Archive for September, 2010

How To Improve Pennsylvania’s Solar House Bill 2405

Posted September 20th, 2010 by SRECTrade.

Last month Governor Edward Rendell wrote an opinion piece supporting an increase to the existing SREC program in Pennsylvania. The Bill is currently off the table, but will likely resurface later this year.  Though we are hopeful that Pennsylvania steps up its solar goals, this Bill, as written sets a scary precedent: it essentially disqualifies any solar facilities from out-of-state that have been previously approved to generate and sell SRECs in the Pennsylvania market.

There is no doubt that the Solar Renewable Energy Certificate programs in Pennsylvania and other states, such as New Jersey, have been a major catalyst for solar development.  Despite the success of these programs, one key challenge remains prominent in the daily efforts of installers and integrators looking to develop projects: long-term SREC financing. This is particularly the case for larger projects that require lending from banks.  Without a long-term SREC project with an accredited buyer, many of these projects do not get done.  Load-serving entities are the only credit worthy counter-parties in this market since they ultimately need to buy the SRECs to comply with state laws.  The problem is that they only have short-term electricity supply contracts into the state and therefore are loath to enter into long-term SREC contracts for risk of exposure to the liability should their electricity supply contracts not be renewed.

Meanwhile, the only projects getting done on a regular basis are small commercial and residential systems that are finance-able without long-term SREC contracts.  Absent a long-term SREC contract, the key to the success of the solar industry in Pennsylvania and other states with similar programs is the faith that the solar owners and financiers place on the SREC market. It is all too easy for someone to walk away from a solar investment because he or she does not trust the government to stand behind the law that created the market-based SREC program.  This is why when Maryland, Delaware and New Jersey recently updated their SREC laws to increase the requirements and raise the fines, the greatest outcome of these changes was not the quantitative effect but the impact it had on the psyche of the industry. These three states all said loud and clear that the SREC program is here and it is here to stay.

Pennsylvania, in many ways, is doing the same with House Bill 2405 by setting a schedule of fines and increasing requirements. However, there is one piece of the legislation that is a step back for the solar industry in general.  When the original SREC program was created in 2004, the law included SRECs from out-of-state facilities. In a pragmatic move to place an emphasis on the local Pennsylvania solar industry, the new Bill, if passed would exclude out-of-state facilities. This is a perfectly fine change for solar projects moving forward… and it may actually be a good thing for the PA SREC market.

However, as written, the Bill would also exclude out-of-state facilities that have already been financed, built and certified by the Pennsylvania AEPS Program to sell SRECs in the state’s market.  These are solar facilities that have been financed to produce SRECs for the Pennsylvania state market, expecting the payback to come from the proceeds of these sales.  They will be shut out of the Pennsylvania SREC market.

Now if you’re a PA resident or legislator, you may not care since it really does not affect you in any tangible way. Out-of-state facilities increase supply, driving cost down, but excluding them opens up opportunity for local solar projects.  If you’re a PA installer, you will likely be happy just to have it passed as it will be a great thing for the PA solar industry.  However, if you are a solar industry advocate in general and/or someone with a penchant for fairness, you are probably holding your breath alongside the solar owners and installers in Virginia, West Virginia and other states that have been lured to solar by Pennsylvania state law.

It would be a setback to SREC programs everywhere to see the first real example of a change to a state law promoting SRECs that leaves its earlier adopters in the dark. Though we’re hoping for an improved solar legislation in Pennsylvania, we are rooting for legislators to not only do what is good for SREC markets, but also what is just plain right for the people who have made an investment based on the 2004 law. The implementation challenges won’t get any easier if you give the skeptics a reason to doubt the program.

In conclusion, Pennsylvania should most definitely pass HB2405, increasing solar requirements, but it should also grandfather in all facilities that were built on the promise of its predecessor.


NY SRECs Expected to be Eligible for DC Market

Posted September 16th, 2010 by SRECTrade.

The District of Columbia Public Services Commission has been revising the language of the state RPS, and details are expected to be released at the beginning of October.  Currently, a discrepancy in the wording of the RPS makes the eligibility of PJM-bordering states, such as New York, unclear.  This ambiguity led to the rejection of New York solar facilities earlier this year, and has effectively halted the certification of NY facilities in DC.  We expect that this revision will clarify the status of New York systems, making them eligible for the DC SREC market.  As soon as concrete details are released, SRECTrade will resume registering New York facilities in DC as a part of our EasyREC program.

