Archive for February, 2012

Why are Pennsylvania SREC prices so low?

Posted February 16th, 2012 by SRECTrade.

SRECTrade has printed auction prices for Pennsylvania ranging from a high of $310 in June 2010 and a low of $20 for SRECs created in the same energy year. The drop in Pennsylvania SREC prices is due to a severe over-supply of SRECs above the amount of SRECs that buyers (electricity producers) need to acquire each year, but how did the market become over-supplied and is anything being done to address the over-supply?


The Pennsylvania SREC market was created as a state-level, long-term incentive for homeowners and businesses to go solar, but around the same time that the SREC market was created, other, more generous solar rebate programs like the Pennsylvania Sunshine Program were created that caused a short-term boom in solar installations. In addition to this, the Pennsylvania SREC market is one of two markets (OH is the other) that accept SRECs from out-of-state sited solar systems, including from states that don’t have their own SREC markets. This means that Pennsylvanians are effectively subsidizing solar in other states and ensuring that Pennsylvania SREC prices remain low.

The Proposed Fix

The Pennsylvania SREC market was created by the state legislature and amendments to the market must go through the legislature first. In the spring of 2011, Rep. Chris Ross (R-Chester) proposed House Bill (HB)-1580 to address some of the key factors behind low Pennsylvania prices. The crux of HB 1580 is a proposal to move up the SREC requirement by three years. This would mean that if the bill passed, Pennsylvania SREC requirements would increase beginning in 2013. A detailed schedule of the proposed increase can be found in the bill.

We’ve followed the progress of HB 1580 over the last year and periodically posted updates to our blog.  Most recently the bill went before the House Consumer Affairs Committee on January 11, 2012 where it met resistance from Committee Chair Rep. Bob Godshall (R-Montgomery) and various entrenched groups representing the Pennsylvania electricity industry. Since the January hearing Rep. Chris Ross has worked hard to develop compromise amedments to HB-1580 that might help the bill survive a tough Committee vote. If the bill makes it out of Committee it has 110 co-sponsors in the House and substantial Senate support in a companion bill.

According to PennFuture, a Pennsylvania environmental and renewable energy advocacy group, Ross’ proposed the following compromises:

  • Capping the Alternative Compliance Payment (ACP) for solar at $325, with a 2% annual decline
  • Offsetting early-year increases in the solar requirement with decreases in later years and extending the SREC program through 2026
  • Allowing solar hot water (SHW) systems to qualify for SREC sales
  • Making slight adjustments to the language of the in-state requirement, aimed at preventing net-metered systems from inadvertently being disqualified
  • Ensuring that utilities cannot procure any AEPS resource above the ACP price

What Can You Do?

Pennsylvania solar advocates are hoping that they can convince the House Consumer Affairs Committee to vote on HB 1580 when the legislature reconvenes in mid-March. If you are a Pennsylvania resident, please feel free to contact House Majority Leader Turzai at 717-772-9943 to express your support for seeing the bill go up for vote.

NJ Market Update

Posted February 13th, 2012 by SRECTrade.

The collapse of NJ SREC prices resulting from a market oversupply in the last six months has called for legislative or administrative action.  Theoretically the RPS is a self-correcting mechanism where low prices lead to a slowdown in build rate while the annual Renewable Portfolio Standard (RPS) increases to catch up to any oversupply.  In practice, SREC price signals are impacted by other outside incentive programs like the Treasury cash grant which can lead to dramatic overshoots like we currently see in NJ and PA.  Also, the RPS adjusts only on an annual time frame, so while it should eventually self-correct, it may take several years even if almost all new solar development stops.  While a few of the large, well-capitalized commercial and utility scale solar companies can afford to stop installation while the market mechanism corrects itself, most of the hundreds of smaller pure play solar installers will either have to leave the state or close.  As a result, they, and the thousands of existing solar PV system owners in the state, are pushing for changes to the RPS program to ensure the continued vitality of the industry and the SREC revenue streams they are counting on to pay for their installations.

