On Thursday March 30th, SRECTrade participated in the annual SunSpec Alliance meeting, presenting as part of a panel on reducing soft costs in solar. The panel explored factors contributing to high costs and specifically how open data standards can reduce these costs across the solar value chain. SRECTrade has long been a proponent of open data standards as we focus on building products and services that increase the efficiency of portfolio management and provide access to the REC markets. To derive these and other benefits, standard adoption needs to be considered and applied in both a technology and service orientated approach.
Currently, the two technology factors with the largest potential positive influence on the market are providing open and equitable access to underlying registries and the development of software solutions that institutionalize portfolio management. Over the last 2 years, SRECTrade has campaigned to open up the underlying REC registries, resulting in the development of the first Application Programming Interface (API) for NEPOOL GIS and an improved API interface for PJM GATS. Open and equitable access to the underlying REC management platforms is fundamental to the continued growth and prosperity of renewable energy adoption. Failing to provide access has increased asset management costs as organizations build bloated teams to manage complex portfolios. Our analysis shows in 2017 the SREC market alone is estimated to exceed $2b in transactions, exposing many organizations to possible costly operational mistakes and strategic risk as it fails to capture institutional knowledge.
Despite the new APIs, adoption of open data standards at the registry level remains a challenge. Most of the national registries still do not have open APIs and even for those that do, are often limited and heavily restricted. The benefits derived from the open communication and exchange of data continues to challenge those that stand to gain most from the existing barriers to entry. Additionally, decision makers are often apathetic and resistant to change, particularly where bureaucracy and legacy software makes the process for change painful. The benefits however are clear. Monopolistic access to data increases costs to participants and stifles innovation that would otherwise lead to reduced costs in the market. Open and equitable access places the cost of innovation on the market and reduces the ability for a central authority to decide market winners. The advent of blockchain technology that promotes decentralized distributed communication has, and continues to, disrupted many industries where data managed by a central authority restricts access and transparency. It is both a sign that modern technology can replace centralized autocratic processes and that consumers are demanding greater access and control of their data.
To reduce portfolio management costs and mitigate operational risk, the ability for organizations to either buy or build software is critical. Unfortunately, to date, in both cases choice is limited or often completely lacking. The absence of APIs prevents organizations from building comprehensive tools and in many markets the ability to procure services. SRECTrade is seeking to solve these problems by lobbying for new public APIs and providing comprehensive portfolio management services through our new SRECTrade-X platform.
Coupled with these technology changes, standardization of business services will also contribute to reduced costs and a greater variety of financial services. Our efforts on this front are focused on unlocking liquidity in the market by establishing standardized processes for creating derivative products and the securitization of REC contracts. Last April, SolarCity announced that it closed the first SREC securitization round, unlocking $40m of residential and commercial solar funding, part of which was originated by SRECTrade. Ron Klein, VP, Capital Markets at SolarCity said at the time that it was “evidence of the maturity of the SREC market”. To unlock similar value for other organizations, SRECTrade has been working to create clear data and reporting structures, backed by our technology platforms, to establish a methodology for financiers to price risk appropriately and provide securitization as a turn key solution.
In summary, a lack of standards and access to underlying data fuels complexity and in turn, increases risk and ultimately the cost of doing business. To reduce soft costs and the burden to REC portfolio managers, the industry needs to continue to drive towards free and open data communication and exchange platforms. Achieving this will unlock innovation, investment and value across the market.