Although prices in the DC market are close to $300 per SREC, the market is small.  In 2010, a total of approximately 3 megawatts must be installed in order to meet the requirement.  That number grows to 15 megawatts in 5 years.  Considering that facilities in the entire PJM region and adjacent territories are eligible for the DC market, it is quite possible that this market becomes oversubscribed in the future. We foresee the DC market as a viable option for smaller solar facilities for now, but in the long-run, it will be difficult for the solar industry in New York to rely on the DC market. The long-term solution for New York is to pass the Solar Jobs Act that is currently pending in the senate. Hopefully it will pass this fall and create one of the largest SREC markets in the nation.


California TRECs – Making a Comeback

Posted September 13th, 2010 by SRECTrade.


On August 25th, the California Public Utilities Commission (CPUC) issued a Proposed Decision (PD) to lift the moratorium on Investor Owned Utilities (IOUs) utilizing Tradable Renewable Energy Credits (TRECs) to meet California’s Renewable Portfolio Standard (RPS). In addition to allowing IOUs to use TRECs for RPS compliance purposes, the CPUC’s PD increased the initial 25% TREC limit to 40%. Based on the petitions submitted by the IOUs and the Independent Energy Producers Association (IEP), the CPUC decided to take the IOUs’ points into consideration and increase the cap to 40% of the annual procurement targets. The utilities argument for increasing the cap was based on the thought that accessing a larger market for renewables will lead to a reduced overall cost.

The CPUC has maintained a December 31, 2011 expiration date for the 40% cap. Additionally, the temporary $50 limit of payments for TRECs is to remain in place through the same time period. The CPUC notes that at this point in time both the cap and the price limit are set to expire unless the CPUC takes action to extend or modify it.


The Proposed Decision will not be on the CPUC’s voting meeting agenda for at least 30 days from the date the PD was issued.

What this means for CA SRECs

Although the implementation of a TREC market in California is a step in the right direction for SRECs, it does not provide the same market dynamics created by a RPS solar carve out as implemented in the other SREC states. Typically, in a general REC program, as structured by the CPUC, larger capacity renewable energy projects, such as wind, dominate the market. Additionally, the current guidelines instituted by the California Energy Commission (CEC) and CPUC on RPS project eligibility do not include customer-side distributed generation (i.e. the majority of residential and commercial rooftop solar systems).

The CEC RPS eligibility guidebook states that both the CEC and CPUC play a role in determining RPS implementation for renewable distributed generation (DG) facilities. The good news is that both the CPUC and CEC allow system owners to retain 100% of the RECs associated with the energy produced even if the owner has participated in a ratepayer-funded program such as the CPUC’s California Solar Initiative (CSI) or the CEC’s New Solar Homes Partnership program. The bad news is that these systems are considered DG facilities and are not RPS eligible unless the CPUC authorizes TRECs to be applied to the RPS.

Now you might be thinking that the proposed decision issued by the CPUC is good news for distributed generation solar, but unfortunately like a lot of things in the REC world it isn’t that clear cut. The PD issued by the CPUC states that, “although there are technologies that can be used for customer-side renewable DG, most current installations are not in fact RPS-eligible because they have not been certified by the CEC.” Seems like a circular argument, but this is what the most recent documents state. The PD goes on to provide similar detail as the CEC that states, “in anticipation of the eventual use of customer-side DG for RPS compliance” the system owner will maintain full control over the RECs associated with their renewable energy generation.

Based on both the PD issued by the CPUC and the revised CEC RPS eligibility guidebook it appears that the groups intend to incorporate distributed generation into the RPS compliance program, but are not ready to make the commitment at this point in time. This appears to follow in line with the process California has taken in implementing a REC market. As indicated by our guest blogger, David Niebauer, California has taken its time in launching a REC program; SB 107 was passed in 2006 and gave the CPUC express authority to use TRECs for RPS compliance. It appears that the CPUC and CEC want to get a feel for how the existing structure of the TREC market will play out before approving DG projects or potentially creating a DG/Solar carve out.

