Archive for March, 2011

SRECTrade’s unique Massachusetts aggregation fosters individual control and market diversity

Posted March 30th, 2011 by SRECTrade.

A key (and unique) benefit of the SRECTrade aggregation in Massachusetts is that all facilities produce their own SRECs and can track and control them online. SRECs are created each quarter at a rate of 1 SREC per 1,000 kWh and tagged to each individual facility in the SRECTrade aggregation. Any remainder is then carried forward and added to the generation for the next quarter.

One of the fundamental components of any successful market is diversity of sellers and buyers. The market-based platform that SRECTrade has designed relies on this diversity. In Massachusetts, SRECTrade manages the largest aggregation in the state’s SREC program. One of the key selling points of the SRECTrade aggregation over others is the individual facility’s ownership of SRECs. Unlike other aggregations where the generation of multiple facilities are combined to create “shared” SRECs in NEPOOL GIS, SRECTrade takes additional steps to ensure that each facility has its own separate SREC account in NEPOOL GIS.

By way of background, there are 3 types of entities that make up the SREC ecosystem in Massachusetts. The Mass CEC Production Tracking System (PTS) is responsible for verifying readings and transferring them to the SREC tracking registry. NEPOOL GIS is the SREC tracking registry that every aggregation will use to track and trade SRECs in the market. In addition to providing a market functionality, SRECTrade offers an aggregation service, known as EasyREC, that gives individual solar facilities access to their SRECs and the market in one online account on Verification (PTS), tracking (NEPOOL) and trading (SRECTrade) make these markets work.

Prior to the SREC program in Massachusetts, a similar structure was used for the Class I REC market dominated by wind and other non-solar renewables. A major difference between the Class I REC market and the SREC market is the value per certificate. Class I RECs trade around $10/REC, while SRECs could be anywhere from $300 to $600/SREC. Since the value (and variability) of the Class I REC market is so insignificant, the existing aggregation model was simplified to combine the generation of all the facilities in an aggregation into one REC account. When this happens, the RECs are only tagged to the aggregation and not to any individual facility. This doesn’t work for SRECs since the value is so much greater and individual ownership is therefore much more important.

The problem with the existing model at the implementation of the Massachusetts SREC program was that it limited the diversity of sellers. All the SRECs created by an aggregation would be tagged to the aggregation and not-differentiated. It also created complexity around accountability in the SREC market, where a buyer who purchases from an aggregation will have no way of verifying what facility the SREC comes from and where that facility is located (though PTS does account for this at the generation level). From the standpoint of SRECTrade, it would not be possible to operate a fair and competitive market if the SRECTrade aggregation lumped all of its customers’ generation together to create one large batch of SRECs. The resulting market on would include a couple smaller aggregations and one large seller representing all of SRECTrade’s aggregation. Facility owners would lose control over when, where and how much the SRECs were sold for in the market.

Fortunately, SRECTrade was able to work with the DOER, NEPOOL and PTS to implement a solution that allowed individual facilities to have their own listings in NEPOOL GIS. Their flexibility in allowing aggregations to report for individual facilities meant that any generation reported by a facility to PTS is sent directly to that facility’s record in NEPOOL GIS each quarter, where the SRECs are created for the facility. Since SRECs are created for every 1,000 kWh, any remainder is then carried forward and added to the next quarter. The screenshot of an online account on is a good example of how SRECs are created and the remaining generation is carried forward.

In establishing individual facility ownership of SRECs, SRECTrade has successfully created a diverse platform that gives sellers the control over, and accountability for, their own SRECs in the market. Without this diversity, the open, public and fair market platform would not exist and facility owners would be limited to the options provided by a small group of non-transparent aggregators – a throwback to the early years of the New Jersey SREC programs when the early aggregators could make as much as 40% on trades behind closed doors. Fortunately, the advent of the public SREC markets have transferred much of the SREC value back to the facility owners where it belongs.

