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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