Implementing a CA SREC Program

But couldn’t the CPUC and CEC approve distributed generation projects, create a carve out for these technologies, and slowly increase or reevaluate the requirements over time? From our perspective this would be great and act as a catalyst to continue pushing residential and commercial solar in the state of California. Not only would a solar carve out help increase the generation of renewable electricity, New Jersey is second to California in solar installations, but it would help push a strong solar economy in California. In the PD, the Alliance for Retail Energy Markets (AReM) states that, “…CSI will have provided incentives for approximately 1,100 GWh by 2011.” Based on 2008 electricity figures, 1,100 GWh equates to approximately 0.4% of California’s total electricity sales. This is 0.4% that will not be counted towards meeting California’s RPS targets. Hopefully the CPUC and CEC will consider the implementation of a solar/distributed generation carve out and help drive a strong solar industry in California while achieving the RPS requirements CA’s IOUs are required to meet.

CA RPS Eligible Solar

Solar systems that do not fall into the customer-side DG category may be RPS eligible and could be qualified to participate in the CA TREC market.

We are constantly staying on top of developments in the CA market and are currently working on solutions for both CA RPS eligible and ineligible solar generating units. For more information please contact us at 877-466-4606 or

For access to the CPUC Proposed Decision click here. For access to the revised, draft CEC Renewables Portfolio Standard Eligibility guidebook click here.


New Jersey Enacts “OREC” Market for Offshore Wind

Posted September 2nd, 2010 by SRECTrade.

To catalyze the development of offshore wind farms, New Jersey has enacted legislation creating a carve-out for offshore wind generation within the NJ Renewable Portfolio Standard.  Commodities known as “Offshore Renewable Energy Certificates” (ORECs), essentially the offshore wind equivalents of SRECs, will have to be obtained by electricity suppliers to demonstrate that a percentage of their electricity has come from offshore wind.  This “Offshore Wind Economic Development Act” was signed by Governor Chris Christie on August 19th and may be necessary for New Jersey to reach its RPS goals from in-state resources.  As currently designed, the NJ RPS requires that 22.5% of energy come from renewable sources by 2021.

Proponents argue that this new OREC market will make NJ a national leader in offshore wind production and create green jobs, just as the high incentives from the SREC market  have made the State a solar powerhouse (In the US, NJ is second only to California in solar installations).  Opponents are skeptical of the costs involved, and estimates from business groups claim the price tag may be as high as $14 billion.  While offshore wind has inherently high fixed costs, due to in part to necessary transmission lines and other construction challenges, a market-based RPS is likely the most efficient way to incentivize a promising technology and ease the financing concerns of developers.

This legislation reinforces New Jersey’s status as a national leader in renewable energy development.  The New Jersey Board of Public Utilities has 180 days to determine the exact design of the OREC program, including the percentage of energy electricity suppliers must obtain from offshore sources.

The move to an OREC market is another example of the success that the SREC market has had in New Jersey.  Since launching in 2004, New Jersey’s SREC program has become a template for reaching RPS solar goals in several states.  That template is now being applied to other types of renewable energy.  In this case, the off-shore wind industry will benefit.

More information can be found here.

California – State Senate Unable to Pass 33% Renewable Portfolio Standard Target

Posted September 2nd, 2010 by SRECTrade.

On August 31st, the California state senate was unable to vote on the country’s most aggressive renewable portfolio standard (RPS) program due to the session coming to at close at midnight. The bill, SB 722, which passed the state assembly, would have required California to produce 33% of its electricity from renewable sources by 2020.

Governor Schwarzenegger had made it clear he would not have signed the bill even if it passed the senate. The governor’s main concerns were that SB 722 did not allow for enough electricity to be imported from out of state. Additionally, the Governor wanted the bill to include a solution to streamline California’s siting and permitting process for renewable energy projects. Back in June, the Governor commented that he would not, “sign legislation mandating a higher requirement without ensuring that the necessary projects can be built.”

The two main arguments here have to do with developing a vibrant renewable energy market in the state of California while also maintaining competitive electricity pricing. Importing electricity from outside of California doesn’t help increase the number of in state jobs required to build the renewable energy projects needed to meet the 33% RPS target. On the other hand, allowing for greater amounts of electricity to come from out of state will increase competition and hopefully keep prices down, something to be mindful of considering the current economic environment in California.

While Governor Schwarzenegger signed an executive order to reach the 33% target, the order could be over turned by any future governor. Although SB 722 didn’t pass, the governor could call a special session of the legislature to pass the bill before the upcoming election. This could be the only chance for the ambitious 33% target as both California Governor candidate Meg Whitman and U.S. Senate candidate Carly Fiorina are opposed to it.