Archive for the ‘New Jersey’ Category

NJ Gov. Murphy Signs AB-3723 / SB-2314 Increasing State RPS

Posted May 25th, 2018 by SRECTrade.

On Wednesday, May 23rd, New Jersey Governor Phil Murphy (Dem) signed Assembly Bill 3723 (AB-3723) and Senate Bill 2314 (SB-2314), increasing the state’s Renewable Portfolio Standard (RPS) requirements. The bill establishes renewable energy goals of 21 percent by 2020, 35 percent by 2025, and 50 percent by 2030, making the New Jersey RPS one of the highest in the nation.

Notably, the state’s solar carve-out requirement is raised and accelerated to 5.1 percent of total electricity sales by EY2021 before beginning to ramp-down in 2024. The requirement ramps down in consideration of solar facilities that will be reaching the end of their 15-year SREC production eligibility term.

On the other hand, the bill lowers the solar alternative compliance payment (SACP) schedule to $268.00 in EY2019 with an additional $10.00 reduction each following year.

The bill also shortens the 15-year period that qualified solar projects can generate solar renewable energy credits (SREC) to ten years, effective for all New Jersey SREC Registration Program applications received as of the enactment date. Lastly, the bill mandates that the current SREC program be closed upon reaching the 5.1 percent target and no later than June 1, 2021. It is anticipated that a supplemental “SREC-II” program will follow shortly after the closure of the first program.

The bill also introduces other clean energy initiatives, including:

  • Community Solar: establishes the Community Solar Energy Pilot Program to allow utility customers access to solar projects that are located away from their properties, but within their utility’s service territory. The pilot program is planned to be converted to a permanent community solar program within 36 months.
  • Energy Efficiency: requires individual utilities to implement energy efficiency measures to reduce electricity usage by 2 percent and natural gas usage by 0.75 percent.
  • Energy Storage: mandates Gov. Murphy’s goal of achieving 600 MW of energy storage by 2021 and 2,000 MW by 2030.
  • Offshore Wind: establishes a goal of 3,500 MW of offshore wind by 2030 that will be supported by an offshore wind renewable energy credit (OREC) program.

Simultaneously, Gov. Murphy signed Executive Order No. 28, requiring state agencies to update the Energy Master Plan (EMP) that prepares a strategy for achieving 100 percent clean energy by January 1, 2050. The new EMP is scheduled to be finalized and published by June 1, 2019.

For more information on the bill and its passage through the New Jersey legislature, please visit our previous blog post on the topic here. SRECTrade expects to publish a detailed New Jersey supply and demand analysis reflecting this new legislation soon.

NJ Solar RPS Increase – New Jersey Assembly and Senate Pass AB-3723 / SB-2314

Posted April 13th, 2018 by SRECTrade.

On Thursday, April 12th, the New Jersey Assembly and Senate passed Assembly Bill 3723 (AB-3723) and Senate Bill 2314 (SB-2314). The bill now sits on the desk of Governor Phil Murphy (Dem) waiting to be signed, after passing the Assembly by a margin of 49-20-2 and the Senate by a margin of 29-8. The bill requires a number of action items to be carried out, including:

  • Requiring the New Jersey Board of Public Utilities to:
    • Administer an energy storage analysis
    • Advance, increase, and extend the solar carve-out schedule and reduce and extend the solar alternative compliance payment schedule
    • Introduce structural changes to the state SREC program
    • Implement energy efficiency and peak demand reduction programs
    • Implement a “Community Solar Energy Pilot Program”
    • Offer tax credits for specified offshore wind facilities
  • Requiring the Department of Labor and Workforce Development to establish job training programs for professionals in manufacturing and maintenance of offshore wind facilities

The bill requires 21% of statewide electricity sales to be derived from Class I renewable energy sources by January 1, 2020, 35% by January 1, 2025, and 50% by January 1, 2030. The cost of this requirement shall not exceed 9% of the electricity purchased by all NJ ratepayers for each energy year 2019-2021 and shall not exceed 7% in each energy year thereafter. In addition, all facilities filing SREC applications after the bill’s enactment date will be subject to a reduced SREC eligibility term of 10 years, down from 15.

No later than 180 days after the enactment of the bill, the board will implement rules to close the SREC program to new systems upon reaching the 5.1% solar carve-out target. The legislation intends to close the existing SREC program to new projects on or before June 1, 2021. Within 24 months from signing the legislation, the Board of Public Utilities will be required to conduct a study that evaluates how to modify or implement a new solar incentive program. A variety of market stakeholders will be consulted in the process to determine the next best steps forward for the NJ SREC market.

