRECTrade, Inc. SRECTrade, Inc. may have issued, and may in the future issue, other communications, data, or reports that are inconsistent with, and reach different conclusions from, the information presented herein.

Copyright. This document is protected by copyright laws and contains material proprietary to SRECTrade, Inc. This document, data, and/or any of its components (collectively, the “Materials”) may not be reproduced, republished, distributed, transmitted, displayed, broadcasted or otherwise disseminated or exploited in any manner without the express prior written permission of SRECTrade, Inc. The receipt or possession of the Materials does not convey any rights to reproduce, disclose, or distribute its contents, or to manufacture, use, or sell anything that it may describe, in whole or in part. If consent to use the Materials is granted, reference and sourcing must be attributed to the Materials and to SRECTrade, Inc. If you have questions about the use or reproduction of the Materials, please contact SRECTrade, Inc.

Maryland SREC Update – June 2016

Posted June 10th, 2016 by SRECTrade.

Much has been made of Governor Hogan’s recent veto of the Clean Energy Jobs – Renewable Energy Portfolio Standard Revisions bill (SB0921/HB1106) and its implications for the long term health of the state SREC market.  Market weakness due to fundamental oversupply has been exacerbated by uncertainty as to the likelihood of the Maryland legislature to expand state renewables markets in step with increasing supply.  With the Maryland SREC market trading at all time lows, we feel that it is important for market participants to be able to base their opinions on accurate empirical data.  As such, we have updated our supply and demand scenario models to reflect the most recent available capacity information made available by PJM GATS.

Our updated Maryland capacity presentation can be found here.

Through May 2016 there was approximately 156,682 SRECs left over from compliance years 2014 and 2015.  Thus far in 2016, 144,133 CY2016 SRECs have also been issued.  Assuming that the observed average monthly build rate of 19.6 MW/month continues through the year, we project that 556,507 additional SRECs will be generated in compliance year 2016.  Taking together the existing inventory of available prior-period SRECs together with the projected production for the remainder of 2016, we foresee an oversupply of 425,535 SRECs  by the end of 2016.

In this latest capacity analysis update we have included parallel analyses for the projected supply/demand balance in future years.  Looking out to 2022, we demonstrate how that balance would evolve under both the currently adopted RPS as well as under the recently proposed RPS.  We have also made a slight change to the range of scenarios we present.  Whereas we typically present this analysis extending the current trailing twelve month average build rate through the full term of the analysis, and two more scenarios where the build rate both increases and decreases slightly, we have chosen to adjust our methodology.  The current build rate of 19.6 MW/month is quite strong relative to historical averages, influenced primarily by above average build numbers for December 2015 through February 2016.  This increase may have been caused by the “ITC cliff” confronted at the end of 2015 or by stronger SREC prices in the summer and fall of 2015.  Whatever the cause, those factors are no longer relevant for the purposes of this analysis, and it is reasonable to believe that monthly build numbers will decrease from here.  Our case 1 and 2, therefore, are reflective of a build rate that is 50% and 75% of the trailing twelve month average.

While the market is clearly oversupplied under almost all scenarios we think it is important to note that the proposed RPS significantly decreases the percentage oversupply in later years, decreasing the oversupply by almost half in some instances.  We point this out to illustrate that the current state of the market may not be as dire as some market participants believe.  We maintain that an oversupplied market is not necessarily a broken market.  One of the advantages of a market-based mechanism is that price fluctuations provide price signals to market participants considering whether to initiate additional projects.  Ideally, the low level of SREC pricing today will lead a significant portion of the current project queue to wait on adding new capacity until the supply and demand balance normalizes.

With that said, the greatest uncertainty as to the future health of the Maryland SREC market is what portion of the PJM interconnection queue will ultimately be built.  There are several large utility scale projects with nameplate capacity of 100 MW or more that could drastically change the supply and demand balance to a point where the only solution would be legislation to either increase the state RPS or restrict eligibility to the existing market.  Our analysis does not account for this potential outcome but we acknowledge that it is certainly a plausible scenario.

We will continue to monitor the state of the Maryland SREC market as more data is made available regarding trends in monthly build rates and new projects that are awarded SREC eligibility.  We will also continue to publish information regarding the Maryland legislative process and the status of the solar carve out.  Please reach out to the SRECTrade team with any questions or feedback.

 

Disclaimer. This document, data, and/or any of its components (collectively, the “Materials”) are for informational purposes only. The Materials are not intended as investment, tax, legal, or financial advice, or as an offer or solicitation for the purpose or sale of any financial instrument. SRECTrade, Inc. does not warranty or guarantee the market data or other information included herein, as to its completeness, accuracy, or fitness for a particular purpose, express or implied, and such market data and information are subject to change without notice. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Any comments or statements made herein do not necessarily reflect those of SRECTrade, Inc. SRECTrade, Inc. may have issued, and may in the future issue, other communications, data, or reports that are inconsistent with, and reach different conclusions from, the information presented herein.

Copyright. This document is protected by copyright laws and contains material proprietary to SRECTrade, Inc. This document, data, and/or any of its components (collectively, the “Materials”) may not be reproduced, republished, distributed, transmitted, displayed, broadcasted or otherwise disseminated or exploited in any manner without the express prior written permission of SRECTrade, Inc. The receipt or possession of the Materials does not convey any rights to reproduce, disclose, or distribute its contents, or to manufacture, use, or sell anything that it may describe, in whole or in part. If consent to use the Materials is granted, reference and sourcing must be attributed to the Materials and to SRECTrade, Inc. If you have questions about the use or reproduction of the Materials, please contact SRECTrade, Inc.

D.C. RPS Bill Passes in First Reading before the Council

Posted June 7th, 2016 by SRECTrade.

