2019 has proven to be a dynamic year in the California Low Carbon Fuel Standard (CA LCFS) market. The beginning of the year brought the implementation of a new rule making followed by continued growth in a variety of low carbon fuels including Renewable Diesel, Ethanol, Electricity and others. Credit pricing remained strong throughout the year and in Q4 2019 spot pricing experienced sustained levels over ~$200 per credit. The enclosed update provides highlights on news impacting the market, a recent price trend overview, and a closer look at the Q2 2019 credit and deficit report by fuel type. Q3 2019 credit issuance is just around the corner and we look forward to continuing to work with market participants in the new year.
SRECTrade offers LCFS credit management and brokerage services to electric vehicle (EV) fleet operators, OEMs, EV charging station owners, and other clean fuel asset owners. We help our clients navigate the entire LCFS process including asset registration, ongoing reporting requirements, transacting, settlement, and remittance of funds. Our domain expertise in environmental commodity markets allows us to provide our clients with industry leading regulatory and market knowledge. Please reach out to firstname.lastname@example.org for more information.
On Friday, December 6th, the New Jersey Board of Public Utilities (BPU) issued an order approving a new SREC program to aid in the transition from the current SREC program to the yet-to-be-determined “Successor Incentive” program. This “Transition Incentive” program will feature a factorized, fixed-price, 15-year Transition Renewable Energy Certificate (TREC). All projects that submitted complete SREC Registration Program (SRP) applications after October 29, 2018, but do not reach commercial operation at the time the BPU determines the 5.1% target has been reached, will qualify for TRECs.
The BPU will hold a cost-cap proceeding in early 2020 to finalize the annual value of the fixed-price TREC. Specifically, the BPU will evaluate two pricing scenarios: 1) a flat 15-year price of $152 and 2) a lower price of $65 for the first three years followed by a higher price of $189 for the last twelve years.
The different TREC project types and factorizations are displayed below:
TRECs will have a useful life of two energy years, including the energy year in which they were generated. If a TREC is not issued or sold during its two-year useful life, it will become an NJ Class I REC. The order further clarifies that Transition Incentive projects will be eligible to generate NJ Class I RECs after their 15-year TREC Qualification Life.
The BPU order also directs electric distribution companies to procure a TREC Administrator. Although the exact mechanics for how TRECs will be transacted are still being determined, the TREC Administrator will ultimately purchase all generated TRECs and allocate them to load-serving entities for compliance based on their market share of retail sales.
SRECTrade will continue to monitor the development of the final TREC levels and the Successor Incentive program.
The Clean Energy Act, signed by New Jersey Governor Phil Murphy in May 2018, states that new rules and regulations will be adopted to close the NJ SREC program upon attainment of 5.1 percent of the kilowatt-hours sold in the state by solar electric power generators. Based on recent build rates, the NJ SREC market is expected to reach the program’s maximum capacity of 5.1% by mid-2020, at which point, the New Jersey Board of Public Utilities (NJ BPU) will transition the state to a new program. While the NJ BPU released a straw proposal in 2018 on the anticipated market closure, the exact strategy of determining the 5.1% attainment and eventual transition program is yet to be confirmed.
The enclosed analysis further details the implications of this market close and SRECTrade’s estimated market dynamics through 2022. The analysis assumes flat load through 2022 and utilizes a capacity factor of 12.56%, the approximate running average capacity factor across NJ certified solar facilities since 2012. In each depicted build scenario, the market will close to new capacity once 3,460 MW is hit, or on June 1, 2021, whichever occurs first.
On September 6, 2019, the NJ Board of Public Utilities (“BPU”) released a memo that detailed Basic Generation Service Provider (“BGS”) load exemptions in 2019. This exempt load dynamic has an impact on market demand through EY 2023 and is further detailed in the analysis.
Data from the New Jersey Office of Clean Energy (“NJOCE”) shows that solar build rates have increased slightly over the past six months in comparison to the past twelve months, increasing by 3.6% in that time frame. With this data from NJOCE and credit data from GATS, SRECTrade estimates that the market is over-supplied by 7.5% for the 2020 Energy Year. Assuming flat load growth and no drastic increase in build rates, the market will likely become under-supplied in 2021 and 2022.
In line with this market dynamic, NJ SREC pricing has seen an upward trend over the past twelve months. The enclosed analysis further details the current standing as well as future scenarios for the NJ SREC market.
Join SRECTrade and MDV-SEIA at the annual Solar Focus Conference in Baltimore, Maryland on November 20th – 21st. This year’s conference will focus on how the solar industry can continue its recent policy successes.
Solar Focus brings together solar professionals and industry leaders from across the country to share ideas, build partnerships, and envision the future of solar power. In addition to panels, there is a Women in Solar Breakfast, job fair, and many more networking opportunities.
More information on the conference can be found here.
On October 2, 2019, Steven Eisenberg, SRECTrade’s Chief Executive Officer, will be presenting during the “Fuel Management & Low Carbon Transportation Technologies” session at the Charge Expo Symposium in San Diego, CA. The session will take place from 10 AM – 12 PM.