As shown below, the bill brings forward and raises the state’s solar carve-out requirements beginning with EY2019 and extends the requirements through EY2033. The requirement peaks at 5.10% in EY2021-2023 before gradually declining through EY2033. The reduction mechanic was introduced to account for solar facilities that will be reaching the end of their SREC production eligibility term.

The bill also reduces the solar alternative compliance payment (SACP) beginning with EY2019 and extends the SACP schedule through EY2033. The SACP level drops to $268 in EY2019 and then gradually decreases by $10 each year following.

For more information on the historical progress of the bill, please view our previous blog post on the topic here. SRECTrade will be publishing an updated New Jersey Supply and Demand Analysis to its blog shortly in consideration of this bill.

New Jersey Senate Passes Concurrence on S-2276

Posted January 10th, 2018 by SRECTrade.

Update: Governor Chris Christie pocket vetoed Senate Bill 2276 (S-2276) when he left office on January 16, 2018.

Please note that the original blog post was slightly revised on January 11, 2018.

On Monday, January 8th, the New Jersey Senate passed the amended Senate Bill 2276 (S-2276), following the Assembly Telecommunications and Utilities Committee’s amendments from mid-2017. The bill now rests on the desk of outgoing Governor Chris Christie (R) for a decision. Although it appears likely that Gov. Christie will pocket veto the legislation when his term ends on Tuesday, January 16th, Governor-Elect Phil Murphy (D) has his eyes set on New Jersey accomplishing 100 percent clean energy by 2050 and leading New Jersey to regain its status as a national leader in solar.

The bill passed by a considerable margin (26-8), demonstrating a strong consensus for support of the Garden State’s renewable energy industry, and also sending an important message to Governor-Elect Murphy regarding the urgency of this legislation.

If signed into law, the bill would establish the New Jersey Solar Energy Study Commission and increase the state’s solar renewable energy portfolio standard. The commission is intended to analyze all aspects of New Jersey’s solar industry and report findings and recommendations to the Governor and Legislature, specifically:

  1. As to whether New Jersey’s solar renewable portfolio standard (RPS) should be modified and extended through a prescribed period, but at least through energy year 2031;
  2. The current trends in utility interconnection study processes and costs; and
  3. The status and future of the state’s solar renewable energy credit market

In the bill, the Legislature speculated that New Jersey’s current statutory solar RPS could result in the loss of over 120 MW of solar per year through 2021, over $240 million per year in lost solar projects, and 5,000 clean energy jobs per year. To ensure the continued success of New Jersey’s solar industry, it is critical that the state pass both interim and future long-term measures to stabilize the industry and promote long-term, sustainable growth.

SRECTrade will continue to provide updates on this and other New Jersey legislative efforts.

New Jersey SREC Update – November 2017

Posted November 22nd, 2017 by SRECTrade.

With the announcement of new NJ solar build data last week, we wanted to provide an update on the current status of New Jersey SREC supply and demand. Since our last update in June 2017, build over the last 6 months (through September) has declined, pacing at 22.7 MW/month. That is approximately a 23.7% decrease against the last 12 month (LTM) rate of 29.8 MW/month. Additionally, the 3 months ending September 2017 saw a 45.5% decline in total build to 48.1 MW for the quarter, against 88.2 MW for the 3 months ending June 2017.

Electricity load served for reporting year 2017, ending May 2017, is estimated to be up 1.3% over RY2016 to 75.2 million megawatt hours. This is a shift in the flat to declining trend the market has experienced since reporting year 2012. Given current build and scenarios based off the 29.8 MW/month LTM rate, the NJ SREC market can expect an oversupply of approximately 500,000 SRECs during reporting year 2018 (approximately 20-25% over the estimated RY2018 requirement).

With regards to pricing, since the beginning of September pricing in the spot and forward markets have experienced appreciation. Pricing for NJ2018 and NJ2019 vintages has risen by approximately 12-14%, while pricing for NJ2020 and NJ2021 vintages has increased by approximately 30%. Price increases for the current vintages could be attributed to slightly lower than expected build rates and annual activity taking place ahead of the basic generation service (BGS) electricity auction, scheduled in early February 2018. Looking forward, price appreciation could also be due to early BGS activity, but also potentially attributed to the possibility of increased RPS requirements, particularly in light of the recent election of NJ Governor Phil Murphy and his stance on clean energy initiatives.

For a complete update on the supply and demand outlook, see our presentation here.

SRECTrade will continue to provide updates as available. Thank you and wishing everyone a Happy Thanksgiving!

H1 2017 SREC Pricing, Presented by Market Insights

Posted July 5th, 2017 by SRECTrade.

