Archive for June, 2012

A Break In The Clouds? – NJ Legislature Passes S1925/A2966

Posted June 26th, 2012 by SRECTrade.


On June 25, 2012, S1925/A2966, now aligned with each other, passed the New Jersey Senate and House. Next, the bill needs to be signed into law by the Governor, which given his recent public support is expected to be completed within the next couple weeks. The bill, which attempts to address the state’s SREC oversupply, adjusts the Renewable Portfolio Standard (RPS) Solar requirements by amending the following:

1) Solar RPS Requirements Increased beginning in Reporting Year 2014: Beginning June 1, 2013 the market will see an increase in SREC requirements, shifting the state’s solar goals from a fixed megawatt hour requirement to a percentage based requirement. Although the requirements increase in the near term, later dated requirements decline over the current solar goals.

2) New Solar Alternative Compliance Payment (SACP) Schedule: Beginning in the 2014 energy year, the SACP will be reduced to $339 declining to $239 by 2028.

3) Grid Supply Projects Capped at 80 MW Per Year in 2014-2016: In 2014, 2015, and 2016 only 80 MW of aggregated grid supply solar can be installed. Certain exemptions for landfills and parking lots have been made. The capacity of a single project shall not be greater than 10 MW.

4) SREC Life Extended to 5 Years: SRECs will be eligible to meet compliance obligations the year in which they are generated and the following four compliance periods.

5) Rules Set for Public Entity Net Metering Aggregation: The bill implements regulations for aggregate net metering for public entities such as schools, counties, or other municipal agencies.

Summary of the Legislation’s Solar % Requirements and SACP

The charts below demonstrate the % Solar Requirements set under the new bill as well as the proposed SACP schedule.

More Solar Now, Less Solar Later – How Does This Compare to the Current RPS Solar Requirements?

While S1925/A2966 increases the RPS requirements in the near term, by 900,000 or more SRECs each year in the 2014-2020 reporting years, beginning in 2024 the bill reduces the SREC requirements. The table below shows the current RPS requirements vs. the number of SRECs estimated to be required under the new legislation.

Oversupply Likely Through at Least 2014, Possibly Longer – What Does This Mean For the Market Moving Forward?

While increasing the RPS requirements is needed to address NJ’s current solar oversupply, the requirements implemented under S1925/A2966 do not necessarily put the market back into under supply. The days of SRECs trading up against the SACP at levels of $600+/SREC are long behind us for 2 reasons: 1) The SACP will naturally push pricing down to levels below $339 when it comes into effect in 2014 and 2) current installed capacity points to oversupply should the market continue at recent rates. This means that if the market is to see an under supplied scenario (i.e. a seller’s market), the amount of solar installed needs to slow down. We would naturally expect to see this take place given the removal of certain federal incentives and a decline in SREC prices, but this decline has been taking somewhat longer than expected in the first half of 2012 (i.e. likely a result of projects being wrapped up from the end of calendar year 2011).

The table below demonstrates the current RPS requirements vs. the estimated requirements under S1925/A2966 assuming no new additional capacity is installed after the NJ Office of Clean Energy’s May 31, 2012 capacity estimates.

It is important to note that the table above shows that regardless of the impact of the new legislation, the 2013 compliance period is oversupplied by approximately 575,000 at a minimum (i.e. the unlikely case of no build throughout the period).

Below, similar to our prior posts, 3 scenarios are analyzed. The first assumes future build continues at half of the last twelve month (LTM) average rate, 38.6 MW/month through May 31, 2012. The second assumes the market continues to build at its LTM average rate and the third case assumes install rates grow adding 1.5x the LTM average rate.

The table below shows the impact of the three scenarios presented above as compared to the estimated SREC requirements under S1925/A2966. If installation rates are able to decrease to half of the LTM average rate, the market will see a slight under supply beginning in 2014. Cases in which the market continues at current rates or increases above current monthly capacity installed show substantial oversupply in each of the periods forecast.

In conclusion, it is important that the solar industry recognizes that if this legislation is signed into law, it does not allow for the rate of installs to see continued growth. The bill merely helps address the oversupply by increasing the near term requirements and putting some limitations on larger scale solar projects. It will be necessary that all industry stakeholders track the market’s progress closely to clearly understand how supply is pacing relative to the SRECs required during that compliance period.