Governor Christie throws support behind NJ SREC program

Posted March 18th, 2011 by SRECTrade.

Many wondered what might happen to the New Jersey SREC program when the state Governor’s office shifted into Republican control. Since taking over, Governor Christie has initiated a review of all the state renewable programs to understand the effect they have on ratepayer costs. SRECs make up such a small percentage of the overall electricity market, that the cost increases should be relatively minor across the ratepayer base. Furthermore, as a cornerstone of the solar industry in New Jersey, the impact that the SREC program has had on the growth of investment and jobs in the Garden State will likely overshadow any nominal increase in electricity rates.

To this effect, New Jersey has out-distanced every other state in the region, particularly in establishing an SREC market that can support an industry – not a few utility scale solar projects. The primary driver of this success has been the emphasis on smaller, distributed projects and accessibility to a market of buyers. In the early years of the SREC market, New Jersey had a cap of 2 MW, limiting the size of any single entrant in the market and ensuring that many stakeholders could benefit from the program. This is in stark contrast to a state like Ohio, where the SREC program has been tripped up out of the gates by large projects that have cornered the market for SRECs.

The divergent stories of AEP and FirstEnergy in Ohio demonstrate a perverse incentive set up by a poorly designed SREC program. With no cap on the size of projects eligible for the SREC market in Ohio, AEP chose to make plans for utility scale projects. The first was a 10 MW project in Upper Sandusky Ohio and the next project is slated for 50 MW by 2015 in southeastern Ohio. Meanwhile, FirstEnergy chose not to develop these utility scale projects in favor of sourcing SRECs from the in-state solar industry. The RFPs (requests for proposal) they issued with the help of Navigant Consulting were ineffective and at the end of the year FirstEnergy was unable to find any supply of SRECs. In their request to the Ohio Public Utilities Commission to be relieved of their SREC obligation in 2010 due to a shortage of supply, FirstEnergy accurately cited that AEP was successful in sourcing SRECs because it went with utility scale projects, whereas FirstEnergy attempted to purchase from distributed projects. The problem in Ohio with SRECs is that a robust market for spot transactions or bilateral contracts was not developed early on because a few utility scale projects corner most of the market, while the rest of it is made inaccessible by bureaucratic RFPs that just don’t cut it in a burgeoning solar industry filled with startup entrants.

This is where New Jersey has been successful. Since the beginning, the SREC market was established in a way that made it accessible to homeowners and businesses, local installers and upstart developers. The New Jersey Office of Clean Energy has meticulously reported statistics on a monthly basis of how many SRECs are created, traded and the prices at which they are trading. Combined with the knowledge that the market was secure from the threat of utility scale entrants, the installation companies and solar development firms that entered the industry were able to make informed decisions that ultimately led to investments in solar. This is why New Jersey has a legitimate solar industry with a diverse group of entrants that will eventually be self-sustaining as the cost of solar continues to come down. Governor Christie gets this.

In the passing of AB 2529, a New Jersey Bill that would expand the eligibility of the SREC program, the Governor rejected a change that would allow utility scale projects to bypass the scrutiny of the BPU in being accepted into the SREC program. As the New Jersey market stands, a utility scale project can be accepted into the SREC program only if the BPU deems that it will not have an adverse impact on pricing in the SREC market.  This Bill would have created an exception to that rule that could have jeopardized the SREC market. Governor Christie writes:

Accordingly, I recommend that this exception be eliminated. I am concerned about the impact that these solar facilities may have on ratepayers, the impacts these facilities may have on the solar power and SREC market and, the impact these facilities may have on the land use. The role of the BPU and DEP is vital in determining the impacts that large scale solar facility projects will have in New Jersey and should not be by-passed.

This is a major vote of confidence in Governor Christie’s support of using the SREC market as a cornerstone for building a solar industry in New Jersey. It demonstrates that he sees the value of protecting this market for the entrepreneurs and small businesses that have made a living on solar in New Jersey. Many of those businesses have taken their expertise into other markets, creating more opportunities in nearby states. As a result of the SREC program, the state has created opportunities for its solar-smart residents both at home in New Jersey and beyond the state line.