The first-half of 2017 was a dynamic period in the SREC markets. SREC prices experienced highs and lows. In order to understand and clearly present pricing data, SRECTrade offers a subscription product – Market Insights. Login to your SRECTrade account and get started for free.

Please see the Year in Review video here:

 

New Jersey SREC Update – June 2017

Posted June 28th, 2017 by SRECTrade.

The 2017 energy year for New Jersey closed at the end of May, and with the latest NJ Office of Clean Energy Solar Activity Reports we have our first indication of total development activity for the full 12 months of the previous compliance period. We have taken the opportunity to update our state capacity model and dig into the available information in greater detail.

You can find our most recent capacity presentation here.

As of the most recent NJ Office of Clean Energy activity report, which tracks registered assets as of 5/31/2017, New Jersey has built a total of 2,169MW of solar capacity.  345MW of that has been built in EY 2017 alone. The most recently published report showed an increase of 38.9MW in solar installations since the figure reported through 4/30/17.  While much of the new capacity was certified in April and May of 2017, an unusually high amount of new capacity was attributed to December of 2016.

  • 12MW from May 2017
  • 11MW from the period between January and April 2017
  • 14MW from December 2016

Given the observed pattern in the delay of these reports accurately displaying the full capacity to be attributed to a given month, we assume that we will see another 5-15MW of capacity added to May 2017 in next month’s activity report, bringing the EY 2017 total new build figure in the range of 350MW to 360MW.

In terms of EY 2017 SREC supply and demand, our analysis shows that 2017 will be slightly (4.8%) oversupplied, but with the implied growth rate of 30MW/month quickly outpacing the growth of the RPS solar carve out schedule. Given a base case of 30MW/month and an assumption of flat load growth, we see an 24% oversupply in 2018 and a 57% oversupply in 2019.

An important piece of information to note however is that state electricity sales have shown a consistent negative trend, with sales dropping from over 83mm MWh in 2007 to 74mm MWh in 2016.  This is an annualized rate of decrease of slightly more than 1% over the previous 10 years.  We have included scenario analysis for both a flat load growth scenario as well as a negative growth scenario. Below demonstrates flat load growth scenarios.

scenario-1

supply

Given the high likelihood of significant market oversupply in coming years, either a drastic slow down in build rates or an expansion of the New Jersey SREC program requirements would be needed to address forecasted supply and demand dynamics.  Industry stakeholder groups are currently in process of evaluating how expanded NJ RPS requirements may be feasible in the framework of the existing program.

As always, we will follow the legislative process closely and keep our clients updated on any substantive changes in the market. Please feel free to reach out to your brokerage team coverage with any questions or comments.

 

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.

New Jersey SREC Update – December 2016

Posted December 23rd, 2016 by SRECTrade.

As the calendar year comes to a close, we wanted to take one final opportunity to examine the most recently released solar installation data from the New Jersey Office of Clean Energy. Throughout 2016 the New Jersey SREC market has been profoundly influenced by the implications of the data in these reports. After experiencing the type of price volatility we’ve seen in 2016, our hope is that market participants will welcome some added insight into these numbers and will consider this analysis as they begin to make projections for 2017.

You can find our most recent capacity presentation here.

As of 11/30/2106, the latest NJOCE Solar Installation Report showed an increase of 26.7MW of installed capacity since it was last issued as of 10/30/16.  Almost 20MW of that increase came from reported installations in October and November, with the balance distributed relatively evenly back to June 2015.

  • 10.3MW added in November 2016
  • 9.6MW added in October 2016
  • 4.6MW added July through September 2016
  • 2.2MW added June 2015 through June 2016

**Regular readers of these reports will also notice that a significant amount of capacity was “added” to the period from 2001 to May 2015, although this was simply a reclassification of previously reported capacity in order to improve the accuracy of the information presented. **

Within this report, a trend which we had previously noted has become more clearly defined.  Assuming that the November figure for installed capacity will be revised upward in future reports to a degree similar to the prompt months in prior data releases, we see that the average monthly rate has fallen drastically from the first half of the year to the second.  Through the first six months of 2016, the New Jersey solar market was adding just over 33MW/month.  Assuming the reported November installation number doubles due to future upward revisions, since July that monthly average has now dropped to 20MW/month.  That represents a 40% drop in new installations.