S-REC-Trade, S-R-E-C-Trade, Shrek-Trade? What is it?

Posted June 26th, 2012 by SRECTrade.

Summer is here, which means our interns have joined us, making it one of the more playful times of the year. Here at SRECTrade, we are regularly amused by the creative ways people have come to pronounce SRECs and consequently, the name of our website. We’ve heard it all from “coupons” to SWREKs to ES-AR-EE-SEEs to SEX-WREKs (we kid you not) to SWREKSYs, and of course, our favorite: SHREKs. The latter was first coined by a few of our customers (independently) in 2009. Since then, the green ogre has become our (unofficial) mascot. Most recently, we were amused to see someone claim that this was ACTUALLY how it was pronounced! We’d love to toss the guy up on our website, but we don’t think DreamWorks would appreciate that, so we’ve settled for a presence in our office…

To be fair… we don’t necessarily enjoy having to explain it either. Try walking around a conference showroom and telling people that you work at SRECTrade. It doesn’t exactly roll off the tongue. Then try getting an investor excited about it. Burton Malkiel famously highlights how company names can (foolishly) affect investor interests in his classic book, A Random Walk Down Wall Street. The “tronics” boom of the early 60s, the biotech boom of the 80s and the dot-com boom of the late 90s all saw companies, that had nothing to do with electronics, biotech or dot-coms, change their names in order to reap the rewards of the higher price-to-earning multiples that their quote-unquote peers were achieving. Don’t be surprised if someday we become something more like SRECBook or InstaSREC or SRECoupon based on what is exciting at the time!

Coming up with a name can either be an art or a science. In our case… it seems the latter prevailed. Back in 2007, InClime, LLC, short for “Innovative Climate Solutions” was set up at Stanford to explore opportunities in the renewable energy space. In late 2007 as the idea that would become SRECTrade was being formed, the platform was named Renewenex, short for “Renewable Energy Exchange.” The founding team would soon figure out that the combination of “e”s and “n”s was a recipe for misspelling and general confusion. Just typing the word Renewenex is next to impossible (try it)! When was taken, the founders settled on the that we’ve all come to know. It may not be the prettiest name in the book, but it doesn’t take long for solar folks to understand what we do and we can guarantee we’ll show up first in search results despite the best efforts of our competitors and would-be copycats!

Finally, for all of you “solar” or “sun” companies out there, fear not… someday, your time will come and Wall Street will fall all over itself for the next hot “solar” company. The solar boom hasn’t happened yet. We’ve fumbled out of the gates thanks to companies like Solyndra, but, whether it’s 5, 25 or 50 years from now, the tech and finance geniuses in this industry will someday figure out how to make solar pervasive across the world. When that happens… we’ll gladly change the website to SolarRECTrade. 🙂

Until that day comes, in case you were wondering… we simply pronounce it “ES-WREK-TRADE,” but feel free to call us SHREKTrade whenever you want!

Massachusetts SREC Market Update – June 2012

Posted June 20th, 2012 by SRECTrade.

For a PDF copy of this analysis click here: Massachusetts SREC Market Update – June 2012


The Massachusetts 2012 compliance year began on January 1, 2012. SREC issuance for Q1 2012 generation (January – March 2012) will take place on July 15, 2012. Solar REC under supply in previous compliance periods led to SRECs pricing just below the Solar Alternative Compliance Payment (SACP). Pricing right below the SACP is common in the early stages of a market with a Solar Carve-Out requirement in a state’s Renewable Portfolio Standard (RPS). As the market matures and attracts more participants, typically due to high SREC prices, the market sees an overbuild of solar which quickly turns to an oversupplied market and pricing declines.

As the Massachusetts 2012 compliance year moves on, the prospect of oversupply has become apparent. In March 2012 we provided an update on MA solar supply, taking a closer look at three different potential install scenarios for the 2012 period. This update takes a similar approach, analyzing how various project size categories are impacting the market and what the forecast scenarios mean for 2012 supply. Additionally, we will look at how these scenarios could impact the 2013 SREC requirements.