Today, the D.C. Council held its first hearing on B21-0650, the Renewable Portfolio Standard Expansion Amendment Act of 2016. The bill, which was introduced earlier this year, passed unanimously in the first hearing, but must still pass a second hearing in July, and a Council vote as early as mid-July, before it passes to the Mayor for signature.

The RPS Expansion Amendment Act of 2016 will increase the RPS and solar carve-out requirements to 50 percent and 5 percent by the year 2032, respectively, and increase alternative compliance payments (financial penalties) for electricity suppliers who fail to comply with RPS requirements.

You can read our prior post on the RPS bill here, and subscribe to our blog to stay up to date on the bill’s progress with the Council and Mayor.

New Jersey RPS Bill Proposes Pull Forward to Address Oversupply

Posted June 3rd, 2016 by SRECTrade.

Last week, New Jersey Senators Robert Smith (D) and Christopher Bateman (R) introduced a bipartisan energy bill in the Senate, with a broad coalition of support from solar energy owners, installation and development stakeholders, renewable energy advocates, and other environmental groups. S2276, which was referred to the Senate Environment and Energy Committee upon its introduction on May 23, will adjust New Jersey’s renewable portfolio standard (RPS) to address the impending “solar cliff” of oversupply. In addition, the bill establishes a Solar Energy Study Commission to enable the Garden State to evaluate potential paths and long term solutions for the future of solar policy in the New Jersey.

Under the Solar Act of 2012, New Jersey utilized a “pull forward” mechanism to adjust the RPS so that the increased demand could absorb an excess of SRECs in the market; unfortunately, the mechanism created a “valley of death” starting in Energy Year 2019 (June 2018), with initial impact hitting in EY2017 and EY2018. Based on current build rates, the market may build between 80 MW and 231 MW more than the RPS will require in those years. In the EY2019 to EY2025 years, the market may build between 183 MW and 335 MW in excess of the RPS demand. Under current conditions, it is not until EY2026 that retirement impacts will provide relief to the oversupply.

Figure 1 below shows SRECTrade’s projections for three potential capacity growth scenarios, and the resulting oversupply/undersupply, based on the current RPS schedule. Case 2 is the base case, where 15.6 MW per month is the historic trailing twelve month (TTM) average build rate in New Jersey. Case 1 represents the bear case, or 75%, of the TTM average build rate. Case 3 represents the bull case, or 150%, of the TTM average build rate.

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Scenario Chart Before Demand Pull

Percent Scenarios Before Demand Pull

Figure 1.

In an effort to forestall the cliff, S2276 proposes to once again pull forward demand from future years for the EY2019 – EY2021 energy years as follows: in EY2018, pull forward 52 MWs; in EY2019, 122 MWs; in EY2020, 115 MWs; and in EY2021, 115 MWs. This pull forward would accelerate SREC demand by 62,400 SRECs in EY2018; by 146,400 SRECs in EY 2019; and by 138,000 SRECs in each EY2020 and EY2021.  The adjustments will allow for the continued growth of New Jersey’s solar industry, which employs more than 7,100 people across 528 solar companies. To date, New Jersey has installed more than 1.6 GW of solar capacity, which is enough to power 257,000 homes and rank the State 4th in the nation.

Figure 2 below represents the potential oversupply/undersupply scenarios with the demand pull forward, using the same three potential capacity growth scenarios from Figure 1. The RPS demand figures for 2018, 2019, and 2020 have been adjusted upward by the SREC-equivalent demand increases proposed in S2276.

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Scenario Chart After Demand Pull

Percent Scenarios After Demand Pull

Figure 2.

In addition to the short-term solution of the pull forward of RPS demand, the bill aims to stimulate the development of long-term solutions through its establishment of the Solar Energy Study Commission. The Commission will be composed of 22 relevant stakeholders, who will provide policymakers with information and best practices for designing and implementing long term solar policies. Under the proposed amended RPS schedule, which ends in June 2021, the Commission would be charged with presenting policymakers with  recommendations for New Jersey before the end of the 2021 Energy Year.

S2276 has earned support from members of the New Jersey-based New Jersey Solar Energy Coalition, the New Jersey Solar Grid Supply Association, national and regional members of SEIA and MSEIA, and the IBEW. The bill will be heard at the Senate Environment and Energy Meeting on Monday, June 6.

SRECTrade will continue to track and report on the status of the bill as it progresses this summer.

 

Disclaimer. This document, data, and/or any of its components (collectively, the “Materials”) are for informational purposes only. The Materials are not intended as investment, tax, legal, or financial advice, or as an offer or solicitation for the purpose or sale of any financial instrument. SRECTrade, Inc. does not warranty or guarantee the market data or other information included herein, as to its completeness, accuracy, or fitness for a particular purpose, express or implied, and such market data and information are subject to change without notice. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Any comments or statements made herein do not necessarily reflect those of SRECTrade, Inc. SRECTrade, Inc. may have issued, and may in the future issue, other communications, data, or reports that are inconsistent with, and reach different conclusions from, the information presented herein.

Copyright. This document is protected by copyright laws and contains material proprietary to SRECTrade, Inc. This document, data, and/or any of its components (collectively, the “Materials”) may not be reproduced, republished, distributed, transmitted, displayed, broadcasted or otherwise disseminated or exploited in any manner without the express prior written permission of SRECTrade, Inc. The receipt or possession of the Materials does not convey any rights to reproduce, disclose, or distribute its contents, or to manufacture, use, or sell anything that it may describe, in whole or in part. If consent to use the Materials is granted, reference and sourcing must be attributed to the Materials and to SRECTrade, Inc. If you have questions about the use or reproduction of the Materials, please contact SRECTrade, Inc.