How long will projects be eligible for the Massachusetts Solar Carve-Out?

Posted March 16th, 2011 by SRECTrade.

Understanding the length of time that Massachusetts solar facilities can generate and sell SRECs as part of the Solar Carve-Out is key to financing solar in the state. In an earlier post, we explained the Massachusetts Last-Chance Auction in great detail. The purpose was to help stakeholders understand the conditions, if any, that would result in the SREC market dropping below $285. From there, it is also important to understand how long a facility can bank on the floor price set by the auction.

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.


Maryland SREC Market and Out-of-State SRECs

Posted March 14th, 2011 by SRECTrade.

The March SREC auction saw a drop in pricing in Maryland that accompanied the more predictable price drops in DC and Pennsylvania. March marks the first month that 2011 SRECs are available for sale in Maryland and it is not uncommon to see a slump in SREC pricing at the beginning of the trading year. However, there were a few notable changes to the SREC market in Maryland over the past few months. As we pointed out earlier, there has been a lot of uncertainty around how the state was interpreting a seemingly contradictory law with respect to out-of-state SRECs. It seemed that the state would allow SRECs from anywhere within the PJM region and adjacent areas, which could be interpreted to include New York and North Carolina.

In the past few months Maryland approved facilities grew from our December report of 12.2 MW total (2.3 MW from out-of-state) to our January report of 27.6 MW total (15 MW from out-of-state). The majority of that increase comes from the inclusion of the 10 MW Exelon solar farm in Chicago. That project resides in the PJM Region and is therefore eligible for the Maryland market. In addition to that project, an additional 2.7 MW of out-of-state facilities were approved, an indication that Maryland is definitely taking on out-of-state facilities, and at a fast rate.

Maryland may have also clarified what constituted an “adjacent” area to the PJM region. On February 10th, GATS sent out an update that included the following: “There are also some MD facilities that are no longer eligible beginning January 2011 and those certification numbers will be removed prior to the certificate creation this month.” This would explain why our January report of 27.6 MW total (15 MW from out-of-state) turned into a February report of only 26.7 MW total (13.9 from out-of-state). It seems  a big part of that reduction came from the exclusion of the SAS 1.2 MW facility in North Carolina. So at the same time that the out-of-state supply was growing in Maryland, some facilities were removed from eligibility.

For the time being, Maryland is a market open to out-of-state facilities, but according to the law:

(a) Utilities must prove that they are unable to meet their requirements with in-state SRECs: “only to the extent that Maryland Tier 1 solar RECs are insufficient, a supplier may satisfy the statutory requirement with RECs from a solar renewable energy facility not connected with the electric distribution grid serving Maryland.”

Note: The concern here is how does a utility demonstrate that they are unable to procure from in-state prior to purchasing out-of-state? In 2010, according to one contact at the PSC, it seemed that the utilities were not willing to make the effort. Perhaps this has changed in 2011.

(b) Starting in 2012, the market becomes an in-state market only: “On or after January 1, 2012, a supplier’s Tier 1 solar REC obligation under Public Utilities Article, §7-703, Annotated Code of Maryland, shall be satisfied only with RECs from a solar renewable energy facility connected with the electric distribution grid serving Maryland.”

Note: This statement is clearly intended to close off the Maryland SREC market only to in-state solar after 2011, but the “electric distribution grid serving Maryland” is not clearly defined in the law. Based on discussions with the PSC, the likely interpretation is that, although the “transmission” grid serving Maryland (used in other places in the law) can include the rest of the PJM region, the actual distribution grid is most likely limited to Maryland. The likelihood of distribution level facilities originating in a bordering state would be rare, if non-existent, according to the PSC.