Although there were undoubtedly a range of factors that contributed to this sudden shift, lower SREC pricing almost certainly played a central role in this change of trend.  When extrapolated out into the future, the extremely aggressive build rates observed in Q1 and Q2 of 2016 indicated a market that would very quickly become oversupplied as the pace of development overtook the rate of RPS growth.  This expectation of future imbalance led to a precipitous decline in prices, bringing the NJ SREC spot market down from highs in the $290s to lows in the $200s.  This decline meant developers experienced further difficulty finding adequate funding to support their pipeline of projects.  The consequence has been that many projects that don’t qualify for residential rates of electricity – those projects who would otherwise depend on healthy SREC prices to be economically feasible – simply didn’t get built.  This is clearly apparent when comparing the three month periods ending in July 2016 and November 2016:

julyvsnov

A closer examination of the data reveals another powerful shift in industry trends. Commercial and residential build rates have historically kept a somewhat even balance with respect to one another.  In 2015, commercial and residential capacity made up 41% and 52%, respectively, of total installations in that year.  In the first half of 2016, that balance was 58% and 40%, respectively.  Since July 2016, that balance has now shifted to 23% and 64%.  While the residential market has remained strong, the larger commercial-sized systems have experienced very real difficulty. Again, this shift is not solely due to SREC pricing, but the significant decline in the amount of funding available from the SREC markets undoubtedly played a powerful role.

As always, we want to apply this information to create better informed opinions regarding the future of the market.  The recent slowdown in new installation has further supported the idea that EY2017 will remain fairly balanced in terms of supply and demand.  Across a range of scenarios, 2017 will most likely remain well balanced with a projected oversupply of only 9-11%. Barring a drastic acceleration in new installations, 2018 is also projected to remain fairly balanced.  2019 and beyond, however, take on a much different dynamic.

nj-supply-projections

Even under modest growth scenarios, the current RPS can again be overwhelmed by the growth of the New Jersey solar market in a matter of years.  It is important to note that the pricing of all financial products – SRECs included – is determined by a combination of current market conditions as well as expectations of market conditions in the future.  Even though 2017 and 2018 appear to be years of relative balance, a drastic oversupply in the later years of the New Jersey market could easily have an adverse affect on pricing in the near term.  Without some type of legislative amendment to the current state RPS schedule, the New Jersey SREC market could feasibly experience a prolonged period of depressed pricing which would signal a new, harsher economic reality for solar market participants across all segments of solar installation.

It is SRECTrade’s opinion that the market would be best served by proactively supporting any available means of expanding the state’s RPS schedule to account for this future growth.  In order to successfully support the solar market, any such solution will need to focus on the longer term expansion of the SREC program.  There have been several different proposals debated amongst industry participants, all of which have their own merits, but the fact remains that ANY expansion is better than none at all.  If the industry chooses not to take this opportunity to expand the RPS program, developers will face an increasing probability of further market contraction and slower growth.

We will continue to update you with any new data as it becomes available.  Please feel free to reach out to your SRECTrade brokerage coverage with any questions or comments you may have, we are always willing and eager to discuss our analysis with all members of the market.

We wish continued success and happiness to all of our friends and partners in the renewable energy industry, and we look forward to working together again in 2017!

 

**This report was updated on 4/20/2017 to address an error in the oversupply projection model which resulted in the oversupply being slightly understated. This has now been corrected** 

 

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.

New Jersey SREC Update – October 2016

Posted October 11th, 2016 by SRECTrade.

New Jersey has continued to be the most active SREC market both in terms of volume and price action, with the market experiencing a small sell-off in recent days.  We maintain that this activity is not necessarily indicative of the true fundamental balance of the market, but rather due to selling pressure from a small group of market participants.  In order to provide a more objective perspective on the state of the New Jersey solar market we have updated our capacity presentation, available here.

As of August 31, 2016 there were 1,871.9MW of solar capacity online and generating SRECs in the state of New Jersey.  This was up 20.5MW from the New Jersey BPU solar installation report for July 2016, and up 78MW from our last NJ update after the solar installation report for June 2016.

After the June report, we emphasized that the headline number reported in the BPU’s solar installation reports can be slightly misleading if taken solely at face value.  A deeper dive into what exactly contributed to the increase from the last report provides additional insight into the true state of the New Jersey market.  The 20.5MW increase from the July 2016 report combines the following:

  • 1.5MW increase for upward revisions in 2011-2014 monthly figures
  • 1.6MW increase for upward revisions in 2015 monthly figures
  • 11.3MW increase for upward revisions in 2016 monthly figure for January-June
  • 5.5MW increase for upward revisions in July 2016, bringing the monthly build from 7MW to 12.5MW
  • 10.9MW addition for new build in August 2016
  • 10.2MW decrease for downward revisions in “estimated installations” (essentially the BPU pipeline figure for old PTO applications that have not yet been processed)

 

This breakdown helps illustrate a few important trends.  First, the magnitude of these revisions has decreased sharply from previous reports, indicating that the BPU may have begun to catch up on the back-dated PTO applications that have served to inflate the headline month-on-month change in reported capacity since Applied Energy Group took over reporting in May of this year.  Second, the rate at which new capacity is being built and brought online has slowed markedly since the peak we witnessed in the first half of this year.  The average build rate for December 2015 through May 2016 was an impressive 33MW/month, however we believe the current last twelve month (LTM) average of 23.9MW/month is a closer representation of the sustainable long term trend.  That LTM is what we use as the base case (Case 2 below) for our resulting scenario analysis and future projections.

