Upon running the figures, the DOER arrived at a 2012 compliance obligation of 81,559 MWhs or SRECs. This represents an increase over the 2011 standard by 2,982 SRECs, or approximately 3.8%. After factoring in the estimated load exemptions from the TransCanada settlement, the 2012 compliance year target is approximately 73,400 SRECs. This equals an increase of approximately 10,400 SRECs from the 2011 adjusted target of about 63,000 SRECs. Converting these figures to MW capacity, using a 1.13 MWh production factor per installed kW per year, 2012 will need the equivalent of approximately 65 MW online vs. the 2011 required capacity of approximately 55.7 MW. This step up in capacity represents an increase of 16.6%.

*Note: The 2011 and 2012 estimated megawatts required in the chart above have been adjusted for the impact of the TransCanada settlement.

Q2 generation (systems online before June 30th): must apply by 8/15/11

Q3 generation (system online before September 30th): must apply by 11/15/11

Q4 generation (system online before December 31st): must apply by 2/15/12

Please email your completed MA EasyREC application to easyrec@srectrade.com or fax to (732) 453-0065.

The proposal establishes a 10-year schedule for the SACP that would maintain the current rate of $550/SREC through compliance year 2013, then decrease 5% each following year. The proposal also requires the schedule to be updated on a yearly basis to include a price for the 10th year of the schedule. For example, the 2022 price will be added to the schedule no later than January 31, 2012. The table below demonstrates the proposed schedule.

Prior to implementation, the proposed schedule is to go through a comment process. The comment period is currently open through August 15, 2011. Once all comments are collected, the DOER will review and begin the necessary process to amend the existing Solar Carve-Out provisions.

Of the 649 projects that are operational, SRECTrade’s aggregation is by far the largest in the state, representing 36% of all facilities that are operational in Massachusetts. In terms of installed capacity, with nearly 3 MW of 19 MW installed as of July 11, the 16% share of capacity is second only to the state’s largest utility, National Grid who has installed 4 projects totaling 3.4 MW which represents 18% of the solar capacity in the market. That said, 16% understates SRECTrade’s presence in the Massachusetts since signing up for SRECTrade’s aggregation service is not a pre-requisite for selling through the platform.

Although key features like transparent, competitive market pricing, low fees, no contracts to sign and online access to the SRECs that are not lumped together with other facilities have made SRECTrade an attractive option to solar owners, the success of the platform can ultimately be attributed to the network of installers that recommend it to their customers. According to the DOER’s report, 42 of the 111 installers with facilities in the ground have customers with SRECTrade, including 8 of the top 10 installers by volume.

Top Installers In SRECTrade’s Network as of July 11, 2011 (as published by DOER)
- My Generation Energy, Inc., Brewster, MA
- SunBug Solar, Somerville, MA
- Sunlight Solar Energy, Waltham, MA
- E2 Solar Inc., Hyannis, MA
- Alteris Renewables Inc., Natick, MA
- NorthEast Solar Design Associates, West Hatfield, MA
- South Mountain Company, Inc., West Tisbury, MA
- SolarFlair Energy, Inc., Framingham, MA

The SRECTrade aggregation is not a prerequisite to participate in the SRECTrade market. The platform is open to anyone in the market looking to sell SRECs. The improved fee structure makes SRECTrade a simple and inexpensive option for aggregations with SRECs to sell. The combination of an open platform and guaranteed volume coming from the state’s largest aggregation makes SRECTrade the top destination in Massachusetts for entities with compliance obligations.

In simplified form, this change means that installers and system owners should get their EasyREC paperwork in as soon as their system is interconnected to the electric grid. By submitting immediately, the the DOER and MassCEC will have ample time to approve the system. Even for systems that go online at the end of Q1 (i.e. March 20th), the state will then have a full 3 months to get the system certified for Q1 SRECs on July 15th.

If a system was interconnected in Q1 but is not certified in DOER by July, then it’s first chance to create SRECs will be October 15th. On that date, DOER will only create Q2 SRECs, and will ignore any Q1 SRECs that would have been generated for the system on July 15th.

All recent applications to SRECTrade’s EasyREC service have already been submitted to DOER on the customer’s behalf, and thus are not going to be affected by this change. Feel free to follow up with us, though, if you would like to double-check your status.

If your system went online before March 31, 2011 and you have not yet submitted your application, go to our EasyREC page and fill out the forms as soon as possible!

The Opt-In Term is the length of time a facility is eligible for the Last-Chance Auction
There are a few misconceptions regarding the “10-year” Opt-In Term and the 400 MW Minimum Standard Cap. For example, it might seem that the program is slated to last 10 years or until it reaches 400 MW, after which the SRECs go away. This is most definitely NOT true. The Opt-In Term actually represents the length of time that a facility that is approved for the SREC program can opt into the Last-Chance Auction, i.e. the amount of time a facility is guaranteed a floor price in the market. Once a facility is approved, this term cannot be changed – though the Opt-In Term for future projects may be adjusted by the DOER (see below).