To summarize, there has been a significant uptake in out-of-state facilities being registered in Maryland, but the law should protect the in-state solar market from being affected by these facilities. In addition, those facilities should be ineligible for the market from 2012 onwards, so the long-term outlook for in-state solar should be secure. Barring any alternative interpretations of the Maryland RPS, the in-state Maryland solar market should be healthy in 2011. There are currently ~13 MW in Maryland and the state needs to have ~30 MW on average in 2011 to meet the requirement of approximately 34,000 SRECs in 2011. If the state can get there on its own, then it limits the opportunity for Exelon and other out-of-state facilities. If Maryland falls short, their will be a market for out-of-state facilities but only in 2011.


SRECs and Taxes: Why SREC Income Should Be Taxable

Posted March 4th, 2011 by SRECTrade.

Despite our best efforts to bring clarity to the debate on the taxation of SRECs, it continues to be a complex issue. We will continue to write about it, not with the expectation that we’ll ever get an answer (short of any official statement from the IRS), but with the expectation that we can provide some perspectives that will allow you and your tax attorney to make the best decision (and please do point your tax advisors to these blog posts). Our earlier blog post providing the perspective of a CPA in New Jersey, who felt that SRECs could be considered a subsidy, drew some attention.

One response from Mark Bolinger, a Research Scientist at Lawrence Berkeley National Laboratory, was of particular interest because, in addition to highlighting the fault in claiming SRECs as a subsidy, he explains why you wouldn’t want the IRS to consider them a subsidy. The question over the taxation of SREC income has further implications because of the ITC or cash grant. If the SRECs were excluded from taxation because they are considered some sort of “subsidy,” then the cost basis of the ITC would have to be reduced by the value of the “subsidy.” He contends that system owners might prefer to pay taxes on SRECs than to reduce the cost basis of the 30% ITC.

Mark pointed out IRS Private Letter Ruling 201035003 which dealt with such a case involving the upfront sale of SRECs to a utility company in which the taxpayer requested affirmation that the proceeds from the sale did not affect the cost basis of the ITC and, subsequently, that the SREC sale not be treated as a subsidy, but rather a taxable sale. According to the private ruling which cannot be cited as precedent, the upfront sale of SRECs was deemed to be a taxable transaction ineligible for the Section 136 exclusion.

He writes: “Specifically, if the SREC payments did actually fall under the Section 136 exclusion and were therefore not taxable, then the basis for the 30% ITC or cash grant would (by law) need to be reduced by the amount of the non-taxable SREC payments (i.e., the 30% benefit would apply to a smaller dollar amount — smaller because you would need to subtract the SREC payments from the eligible system cost).  But how do you know in the project’s first year — when calculating the size of your ITC — what the value of a future stream of SREC payments will be over the life of a PV system?  You can’t know this at the time you are calculating your ITC (SREC prices will vary, system output will vary, no agreement on appropriate discount rate), which almost by default means that SREC payments cannot be considered non-taxable.”

He goes on to say: “it’s not even clear that trying to avoid taxes by seeking refuge under Section 136 is even advantageous to the taxpayer.  The knee-jerk response is always “no taxes mean more value,” but if no taxes also means a reduction in the basis to which the 30% ITC or cash grant apply, then you might — depending on your marginal tax rate — actually prefer to pay the taxes and leave the basis whole.”

This is the most sound reasoning that we’ve seen yet for paying taxes on your SREC income. At the very least it is a strong argument against considering SREC income as a subsidy. It doesn’t necessarily refute one unofficial argument that the SREC income cannot be taxed if it is paying down the cost of an initial capital investment, though we’re confident there are plenty of counterarguments out there. Regardless, the SRECs and Taxes issue will continue to be one left up to interpretation. We will be sure to continue to add contributions from our community in the Taxes section of our blog, and if anyone from the IRS is reading… we’ve got 10,000 readers interested in what you have to say!