Solar Installed Can Reach Oversupply – Current and Historic Capacity

The chart below demonstrates the beginning balances of MW capacity (in gray), the added MW capacity (in green), and the total capacity (above each bar) on a monthly basis going back to January 2011. The balances below were derived from the Department of Energy Resources’ (DOER) RPS Solar Carve-Out Qualified Units report as of June 7, 2012. Monthly capacity balances are based on the Commercial Operation Date noted in the report.

Converting 2012’s SREC requirement to an average balance of online MW capacity, we estimate approximately 65.0 MW needed to be operational all year long. Note, this takes into consideration the exempt load resulting from the TransCanada settlement. Taking the beginning balance of capacity as of January 1, 2012 and the ending balance of capacity as of May 31, 2012, the average capacity online for the 2012 year to date is 61.2 MW. During this five month period, 21.5 MW were installed, compared to 10.3 MW, a growth rate of 109.0%, for the same period in 2011. Additionally, the DOER noted the MWh reported to the Production Tracking System (PTS) from January 2012 to May 2012.

As shown above, the MWhs reported through May 2012 are approximately 40% of this year’s SREC obligation. Historically, the MWh reported to the PTS have typically been understated as compared to the actual number of SRECs issued in NEPOOL GIS. With less than half way through the year, and some of the most productive months ahead of us, it appears that the generation reported and the expected remaining generation is in line to exceed this year’s obligation.

500 kW+ Projects See Growth – Projects Installed by Size Category

The last time we evaluated MA projects by size category, projects less than 500 kW saw substantial growth. In addition to continued growth in these categories, MA solar has also seen growth in projects greater than 500 kW. In the early stages of the MA SREC market, projects greater than 500 kW quickly have an impact on SREC oversupply. The table below shows operational projects based on their DOER reported commercial  operation date as of June 30, 2011 and June 1, 2012.

Three Cases Point to Oversupply in 2012 – Capacity Forecast Scenarios

Over the Last Twelve Months (LTM),  June 2011 – May 2012, average operational capacity installed has been 4.1 MW per month. The cases presented below apply three scenarios for the remaining months in the compliance period (June – December 2012):

1) Half of the LTM average capacity is added per month: This equals approximately 2.0 MW/month for the remaining months left in 2012. Note, the DOER’s June 7, 2012 data showed 2.3 MW installed in June alone, thus we can be assured that at least this capacity and likely more will come online in June.

2) LTM average capacity remains the same per month: This equals approximately 4.1 MW/month for the remaining months left in 2012.

3) Two times the LTM average capacity is added per month: This equals approximately 8.2 MW/month for the remaining months left in 2012.

As demonstrated in the cases above, each scenario forecasts oversupply for the 2012 period. Furthermore, adjusting Case 1 to reflect no solar installed in the 2nd half of the year, the market would still see oversupply of approximately 5,400 SRECs, or 7.3% of the estimated MA2012 requirement.

This outlook has had downward pricing pressure on both the 2012 vintage as well as future periods. 2012 SRECs have traded down from 2011 prices, recently trading around $300/SREC. Additionally, multi-year forward contracts for delivery beginning in 2013 are trading below the Solar Credit Clearinghouse Auction price; below $200/SREC.

Not Much Solar Needed in 2013 – Forecasting MA’s 2013 SREC Compliance Obligation

In August 2012, the DOER will release a statement announcing the 2013 compliance year obligation. The SREC compliance obligation is set by a formula per regulation 225 CMR 14.07 (2)(d). The formula for 2013 is currently set as follows:

Total Compliance Obligation 2013 = Total Compliance Obligation 2012 + [Total SRECs Generated (projected) 2012 – SRECs Generated (actual) 2011] x 1.3 – ACP Volume 2011 + Banked Volume 2011 + Auction Volume 2011

The table below estimates what the 2013 requirement may be under each scenario presented above. It is important to note the 2012 Compliance Obligation is presented without exemptions as it was done for 2011 when calculating the 2012 obligation. Additionally, the ACP volume for 2011 was determined using our estimated 2011 requirement after exemptions less 2011 actual generation, as this would be reflective of the full number of ACPs paid.

The forecast figures demonstrate that a substantial amount of generation, ~36,300 SRECs, would be reduced from the 2013 requirement given the volume of ACPs paid for 2011 compliance requirements. In Case 3, this would put the market at oversupply prior to the beginning of 2013, while Case 1 and Case 2 would need less than the current LTM average installed capacity per month to be installed in 2013.