The 400 MW Cap is a limit to the amount that will be approved for the Solar Carve-Out
Meanwhile, the 400 MW cap is actually just a limit to the capacity of projects that can be eligible for the Solar Carve-Out. The 400th MW approved for the SREC program will be eligible for the full-length of the published Opt-In Term. This means that if Massachusetts reaches 400 MW in 2015 and the Opt-In Term is still 10 years, then the Solar Carve-Out will fade out in 2025. In simple terms: the state will accept 400 MWs into the program and every accepted facility will be guaranteed a floor of $285 for “X years” from the time it is installed. “X years” will vary based on the Opt-In Term established in the year of installation.

The Opt-In Term may change for future projects
Today, the Opt-In Term is 10 years and that will not change for any existing projects. However, every year, the DOER may make a change to the Opt-In Term for NEW facilities based on the results of the last-chance auction. If there is an oversupply, then the Opt-In Term may be decreased by as much as 2 years to a minimum of 5 until 2017, and a minimum of zero thereafter. If there is a shortage, the Opt-In Term may be increased to a maximum of 10 years.

The Solar Carve-Out expires when the Opt-In Term ends for the final project approved under the 400 MW Cap
Finally, facilities can continue to sell SRECs after the Opt-In Term as long as the Solar Carve-Out program is still in place. The only difference is that those facilities will no longer be eligible for the Last-Chance Auction and therefore are not supported by the $285 floor price. The Solar Carve-Out will expire after the Opt-In Term for the final project registered under the 400 MW Cap has concluded AND all remaining SRECs created during that time have either been sold or expired. After this time, all facilities will be transferred to the RPS Class I REC market (which by that time could be worth very little).

Here are the key paragraphs taken from the DOER Solar Carve Out website worth reading carefully:

Minimum Standard Cap and Termination of the Program
The Minimum Standard is capped at 455,520 MWh (sufficient to enable the installation of approximately 400 MW of solar PV). When DOER qualifies 400 MW of solar for the program, qualification of all additional solar installations is transferred to the RPS Class I Program. Once the cap has been met, the Minimum Standard for the RPS Solar Carve-Out will be set annually per regulation to maintain market balance. The RPS Solar Carve-Out program remains in effect until all the Auction Opt-In Terms of the qualified projects and the full shelf-life years of any Re-Minted Auction SRECs have both expired, thereby maintaining the price certainty promised to all solar generators. For the year after the final Compliance Year, when the Solar Carve-Out Minimum Standard is set to zero SRECs shall cease to exist, and all generation from qualified Solar Carve-Out Renewable Generation Units shall produce RPS Class I Renewable Energy Attributes.

Opt-In Term
The Auction Opt-­In Term is defined as the number of years (expressed in calendar quarters) that a project is eligible to deposit SRECs into the Solar Credit Clearinghouse Auction Account. For all projects qualified in 2010, this is set at 10 years, or 40 quarters. Any SRECs generated in this span of 40 quarters will be eligible to participate in an auction that will potentially be held each July, where they will be assured a price of $300/MWh for their SRECs (minus a $15 auction fee assessed by DOER). This mechanism sets a floor price for SRECs and gives projects long-­term price assurance should they be unable to sell them directly to LSEs or there be an oversupply of SRECs. Once a project’s Opt-In Term has expired, its owner may continue to sell their SRECs until the program officially ends, but will not have the price assurance guaranteed by the ability to Opt-­In to the auction.

Adjustments to Auction Opt-In Term
Long Market (SREC Oversupply) Adjustment: The Auction Opt-In Term is reduced by 4 quarters for each full 10% of the year’s Compliance Obligation that is deposited into the Auction Account. The maximum reduction per annual adjustment is two years. The minimum Auction Opt-In Term is 20 quarters or 5 years for the first 7 years of the program (through Compliance Year 2016). After that time, the minimum term is reduced to zero years, unless otherwise set by the Department of Energy Resources (DOER). Short Market (SREC Shortage) Adjustment: The Auction Opt-In Term is increased by 4 quarters for each full 10% of the year’s Compliance Obligation that is met through Alternative Compliance Payments. The maximum reduction per annual adjustment is two years. The maximum Opt-In Term is 40 quarters.

In conclusion, we will monitor the Opt-In Term as it is published each year by the DOER. The term will not change for existing projects once established, but it will impact new projects. Solar developers should consider this as they do project finance for facilities that may not be completed this year. Given the shortage in the SREC market in 2010, we do not foresee any changes to the Opt-In Term in 2011.

SRECTrade continues to offer long-term Fixed-Price and Upfront SREC payments for solar projects in Massachusetts.