In the graph below you’ll find the representation of our projection analysis. Under the current RPS schedule and using the observed LTM build rate as our base case (i.e. Case 2), we see 2017 as slightly over supplied.  The market balance continues into a slight oversupply in 2018, with the degree of oversupply steadily increasing year-on-year through 2021.  All data and projections are available in our presentation hyperlinked above.

 

New Jersey SREC S&D

 

As always, we will continue to monitor the development of the market trends mentioned above and share our analysis as new information becomes available.  In the meantime please feel free to reach out to your SRECTrade coverage with any questions or comments.

 

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.

New Jersey SREC Update – August 2016

Posted August 15th, 2016 by SRECTrade.

We recently received an update on the New Jersey solar market from the office of New Jersey’s Clean Energy Program, bringing us up to date on new solar capacity built through June.  As of June 30th, New Jersey had a total installed capacity of 1,793.79MW – a 61.49MW addition from the figure previously reported as of the end of May.

The 61.49MW addition is obviously noteworthy at first glance, and the market has immediately responded by selling off significantly in the days that followed the report’s release.  A closer look into the data, however, provides a more nuanced understanding of what that figure really represents.  Given the magnitude of the market reaction after this release we took the opportunity to update our New Jersey capacity models to provide a framework to better understand the data.

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

While it is true that 62MW of new projects were added to the cumulative total of installed capacity, that number actually represents revised figures for monthly installations dating back to January 2015.  The 62MW can be broken out as follows:

  • 11MW of upward revisions attributed to 2015 monthly figures
  • 32MW of upward revisions attributed to 2016 monthly figures
  • 19MW of new build attributed to June 2016

Given the distribution of the newly reported capacity increase, the result on the observed average build rates is not quite as extreme as we have seen other groups report.  Using the newly updated numbers, the trailing twelve month average build rate is about 22.5MW/month and the 2016 YTD average is 25.7MW/month.

In aggregate, the New Jersey RPS is quite large and this recent surge in build in and of itself does not necessarily tip the overall balance of the SREC market.  While we have seen a broad sell off in New Jersey SRECs across most vintages, we believe the New Jersey market can maintain current pricing even if the build rate remains elevated in the short term.  What has most likely sent SREC prices lower is the possible impact that a more long-term increase in build rates might have on the balance of the NJ SREC market.

Looking ahead there are two very different possible scenarios.  For the sake of keeping RPS comparisons constant through this analysis, we will make the assumption that NJ SB2276 (which increases the NJ RPS solar requirement slightly) successfully makes its way through the legislative process and is formally adopted.   First, the solar sector could react to the recent drop in SREC values and regress from its current trend to a less aggressive – though still above the historical average – rate of 17MW per month.  A build rate averaging somewhere close to 17MW per month would keep solar installations just slightly ahead of goals set by the current RPS schedule, leaving us no more than 5% oversupplied in any given year through 2021.  This would likely leave SREC prices stable and trading at consistently strong levels.

The alternative is to presume that the most recent increase represents a “new normal” for New Jersey solar.  An average build rate of 34MW per month, which more closely tracks the current trend, extrapolated out over the next five years would result in a very significant oversupply that would almost certainly push SREC prices lower in 2019 and beyond.   A build rate anywhere near 34MW per month eventually outpaces the growth built into the current RPS schedule and overwhelms the market structure that has been put in place through recent legislation.

We will focus on following how this trend develops over the coming six months.  If the solar industry does indeed respond to the price signals being sent by the NJ SREC market, and build rates normalize to more sustainable rates, then New Jersey solar economics will continue to benefit from strong SREC prices.  If, however, developers ignore these signals and continue to aggressively install new assets irrespective of RPS support we will likely see SREC prices continue to retreat in a manner that reflects the underlying shift in the balance of SREC supply and demand.

As always, we will continue to monitor these trends and share our analysis as new information becomes available.  In the meantime please feel free to reach out to your SRECTrade coverage with any questions or comments.

 

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.

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.

 

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