The RPS in NJ was created by a state law, but largely implemented by an administrative agency, the Board of Public Utilities (BPU).  While the state law sets the general framework for the RPS, it also gives the BPU significant latitude to modify the RPS rules, creating two avenues for changes to the RPS: legislative amendments or administrative rule changes. Mainly due to disagreement within the solar industry itself over the role of large utility scale solar farms in the RPS, the state legislature failed to pass a bill in the last hours of the 2010-2011 session that would have increased the RPS requirement in the short-term and decreased the alternate compliance payment (ACP) to minimize costs to ratepayers. With a new legislature recently sworn in, it will probably take months before any further legislative action will take place.

This leaves administrative action by the BPU as the only possible short-term solution. The two ideas on the table now both involve extending the Electric Distribution Company (EDC) loan and SREC-based financing programs, which otherwise have all expired.  The first option is to extend them and increase the RPS requirements 1:1 for the increase in the capacity these programs will bring on line, effectively having a neutral effect on the market. The second option is to extend the loan programs but do nothing to the RPS requirements, which would exacerbate the oversupply by driving yet more capacity into the market without stepping up demand.

The most pressing issue for either option is a bit more subtle, but affects all parties in the electric utility industry.  There is an existing law, the Solar Energy Advancement and Fair Competition Act, which generally exempts Basic Generation Service (BGS) suppliers from any change in SREC requirements during their contract term. That means that any increase in the RPS falls entirely on competitive Load Serving Entities (LSEs) that do not have BGS load requirements for the first 3 years, making it more difficult for them to compete with BGS suppliers. As a result, the LSEs are generally against any RPS change that goes into effect now, although ambivalent to something that goes into effect in 3 years. The EDCs are split on the program, some support extending the loan programs and others don’t. The NJ Rate Counsel is generally opposed to any action that would increase costs to ratepayers.

The Solar Energy Industries Association, a solar trade group, has emerged as a creative negotiator in the process.  They have put forward a modified option 1 which extends the EDC loan programs and increases the RPS an equal amount. However, while the loan programs go into effect now, the increase in requirements doesn’t happen for 3 years. To avoid a glut in the market, the EDCs would be required to bank all the SRECs they generate in the first 3 years, and sell them all once the corresponding increase goes into effect. This clever solution addresses the concerns of most of the parties involved and may have a good chance to pass.

None of these options actually addresses the current oversupply for existing systems, so unless the conversation changes dramatically, we will continue to see depressed NJ SREC prices for several years with no quick fix in sight. The only exception to this might occur in August or September if enough generators decide to hold their SRECs for higher prices and create a shortage of available SRECs, even though the supply of generated SRECs exceeds demand. There is a very asymmetric engagement here if the market is examined through a game theory lens. In a normal game like this, buyers and sellers have an equal time horizon, i.e. the buyers need 100 SRECs by Sep 30th and the sellers have to sell it by Sep 30th or it will become worthless, essentially a big game of chicken to see who blinks first. In this case, the buyers need the 100 SRECs by Sep 30th, but the sellers don’t have to sell by then and in fact will rationally anticipate that today’s low prices will inhibit further supply, leading to an undersupply sometime in the next 3 years (the life of their SRECs), which will allow them to sell for more then buyers are offering today. Throw in some option theory here, and absent a liquidity crunch sellers should be unwilling to exercise their option to sell early since they give up the remaining volatility value. The real question is if the thousands of sellers will continue to show a unified front, or if, like often occurs in the Prisoners Dilemma, they will sell low even if sub-optimal because they can’t trust all the other sellers not to do the same.

Solar Capacity in the SREC States – January 2012

Posted February 8th, 2012 by SRECTrade.

SRECTrade SREC Markets Report: January 2012

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

A PDF copy of this table can be found here.

GATS Renewable Energy Generators 2_6_12_v1

PJM Eligible Systems

As of this writing, there were 22,172 solar PV and 285 solar thermal systems registered and eligible to create SRECs in the PJM Generation Attribute Tracking System (GATS). Of these eligible systems, 109 (0.49%) have a nameplate capacity of 1 megawatt or greater, of which 11 systems are greater than 5 MW. The largest system, the PSE&G utility pole mount project located in New Jersey, is 25.1 MW, and the second largest, located in Ohio is 12 MW. The third largest system, at 11.2 MW, is located in Delaware.

