Posts Tagged ‘Pennsylvania AEPS’

PA Passes Act Restricting Geographical Eligibility for PA SRECs

Posted October 30th, 2017 by SRECTrade.

On October 30th, Pennsylvania Governor Wolf signed into law Act No. 40 (see HB 118), a Comprehensive Opioid Package containing, among other items, language amending the state’s Alternative Energy Portfolio Standards (AEPS). Originating in February 2017, HB118 was revised several times before passage in the House and the Senate in late October.

Amendments to the AEPS require solar photovoltaic systems to satisfy one of the following in order to be eligible for participation in the AEPS solar carve-out (PA SREC) program:

“(I) DIRECTLY DELIVER THE ELECTRICITY IT GENERATES TO A RETAIL CUSTOMER OF AN ELECTRIC DISTRIBUTION COMPANY OR TO THE DISTRIBUTION SYSTEM OPERATED BY AN ELECTRIC DISTRIBUTION COMPANY OPERATING WITHIN THIS COMMONWEALTH AND CURRENTLY OBLIGATED TO MEET THE COMPLIANCE REQUIREMENTS CONTAINED UNDER THE “ALTERNATIVE ENERGY PORTFOLIO STANDARDS ACT.”

(II) BE DIRECTLY CONNECTED TO THE ELECTRIC SYSTEM OF AN ELECTRIC COOPERATIVE OR MUNICIPAL ELECTRIC SYSTEM OPERATING WITHIN THIS COMMONWEALTH.

(III) CONNECT DIRECTLY TO THE ELECTRIC TRANSMISSION SYSTEM AT A LOCATION THAT IS WITHIN THE SERVICE TERRITORY OF AN ELECTRIC DISTRIBUTION COMPANY OPERATING WITHIN THIS COMMONWEALTH.”

HB118 includes the following grandfathering language to protect certain systems already certified under the AEPS, but it is unclear how the Pennsylvania Public Utilities Commission (PUC) will interpret the language for certified but out-of-state generators.

(2) NOTHING UNDER THIS SECTION OR SECTION 4 OF THE “ALTERNATIVE ENERGY PORTFOLIO STANDARDS ACT” SHALL AFFECT ANY OF THE FOLLOWING:

(I) A CERTIFICATION ORIGINATING WITHIN THE GEOGRAPHICAL BOUNDARIES OF THIS COMMONWEALTH GRANTED PRIOR TO THE EFFECTIVE DATE OF THIS SECTION OF A SOLAR PHOTOVOLTAIC ENERGY GENERATOR AS A QUALIFYING ALTERNATIVE ENERGY SOURCE ELIGIBLE TO MEET THE SOLAR PHOTOVOLTAIC SHARE OF THIS COMMONWEALTH’S ALTERNATIVE ENERGY PORTFOLIO COMPLIANCE REQUIREMENTS UNDER THE “ALTERNATIVE ENERGY PORTFOLIO STANDARDS ACT.”

(II) CERTIFICATION OF A SOLAR PHOTOVOLTAIC SYSTEM WITH A BINDING WRITTEN CONTRACT FOR THE SALE AND PURCHASE OF ALTERNATIVE ENERGY CREDITS DERIVED FROM SOLAR PHOTOVOLTAIC ENERGY SOURCES ENTERED INTO PRIOR TO THE EFFECTIVE DATE OF THIS SECTION.

The revisions are effective as of the date of the Act (October 30, 2017). Accordingly, any new solar photovoltaic system seeking certification in the PA AEPS solar carve-out (SREC) program as of this date must meet the eligibility requirements above. The full text of the Act is available here.

SRECTrade will provide updates on the Act and on the PUC’s interpretation as soon as more information is made available.

Pennsylvania legislature commences efforts to fix SREC program

Posted May 30th, 2011 by SRECTrade.

The Pennsylvania SREC market has had its design flaws. After HB 2405 and HB 1128 fell by the wayside last year, the Pennsylvania SREC market took the expected turn for the worst. SREC prices have dropped from a high of $310 to a low of $80 per SREC. Representative Chris Ross, who spearheaded the initial Alternative Energy Portfolio Standard in Pennsylvania has proposed an amendment to address some of the issues facing the Pennsylvania solar industry. Here are the two major changes that he is proposing as an amendment to the original Act:

1. After January 1, 2012, PA will no longer register solar technologies from out-of-state

2. The requirements for the 2013, 2014, 2015 Energy Years will increase from approximately 70 MW, 118 MW and 205 MW to 207 MW, 238 MW and 290 MW respectively.

These two changes would make a positive impact on the market. Closing the doors to out-of-state facilities would allow Pennsylvania to focus the opportunities created by the program on local businesses and local projects. Though the wording is a bit vague, it also seems that facilities registered prior to 2012 will be allowed to continue to sell their SRECs in the state market. This is an important distinction for the facilities that have been financed and accepted into the PA program with the expectation of participating in the market. Meanwhile, the increase in the requirements is a necessary step in order to make SRECs relevant again, though it may not be enough.

The market has been flooded with SRECs from facilities throughout the PJM region. The 2011 Energy Year SREC requirement only had room for about 18 MW of solar. To date, there is 78 MW registered to generate SRECs, with more facilities built and awaiting approval. 33 of the 78 MW are located within Pennsylvania. With the requirement only growing to 44 MW and 70 MW in the next two years respectively, the SREC market in Pennsylvania will face a prolonged collapse in pricing. Even with the proposed increases in 2013-2015, this could still be a problem. The oversupply from the 2011 and 2012 Energy Year will carry into the 2013 Energy Year, meaning that even with an increase to 205 MW of needed capacity in 2013, unsold SRECs from previous years will keep downward pressure on SREC prices.

One of the more fundamental flaws with the SREC program in Pennsylvania was reported on recently by the Central Penn Business Journal. The article accurately highlights how, in addition to out-of-state supply, local incentives skewed the role that SRECs were playing in the solar economics. The most-obvious culprits in the Pennsylvania SREC collapse are the out-of-state facilities that were flooding the market, but if you look at the numbers, Pennsylvania would still be over-supplied if you excluded all the out-of-state facilities. When attractive upfront incentives mitigate the influence of SRECs in the decision to go solar, many facilities will be built without SRECs in mind. When these projects enter the market, they undermine the credibility of the market and out-compete facilities that need to factor in a value for SRECs, driving prices below sustainable levels.

To promote a healthy SREC market, the long-term solution (once the current oversupply has been addressed) is, ironically, to shift towards a greater reliance on SRECs. A greater reliance on SRECs means that market prices will track closely with the value needed to cover the gap between developing solar and utilizing other electricity sources. When that happens the market will act as it should, trending downwards as costs come down, while remaining at levels that sustain development. If Pennsylvania continues to put upfront incentives in front of developers, the SREC market will never rebound.

In contrast, New Jersey has moved away from upfront incentives and promoted the SREC-only concept. The importance of SRECs in financing solar projects in New Jersey is why the market won’t see the collapse that some of the skeptics are predicting. Growth in the market will have to slow, but it is unlikely that SREC prices collapse the way they have in Pennsylvania. This is because when SREC prices come down in New Jersey and contracts become scarce, solar projects won’t be built (assuming rational behavior). In Pennsylvania, overly-attractive upfront incentives over the past two years have made SRECs an afterthought. If the market is ever going to function properly, the state will need to either come up with the appropriate combination of SREC values and incentives to promote solar at a rate in alignment with the growth of the RPS, or it will have to take a cue from New Jersey and shift away from the upfront incentives all together.