Solar Capacity in the SREC States – May 2012

Posted June 11th, 2012 by SRECTrade.

SRECTrade SREC Markets Report: May 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.

PJM Eligible Systems

As of this writing, there were 25,753 solar PV and 340 solar thermal systems registered and eligible to create SRECs in the PJM Generation Attribute Tracking System (GATS). Of these eligible systems, 161 (0.62%) have a nameplate capacity of 1 megawatt or greater, of which 16 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 New Jersey is 12.5 MW. The third largest system, at 12 MW, is located in Ohio.

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 June 11, 2012, 28.2 MW of solar capacity was registered and eligible to create DE SRECs in PJM GATS. 11.2 MW of the 28.2 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*. Additionally, the DE SREC Pilot Program solicitation recently closed its first solicitation. As of June11, 2012, PJM GATS reported the issuance of approximately 27,300 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: The end of February marked the first issuance period of MD2012 SRECs in PJM GATS. As of June 11, 2012, 50.3 MW of MD sited solar capacity was registered to create MD eligible SRECs. 2012 Solar RPS requirements are estimated at 56.1 MW or approximately 67,310 SRECs. MD Governor, Martin O’Malley recently signed into law legislation to pull forward the RPS requirements. As of June 11, 2012, PJM GATS reported the issuance of approximately 15,800 MD2012 SRECs. Additionally, all out-of-state MD systems are no longer eligible to produce MD certified SRECs and their MD certification numbers have been removed from their systems in PJM GATS. Lastly, there are MD sited SRECs available from prior eligible periods, which could be utilized for compliance needs in 2012.

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, assuming all requirements were met with current vintage year SRECs. As of June 11, 2012, 756.5 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 756.5 MW figure. As of April 30, 2012 the NJ Office of Clean Energy (NJ OCE) reported that 770.0 MW of solar had been installed in NJ. Additionally, estimates through May 2012 show 802.3 MW of total installed capacity. For more information on the status of the NJ market and information on the expected legislation to adjust the Solar RPS see the following: New Jersey Legislation Update: A2966. As of June 11, 2012, PJM GATS reported the issuance of approximately 558,400 NJ2012 SRECs. This figure surpasses the current 2012 compliance year requirement of 442,000 SRECs by approximately 116,000 SRECs. Given current installed capacity, we estimate the market will be oversupplied by more than 200,000 NJ2012 SRECs.

Ohio: Ohio’s 2012 RPS solar target requires approximately 95,300 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 June 11, 2012, 49.0 MW of in-state capacity and 89.3 MW of out-of-state capacity were eligible to generate OH SRECs. A large increase of in-state capacity recently came from a 9.8 MW project sited at the Campbell Soup facility in Napoleon, OH. As of June 11, 2012, GATS issued approximately 16,400 in-state and 33,000 out-of-state OH2012 eligible SRECs. Additional SRECs from prior years are also eligible for the current compliance period, which may impact the current year’s requirements.

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 June 11, 2012, 213.2 MW of solar capacity was registered and eligible to create PA compliant SRECs. As of June 11, 2012, PJM GATS reported the issuance of approximately 174,000 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. For an update on HB1580 to increase the Solar RPS requirements, see the following link.

Washington, DC: DC’s 2012 RPS amended solar target requires approximately 61,180 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 June 11, 2012, 24.1 MW of capacity was eligible to generate DC SRECs. Additionally, as of June 11, 2012, GATS reported the issuance of approximately 8,600 DC2012 eligible SRECs. SRECs from prior years are also eligible for the current compliance period, which may impact the current year’s requirements.

Massachusetts DOER Qualified Projects

As of June 7, 2012, there were 2,213 MA DOER qualified solar projects; 2,184 operational and 29 not operational. Total qualified capacity is 84.4 MW, 74.2 of which is operational and 10.2 MW not operational. Electricity suppliers providing power to the state need to acquire approximately 73,400 SRECs in 2012. 29,017 MWh have been reported to the PTS during January – May 2012. The next issuance period for Q1 2012 SRECs will be on July 15, 2012.

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 with only that particular compliance period vintage. For example, New Jersey needs approximately 368 MW online for the entire 2012 reporting year to meet the RPS requirement with 2012 vintage SRECs only. SRECs still available from prior eligible periods can also impact the Solar RPS requirements. 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.