Delaware: The reporting year 2011-12 (6/1/11 – 5/31/12) requirement for DE equates to approximately 23,700 SRECs being retired. If all retired SRECs were of DE2011-12 vintage, approximately 19.8 MW would need to be operational all year long. As of February 6, 2012, 26.1 MW of solar capacity was registered and eligible to create DE SRECs in PJM GATS. 11.2 MW of the 26.1 MW currently eligible is from the Dover Sun Park project developed by LS Power. In the 2011-12 compliance year, Delmarva Power has contracted to purchase 9,846 SRECs from the project, of which 7,000 are being held by the Sustainable Energy Utility (SEU) until 2015-16*. As of February 7, 2012, PJM GATS reported the issuance of approximately 15,500 DE2011-12 vintage SRECs. Additional SRECs from prior eligible periods may also impact the market should there be a demand for these older vintage SRECs.

DE chart

Maryland: Maryland’s 2011 Solar RPS target requires approximately 33,160 SRECs to be retired. To meet this using only 2011 vintage SRECs, approximately 27.6 MW would need to be operational all year long. As of February 6, 2012, 63.9 MW of solar capacity was registered to create MD eligible SRECs. 39.2 MW of this capacity was sited in the state of MD. The RPS currently requires electricity suppliers to acquire SRECs from in-state sited solar systems before looking to outside systems. As of February 7, 2012, PJM GATS reported the issuance of approximately 34,100 MD2011 SRECs from MD sited systems. There are also MD sited SRECs available from prior eligible periods, which could be utilized for compliance needs in 2011.

MD Chart

New Jersey: The New Jersey 2012 reporting year requires 442,000 SRECs to be retired. This equates to approximately 368 MW of capacity being operational all year long if all requirements were met with current vintage year SRECs. As of February 6, 2012, 535.2 MW of solar capacity was registered and eligible to create NJ SRECs in PJM GATS. While this figure represents all projects registered in GATS, there are recently installed projects awaiting issuance of a New Jersey state certification number. This delay results in a portion of installed projects not yet represented in the 535.2 MW figure. As of December 31, 2011 the NJ Office of Clean Energy (NJ OCE) reported that 565.9 MW of solar had been installed in NJ. As of February 7, 2012, PJM GATS reported the issuance of approximately 282,500 NJ2012 SRECs.

NJ Chart

Ohio: Ohio’s 2011 RPS solar target requires approximately 46,940 SRECs to be retired by the end of the compliance period. At least 50% of the SREC requirement must come from systems sited in the state. As of February 6, 2012, 43.1 MW of in-state capacity and 76.7 MW of out-of-state capacity were eligible to generate OH SRECs. A large increase of in state capacity came from a 9.8 MW project sited at the Campbell Soup facility in Napoleon, OH. Additionally, as of February 7, 2012, GATS issued approximately 30,230 in-state and 71,000 out-of-state OH2011 eligible SRECs. Additional SRECs from prior years are also eligible for the current compliance period, which may impact the current year’s requirements.

OH Chart

Pennsylvania: The reporting year 2012 requirement for PA equates to retiring approximately 49,450 eligible SRECs. If all compliance obligations were met using 2012 vintage SRECs, approximately 41.2 MW would need to be operational all year long. As of February 6, 2012, 167.6 MW of solar capacity was registered and eligible to create PA compliant SRECs. As of February 7, 2012, PJM GATS reported the issuance of approximately 105,000 PA2012 SRECs. Given the oversupply during previous reporting years, there are also SRECs from the 2010 and 2011 reporting years eligible for the PA2012 compliance period.

PA chart

Washington, DC: DC’s 2011 RPS amended solar target requires approximately 48,220 SRECs to be retired by the end of the compliance period. The figures displayed above demonstrate the capacity of systems eligible to create DC SRECs moving forward. These SREC and capacity figures do not take into consideration the amount of electricity delivered into the district that may be exempt from complying with the Distributed Generation Amendment Act increases, considering some electricity contracts may have been signed prior to the amendment’s implementation. As of February 6, 2012, 23.0 MW of capacity was eligible to generate DC SRECs. Additionally, as of February 7, 2012, GATS issued approximately 23,800 DC2011 eligible SRECs. SRECs from prior years are also eligible for the current compliance period, which may impact the current year’s requirements.