Steven will speak about the benefits of the California Low Carbon Fuel Standard (CA LCFS), a market based program that encourages the adoption of low carbon intensive fuels and vehicles. SRECTrade works with participants across the LCFS market, providing credit portfolio management and transaction services to clean fuel fleet operators and other credit generators.
From September 26th – 27th SRECTrade will be proudly sponsoring the Zero Emission Bus (ZEB) Conference in San Francisco, CA. The conference will center around electric bus knowledge and industry collaboration, as more cities, states and provinces turn toward zero-emission mobility as a key strategy in mitigating climate change. Join us this September in discussing real strategies for the world’s transit innovators and learn more about how to prepare for electrification at scale.
The Conference is hosted by the Center for Transportation and the Environment (CTE). Learn more about the event and register for it here.
SRECTrade works with participants across the California Low Carbon Fuel Standard (CA LCFS) market, providing credit portfolio management and transaction services to clean fuel fleet operators and other credit generators. For more information on our services contact us at email@example.com.
On Friday, August 30th, the Massachusetts Department of Energy Resources (DOER) announced the final 2020 SREC-I and SREC-II Compliance Obligations and Minimum Standards. This announcement follows the results of the SREC-I and SREC-II Solar Credit Clearinghouse Auctions. The final announcement differs only slightly from the preliminary announcement in July.
Solar Carve-out (SREC-I)
The DOER has determined that the Final 2020 Compliance Obligation for the SREC-I program will be 748,584 MWh and that the Minimum Standard will be 1.6116%. The 2020 Minimum Standard for load under contracts signed before June 28, 2013 will be 0.9867%. The Determination of the CY 2020 Total Compliance Obligation and Minimum Standard, published by the DOER, outlines how this Minimum Standard was calculated. Both Minimum Standards are slightly lower than their preliminary counterparts, as a result of the updated Solar PV Capacity Factor used to estimate production.
Solar Carve-out II (SREC-II)
The DOER has also calculated the Final 2020 Compliance Obligation and Minimum Standard for the SREC-II program, which are 1,023,737 MWh and 2.2040%, respectively.
In addition, the DOER calculated the 2020 SREC-II Compliance Obligation and Minimum Standard for load under contracts signed after May 8, 2016 as 1,765,527 MWh and 3.8011%, respectively. The final SREC-II baseline Compliance Obligation and Minimum Standard are slightly lower than their preliminary counterparts, primarily due to two reasons:
A reduction in the average capacity factor applied to estimated generation from 13.35% to 13.08% (using nine years of Massachusetts Production Tracking System production data)
An improvement to the SREC-II production estimation formula to account for the loss of partial MWhs left over after a reporting period, since these partial MWhs do not result in the creation of partial SREC-IIs
SRECTrade’s CEO, Steven Eisenberg, will be speaking on a panel at the Renewable Energy Markets (REM) conference on Thursday, September 5th in San Diego, CA. The panel, Clean Transportation Policy: EVs, LCFS, RINs and More, will take place from 3:00 – 4:00 PM (PT).
As the transportation sector is the largest contributor of greenhouse gas emissions, policies and programs aimed at cleaning up this sector are becoming increasingly predominant. The Panelists will explain these programs in terms of their effectiveness and how they will interact with and affect other markets and sectors, in particular the voluntary renewable electricity market.
Speakers include: William Murtha, Argus Media (Moderator) Josh Bledsoe, Latham & Watkins, LLP Steven Eisenberg, SRECTrade Arpit Soni, California Air Resources Board (CARB)
On August 22, 2019, Steven Eisenberg, SRECTrade’s Chief Executive Officer, will be speaking at a Voice of the Customer Event hosted by CALSTART, a non-profit organization in the clean transportation industry. The event will focus on the application and deployment of Electric Class 5 Trucks and Yard Tractors. The meeting will take place at the South Coast Air Quality Management District office from 10:00 AM – 2:00 PM.
Steven will speak about the California Low Carbon Fuel Standard (LCFS), a market based program that encourages the adoption of low carbon intensive fuels and vehicles. SRECTrade works with participants across the LCFS market, providing credit portfolio management and transaction services to clean fuel fleet operators and other credit generators.
On Thursday, July 25th, the Massachusetts Department of Energy Resources (DOER) announced that all of the MA2018 SREC Is and SREC IIs submitted to the auction account were transacted in the first round of the Solar Credit Clearinghouse Auction (SCCA).
A total volume of 9,780 SREC Is were bid on across 21 unique bidders, creating more than sufficient demand to clear the available auction volume of 632 SREC Is.
A total volume of 63,388 SREC IIs were bid on across 21 unique bidders, creating more than sufficient demand to clear the available auction volume of 4,626 SREC IIs.
DOER and EnelX are in the process of certifying and finalizing the auction results. More information will be made available on the SCCA webpage in the coming weeks.
If SRECTrade submitted SRECs to the SCCA on your behalf, we will provide further notice on the status of your transaction once the DOER and EnelX provide us with finalized auction results.