Here is the conclusion of the Private Letter Ruling described above:

IRS Private Letter Ruling 201035003
Law & Analysis

Section 25D(a)(1) of the Code allows an individual a credit against the tax imposed for the taxable year in an amount equal to 30 percent of the qualified solar electric property expenditures made by the taxpayer during such year.

Section 25D(d)(2) defines the term “qualified solar electric property expenditure” as an expenditure for property which uses solar energy to generate electricity for use in a dwelling unit located in the United States and used as a residence by the taxpayer.

Section 25D(e)(1) allows the expenditures for labor costs properly allocable to the onsite preparation, assembly, or original installation of the qualified solar electric property and for piping or wiring to interconnect such property to the dwelling unit to be taken into account for purposes of § 25D.

Under § 25D(e)(8)(A), generally, for purposes of determining the tax year when the credit is allowed, an expenditure with respect to an item shall be treated as made when the original installation of the item is completed. Under § 25D(e)(8)(B), in the case of an expenditure in connection with the construction or reconstruction of a structure, such expenditure shall be treated as made when the original use of the constructed or reconstructed structure by the taxpayer begins.

Section 61(a) provides, that, except as otherwise provided by law, gross income means all income from whatever source derived, including gains derived from dealings in property (§ 61(a)(3)). Under § 61, Congress intends to tax all gains or undeniable accessions to wealth, clearly realized, over which taxpayers have complete dominion. Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955).

Section 136 provides an exception to this general rule, stating that gross income does not include the value of any subsidy provided (directly or indirectly) by a public utility to a customer for the purchase or installation of any energy conservation measure. Section 136(b) provides, in relevant part, that a taxpayer may not take a tax credit (such as the credit under § 25D) for an expenditure to the extent of the amount excluded as a subsidy under § 136(a) with respect to the expenditure.

In the current situation, Taxpayer sold all of the environmental attributes associated with the RECs to Public Utility in exchange for a payment. As such, Public Utility’s payment to Taxpayer is neither a rebate nor purchase-price adjustment, since Public Utility has no reasonable nexus to the cost or sale of the subject property from the vendor, X. Also, the payment is not a “subsidy” intended to facilitate the acquisition of property deemed advantageous to the payor, though Public Utility may make such PLR-102696-10 4 payments in other contexts. Rather, Taxpayer represents that the transaction between the parties is effectively a sale or exchange of property and property rights. Public Utility will in fact make no payment to Taxpayer absent the transfer of Taxpayer’s valuable property interests (namely, the RECs associated with the Residential Solar System purchased by Taxpayer from X), and the parties specifically state that the subject payment is to be made in consideration of the transfer of such property interests.

Based solely on the information submitted and representations made, we conclude that the proceeds from this sales transaction are not within the purview of § 136. Consequently, Taxpayer must include gain from the sale of the RECs to Public Utility in Taxpayer’s gross income under § 61(a). Further, Taxpayer is not required under § 136(b) to reduce the basis in the Residential Solar System. Taxpayer represents that the Residential Solar System generates electricity for Taxpayer’s residence located in the United States. Thus, Taxpayer may take a credit for 30 % of the expenditures for qualified solar electric property, and Taxpayer does not have to reduce the expenditure by the amount of the REC Payment.

The rulings contained in this letter are based upon information and representations submitted by Taxpayer and accompanied by a penalty of perjury statement executed by Taxpayer. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination. Except as specifically set forth above, we express no opinion concerning the federal income tax consequences of the facts or transactions described above under any other provision of the Code. Specifically, we express no opinion on whether the amounts allocated to the qualified expenditures are correct and thus we express no opinion on the accuracy of the tax credit amount.

This ruling is directed only to the taxpayer who requested it. Under § 6110(k)(3) of the Code, a letter ruling may not be used or cited as precedent.


SRECs and Taxes – Perspective from a New Jersey CPA

Posted March 2nd, 2011 by SRECTrade.