New Jersey Legislation Update: A2966

Posted June 7th, 2012 by SRECTrade.

***UPDATE: As of the close of June 7, 2012, the NJ legislature noted A2966 passed out of the Assembly Telecommunications and Utilities Committee. The bill will now move on to its second reading.***

On Thursday, June 7, 2012 at 10 a.m. ET the New Jersey Assembly’s Telecommunications and Utilities committee will review Assembly Bill 2966. A2966, sponsored by Assemblyman Chivukula, is the assembly’s version of S1925, which passed out of the Senate on 5/31/12; 23 (Yes), 9 (No), 8 (Not voting). While both bills propose to revise NJ’s Solar Renewable Portfolio Standards (RPS), A2966, proposes slightly different revisions as compared to S1925. For a detailed review of S1925, see our prior note here. Should A2966 pass out of committee, the bill will be voted on in the Assembly. If it passes out of the Assembly, A2966 and S1925 would have to be reconciled prior to its review by the Governor’s office before ultimately being signed into law.

Summary of A2966

Similar to S1925, A2966 proposes a few substantial changes that would influence New Jersey’s RPS requirements beginning in the 2014 compliance year (June 1, 2013 – May 31, 2014). The chart below demonstrates the proposed % based Solar requirement outlined in A2966 vs. S1925. Under A2966, the Solar RPS requirements would change beginning in the 2014 compliance year, with a requirement of 1.99% increasing to 4.63% by the 2028 energy year. Additionally, the second chart below shows the proposed Solar Alternative Compliance Payment (SACP) schedule in A2966 vs. S1925.

How Does A2966 Impact New Jersey’s Future SREC Requirements?

The table below shows the SREC quantities required under the current RPS versus the estimates required under the A2966.

Similar to S1925, A2966 takes the steps needed to prop up the NJ SREC market, but a closer look suggests that even if this bill is signed into law the market could continue to be oversupplied. The table below shows the current RPS and estimated requirements under A2966 through 2017. Both scenarios demonstrate what the markets look like given installed capacity through April 30, 2012, and assume that excess, eligible SRECs from prior periods are used to meet the compliance obligations in the current period. Under the current RPS requirements, assuming no new build, the market is oversupplied through energy year 2016. Applying these same figures to the estimated SRECs required if A2966 is implemented, the market is short approximately 198,000 SRECs in 2014 (the equivalent of approximately 165.0 MW operational all year long).

Although the requirements under the current installed capacity and proposed changes under A2966 put the EY2014 market at under supply with no new build, the likelihood of that is minimal. Over the last twelve months (LTM), through April 2012, the average MW installed per month has been 36.8 MW. That figure over the last 6 months has reached 46.6 MW/month. Given the recent historic build rates, we have analyzed 3 different scenarios in which the following cases are assumed:

1) Case 1 – shows half of the LTM average MW added per month throughout the course of the annual forecast periods;

2) Case 2 – shows the LTM average MW added per month remains the same throughout the annual forecast periods;

3) Case 3 – shows 1.5x the LTM average MW added per month throughout the annual forecast periods.

Note, for the purpose of obtaining an ending balance of MW capacity as of May 31, 2012, the table below assumes another 36.8 MW is added in the month of May 2012.

Under A2966, the market is less oversupplied or under supplied depending on the case displayed above. One of the main differences between the table above and our estimates under S1925, is that if installations slow down to half of the LTM monthly average rate, Case 1, the market would be oversupplied though 2015; whereas Case 1 under S1925 would see under supply in 2015. It is important to note that each case assumes all excess, eligible SRECs from the prior period are utilized to meet the current year RPS requirements.

As demonstrated in the scenario analysis, the market would need to substantially slow down current monthly build rates to allow supply to come in line with demand in the future RPS compliance periods. A2966 attempts to lessen the impact of oversupply, but even under the scenarios above, all three cases show oversupply through at least 2015. Additionally, the trade-off of an increased Solar RPS % comes at the cost of reducing the SACP. Thus, although the NJ solar industry can continue to build projects at a reduced rate, new installs will have to be underwritten with the understanding that less value will be derived from SRECs.

Note: Percentage based SREC requirements have been forecast 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 per MW in New Jersey.