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Solar is nothing new to Massachusetts, but SRECs were only introduced in 2010. Prior to the solar carve-out, solar owners had to rely on large upfront incentives and the sale of Class I RECs that had limited value.  The solar carve-out set the stage for an SREC program that will provide a market-based incentive to help subsidize the cost of solar today. Though any homeowner or investor would prefer an upfront cash grant from the state for their solar system, the reality is that both society and the industry have suffered from a reliance on these programs that are at the same time costly and incredibly volatile in availability. The beauty of the SREC program is that it creates a market-based subsidy that is not paid out by the state government, but by the electricity companies that supply the state. Though the price paid for SRECs may vary, the payments made to solar owners for SREC sales can be viewed as a tax levied on the suppliers of dirty energy. As such, once implemented, the program does not require the additional allocation of state funding to subsidize projects. As solar proliferates in the state, the market-based SREC price will come down over time. Meanwhile, solar businesses that adapt to the SREC program will find comfort in the continuity it provides, especially after years of boom and bust periods driven by upfront subsidies.

This fluctuating SREC price is at the heart of the greatest challenge that participants in the solar industry face when confronted with an SREC market. Addressing this uncertainty is precisely why Massachusetts stands out from any other SREC market in the U.S.  Instead of setting fixed long-term targets that may or may not be achieved, Massachusetts has set up a formula that publishes a new target each year based on the conditions in the market the previous year. This formula is designed to ensure that the state is setting goals that are neither too aggressive nor too weak.  As a result, it should be easier for developers to finance solar projects based on the price of SRECs.

This is very different from what we’ve seen in other states. In New Jersey, the state goals increased so aggressively that the market could not keep up and SREC values remained high. This isn’t entirely a bad thing for New Jersey since the state earned ~$700 for each SREC that electricity companies fell short last year. Though that money was intended to fund clean energy projects, Republican Governor Christie was able to use it to balance the state budget. Although the next few examples highlight the opposite extreme, the shortfall in New Jersey in 2010 could very easily happen to any of the other SREC states 5 years from now. At about 255 MW required this year, New Jersey dwarfs every other state that followed in implementing a program.

In the smaller state markets, the problem in the early years is the disproportionate impact that a large project could have on a single market. In 2009 the Delaware market was threatened by a 14 MW Delmarva project that would have collapsed state SREC pricing if it weren’t for state intervention.  Meanwhile, in the next few years, the announcement by AEP of a 50 MW project in Ohio could place a significant burden on the in-state solar industry that only has about a 45 MW requirement for 2011. New Jersey was able to protect the SREC program in the early years by placing a 2MW maximum on qualification. It lifted that restriction in 2010 to feed the exponential growth needed to meet the RPS solar requirement. Hopefully Ohio, Pennsylvania and the other budding state SREC markets realize the impact these large projects will have on a solar industry that is just learning to thrive off of SRECs.

Meanwhile, back in Massachusetts, it seems the state has already thought through a lot of these issues. The aforementioned formula for determining the requirement each year provides certainty that an influx of large projects won’t collapse SREC pricing for everyone else.  In addition, though it recently raised the cap on system sizes from 2 MW to 6 MW, the cap should be enough to ensure that an industry is built, not a few large solar farms. Finally, in case the flexible requirement and 6 MW cap weren’t enough to help participants feel comfortable, the state implemented a program with a floor price of $300 per SREC.  As a result, SRECs in Massachusetts will trade between $300 and $600.  In the unlikely event that there is an oversupply, the state will host a fixed-price auction that will give buyers a chance to purchase the SRECs at $300 to get an early start on the next year. If the SRECs don’t sell after a couple rounds, the state will put them back into the market with an extended life, while at the same time, increasing the requirements proportionally.

In summary, if all goes as planned with the Massachusetts solar carve-out, the state requirement should increase enough each year so that there is never an oversupply.  In the event that there is an oversupply, the state will host an auction for buyers at $300.  If any SRECs go through the auction unsold, the state will increase the requirements to make sure that buyers will be willing to pay more than $300 for them.  For someone looking for certainty in SREC prices, a gaping oversupply will be very unlikely, an unsuccessful last-chance auction will be extremely rare, and if both those scenarios exist, the possibility that a buyer is not willing to pay at least $300 per SREC is unimaginable under the rules put forth by the state of Massachusetts.

Hopefully all the other SREC states, current and future, take note of the Massachusetts Solar Carve-Out.

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This should serve to counterbalance the change prompted by the TransCanada settlement that exempts certain buyers from the solar carve-out.

To see the all the changes made to the legislation see the RPS Class I Revised Regulation with Tracked Changes.

- Solar photovoltaic project located in Massachusetts
- Under 2MW in capacity
- Installed on or after January 1, 2008
- Has not received funding from Commonwealth Solar I
- Has not received substantial support from ARRA-related federal stimulus funds

Go to the Massachusetts Solar Renewable Energy Certificate (SREC) Program page for more details.