As tax season approaches, we are asked about how clients should handle the income associated with SREC sales for tax purposes. SRECTrade is not in a position to provide tax advice and we always recommend that clients should consult their tax advisors when it comes to making tax related decisions, but below is some information provided by a New Jersey CPA.

IRS Publication 525 “Taxable and Nontaxable Income” under the caption “Other Income”, states the following:

“Energy conservation subsidies. You can exclude from gross income any subsidy provided, either directly or indirectly, by public utilities for the purchase or installation of an energy conservation measure for a dwelling unit.”

It goes on to define a couple of terms:

“Energy conservation measure. This includes installations or modifications that are primarily designed to reduce consumption of electricity or natural gas, or improve the management of energy demand.”

“Dwelling unit. This includes a house, apartment, condominium, mobile home, boat, or similar property.  If a building or structure contains both dwelling and other units, any subsidy must be properly allocated.”

The CPA’s interpretation of this is that the income from the sale of SRECs is not taxable income to the extent that it does not exceed the net cost of purchase/installation, meaning the actual cost less any federal tax credits and state rebates. The CPA advised their client that the law, both federal and state (NJ in this case), is not definitive with respect to SRECs specifically, but the CPA is comfortable taking this stance based on the information that is available at this time.

This information is provided to help assist SREC sellers in determining the best way to handle their SREC income, but by no means is this definitive. We suggest you consult your tax advisor to determine the best way to handle the income associated with your SREC sales. Additionally, be sure your tax advisor understands the underlying mechanics of how SRECs are utilized as a market based incentive for solar system investment.


Solar Capacity in the SREC States – February 2011

Posted March 2nd, 2011 by SRECTrade.

SRECTrade SREC Markets Report: February 2011

The following post outlines the megawatts of solar capacity certified and/or registered to create SRECs in the SREC markets SRECTrade currently serves.

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PJM Eligible Systems

As of the end of February, there were 12,995 solar PV (12,747) and solar thermal (248) systems registered and eligible to create SRECs in the PJM Generation Attribute Tracking System registry. Of these eligible systems, 43 (0.33%) have a nameplate capacity of 1 megawatt or greater, of which only 3 systems are greater than 5 MW. The largest system, currently located in Ohio, is 12 MW,  and the second largest, located in Chicago and eligible for the PA, DC, and MD markets, is 10 MW. The third largest system, located in NJ, is 5.6 MW.

Massachusetts DOER Qualified Projects

As of February 18, 2011, there were 220 MA DOER qualified solar projects; 204 operational and 16 not operational. Of these qualified systems, 10 (4.5%) have a nameplate capacity of 1 megawatt or greater, of which only 3 are between 1.5 and 2 MW. Only one of the projects greater than 1 MW is currently operational.

Capacity Summary By State

The tables above demonstrate the capacity breakout by state. Note, that for all PJM GATS registered projects, each state includes all projects certified to sell into that state. State RPS programs that allow for systems sited in other states to participate have been broken up by systems sited in state and out of state. Additional detail has been provided to demonstrate the total capacity of systems only certified for one specific state market versus being certified for multiple state markets. For example, PA includes projects only certified to sell into the PA SREC market, broken out by in state and out of state systems, as well as projects that are also certified to sell into PA and Other State markets broken out by in state and out of state systems (i.e. OH, DC, MD, DE, NJ). PA Out of State includes systems sited in states with their own state SREC market (i.e. DE) as well as systems sited in states that have no SREC market (i.e. VA). Also, it is important to note that the Current Capacity represents the total megawatts eligible to produce and sell SRECs as of the noted date, while the Estimated Required Capacity – Current and Next Reporting Year represents the estimated number of MW that need to be online on average throughout the reporting period to meet the RPS requirement within each state. For example, New Jersey needs approximately 255 MW online for the entire 2011 reporting year to meet the RPS requirement. Additionally, the data presented above does not include projects that are in the pipeline or currently going through the registration process in each state program. This data represents specifically the projects that have been approved for the corresponding state SREC markets as of the date noted.