DC Chart

Massachusetts DOER Qualified Projects

As of January 25, 2012, there were 1,321 MA DOER qualified solar projects; 1,278 operational and 43 not operational. Total qualified capacity is 53.3 MW, 36.7 of which is operational and 16.6 not operational. Of these qualified systems, 12 (0.91%) have a nameplate capacity of 1 megawatt or greater, of which 4 are between 1.5 and 2 MW. Four of the projects greater than 1 MW are currently operational, with the largest, 2.3 MW, recently operational as of December 2011. Electricity suppliers providing power to the state need to acquire approximately 62,900 SRECs in 2011. Through the Q3 2011 issuance period (1/15/12), 19,257 SRECs have been minted. The Department of Energy Resources (DOER) projects approximately 29,000 SRECs to be generated in 2011, leaving the market short approximately 33,900 SRECs. The next issuance period for Q4 2011 SRECs will be on April 15, 2012.

MA Chart

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 368 MW online for the entire 2012 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 dates noted.

*Source: State of Delaware Pilot Program For the Procurement of Solar Renewable Energy Credits: Recommendations of the Renewable Energy Taskforce

Note: SREC requirements for markets without fixed SREC targets have been forecast based based on EIA Report updated 11/15/11 “By End-Use Sector, by State, by Provider”. Projected SRECs required utilizes the most recent EIA electricity data applying an average 1.5% growth rate per forecast year. The state’s RPS Solar requirement is then multiplied by forecast total electricity sales to arrive at projected SRECs required. Projected capacity required is based on a factor of 1,200 MWh in PJM states and 1,130 MWh in MA, generated per MW of installed capacity per year.

February 2012 SREC Auction Results

Posted February 3rd, 2012 by SRECTrade.

SRECTrade’s February 2012 SREC Auction closed this week. Below are the clearing prices by vintage across the markets SRECTrade is currently active in.

February SREC Prices Energy Year Ending
State 2010 2011 2012*
Delaware $60.00
Maryland In-State $180.00 $205.00
Maryland Out-of-State
New Jersey $205.00
Ohio In-State $285.00
Ohio Out-of-State $40.00
Pennsylvania $9.99 $30.00 $35.00
Washington, DC $275.00

*Delaware, New Jersey and Pennsylvania operate on a June-May energy year.
Green text represents a price increase over the last auction clearing price for that vintage, red text represents a decrease.
“-” reflects no sale, which would result if there were no matching bids and offers that cleared for a sale in the auction.

State Market Observations:

Please note, all capacity references are from the December capacity analysis and reference the amount of supply registered as of the end of December. Additional details regarding SREC issuance are provided in the capacity analysis.

Delaware (Supply: 25.5 MW | Demand: 19.8 MW): Pricing was down from $65.00/SREC to $60.00. The Delaware PSC approved the SREC Procurement Pilot Program for long term contract solicitations which should commence in Q2. As of January 3, 2012, PJM GATS reported the issuance of approximately 13,560 DE2011-12 vintage SRECs. Additional SRECs from prior eligible periods may also impact the market should there be a demand for these older vintage SRECs.

Maryland (In-state Supply: 37.8 MW | Demand: 27.6 MW): SRECs held at $205 this past auction period.  MD2011 Out-of-State did not trade. The state continues on pace to maintain a balanced supply relative to demand for the compliance year.

Massachusetts (Operational Supply: 32.5 MW | Demand: 55.7 MW): There was no sale of MA SRECs this period as they were sold in the Quarterly SREC Auction in mid-January. The next quarterly MA SREC auction will close in mid-April.

New Jersey (Supply: 483.2 MW* | Demand: 368 MW): The 2012 market dropped back down to $205 after the state legislature failed to pass a Bill to increase the solar requirements. Inaction will lead to continued declines in pricing.

Ohio (In-State Supply: 29.0 MW; Out-of-state Supply: 68.0 MW | Demand: 39.1 MW) : OH2011 sited SRECs dropped to $285 with growing SREC supply from large in-state systems. The out-of-state SREC market increased again to $40/SREC.

Pennsylvania (Supply: 159.4 MW | Demand 41.2 MW): PA2011 SRECs traded up again to $30/SREC and PA2012 increased to $35/SREC.

Washington, DC (Supply: 21.7 MW | Demand: 41.9 MW): The 2011 DC SRECs increased to $275/SREC.

For historical pricing please see this link. The next SRECTrade auction closes on Thursday, March 1 at 5 p.m. ET.