Archive for October, 2012

Solar Capacity in the SREC States – September 2012

Posted October 16th, 2012 by SRECTrade.

SRECTrade SREC Markets Report: September 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 28,657 solar PV and 468 solar thermal systems registered and eligible to create SRECs in the PJM Generation Attribute Tracking System (GATS). Of these eligible systems, 185 (0.64%) have a nameplate capacity of 1 megawatt or greater, of which 18 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 Maryland is 16.1 MW. The third largest system, at 12.5 MW, is located in New Jersey.

Massachusetts DOER Qualified Projects

As of October 10, 2012, there were 3,218 MA DOER qualified solar projects; 3,206 operational and 12 not operational. Total qualified capacity is 132.0 MW, 123.9 of which is operational and 8.0 MW not operational. Electricity suppliers providing power to the state need to acquire approximately 73,400 SRECs in 2012. According to NEPOOL GIS, 44,956 Q1 and Q2 2012 SRECs have been issued for the year to date. Additionally, 36,576 MWhs were reported to the MassCEC production tracking system for the 3 months covering July-September 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 needed approximately 496.7 MW online for the entire 2013 reporting year to meet the RPS requirement with 2013 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.

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.

The Argument for SRECs

Posted October 16th, 2012 by SRECTrade.

Occasionally SRECTrade is asked to defend the efficacy of the SREC system. The harsh drop in SREC prices over the last several months in New Jersey and the long-term outlook for Pennsylvania are sobering examples of SREC market volatility. A recent guest post on Greentechmedia itemized the viewpoint that the structure of SREC markets (in their current form) are detrimental to the distributed solar industry. While we agree that the SREC subsidy mechanism is complicated and can be improved upon we also think SRECs are the best option proposed to date. Like the Winston Churchill quote on democracy we say “SRECs are the worst form of incentive except all of the others that have been tried.”

So far we’ve been presented with two production-based options for subsidizing the solar industry: 1) feed-in-tariffs (FITs) and 2) solar renewable energy credits (SRECs). It is our opinion that non-production based incentives (read grants and tax credits) are a poor method for incentivizing solar as they focus on capacity without regard for long-term optimization and maintenance of the systems to maximize lifetime electricity production.

At their most basic level, FITs are fixed electricity rate guarantees to project owners above the cost of non-solar electricity. FITs typically operate independent of a market. SRECs are a market-based incentive that fluctuate in value depending on supply and demand factors and are traded separately from the actual electricity produced. The idea is that SREC pricing should reflect a market’s need for the subsidy. Below we use some of the concerns we’ve heard voiced about SRECs to underline why they are the best option we have for now.

SRECs Enhance Risk – By definition SREC markets are risky because un-contracted SRECs do not have a fixed price. These risks should be factored into any solar investment in the SREC market states. The problem is that the solar industry ignores huge risks posed by other subsidy schemes and focuses on SREC risk instead. For example, FITs were seen by project finance players as a risk-free long-term contract subsidy until places like Spain, in an effort to control unforeseen costs, retroactively applied production caps for payments far below actual power production and wiped out the economics from under the feet of existing solar systems.

With SRECs you have an independently tradable asset that allows you to sign contracts with counterparties that can be evaluated using standard commercial risk techniques.  With a FIT you’re subject to the whim of a government that may be elected several years from today concerned with cutting “excess” costs. Additionally, solar subsidies tied to payment for actual electricity production (SRECs are traded independent of the sale of solar electricity) are subject to the risk that utilities will impose creative methods to recapture their costs. For example utilities have tried to impose punitive standby charges (recently been attempted in NJ, AZ, CA, and VA), and the tiered residential tariff structure that has driven the CA market is always subject to change. Even the 1603 cash grant in lieu of the investment tax credit (ITC) is subject to claw back, so not even the grant incentive is risk-free. The bottom line is that SREC risk is known at the outset and therefore can be managed, and in fact may be the least “risky” part of the investment.

SREC markets don’t balance themselves- Again, SREC markets aren’t perfect. The long latency between market signals and impacts on build rates are a weakness that market systems like the Massachusetts SREC market are attempting to improve. SREC markets could also be improved in this regard policy adjustments like requiring traditional electricity suppliers (the “natural” buyers of SRECs) to meet compliance requirements throughout the year, among other things. A FIT, on the other hand, is a government determined rate that is almost by definition going to be either set too high, which will give windfall profits to developers, or too low which won’t provide enough incentive to produce the desired result. A grant is an even blunter policy instrument. The compounding impact of the 1603 cash grant and state and local grant programs are large contributors to “failed” SREC markets like PA.

SRECs are too complicated- We spend a good amount of time trying to simplify and explain SREC markets, so we understand this criticism but also understand that there is almost an inverse correlation between complexity and maximum effectiveness with minimal cost. We can make it dead simple but ineffective and costly, or a little more complicated and more cost effective. An SREC program allows those who want simplicity to trade off a slightly lower return in exchange for SRECTrade or other SREC service providers to manage all the complexity of SRECs for them. Those who want to maximize returns can manage that complexity themselves. FITS and grants don’t offer this degree of flexibility and cost effectiveness.

Some Parties Bear Disproportionate Amounts of Risk- In a fully functioning market, aggregated groups of smaller players can sign up for the same contracts as larger projects, and this has been the case for some time in most of the SREC markets. This means market price is almost solely determined by aggregate supply and demand, making it hard for a single competitive supplier to have outsize influence against the aggregated supply of a company like SRECTrade.

We acknowledge that there are market inefficiencies at play that allow larger solar developers advantages, but these advantages can be mitigated through tiered mechanisms like those seen in the Delaware SREC Procurement Program where residential and solar commercial facility owners do not compete against large, sophisticated facility owners and developers.

SRECs Guarantee a Certain Amount of Added Cost- Any incentive program has administrative costs. If you use a FIT or rebate program then it will likely be administered by a regulated utility or government agency, neither of which have any competition to compel them to drive down costs. While SREC markets require aggregators and brokers, these are themselves competitive markets where service providers are incentivized to minimize their cost in order to be able to compete for customers on price.

SREC programs aren’t perfect by any means, but in our opinion they’re the best we’ve got and the proof is in the results. California is often cited as a counter-model the SREC system, but New Jersey (the largest SREC market) overtook California as the state with the most MW of solar installed the first quarter of this year, all the more amazing when you consider that CA has four times the population and a green reputation.

NREL Project Shows Solar Installations Over Time: Underlines Role of State Incentives

Posted October 4th, 2012 by SRECTrade.

At SRECTrade we spend most of our time thinking about SRECs and how to effectively manage their creation and sale. We deal with a relatively abstract concept and are sometimes left wondering after a particularly long day of answering client questions and crunching data sets, what all of this stuff means on the ground. That’s why we really like the National Renewable Energy Laboratory’s (NREL) Open PV  Project, in particular the Solar PV Installations Over Time graphic that they’ve produced.

NREL shows PV installations from 2000 to 2012 by intensity (presumably driven by capacity installed) and location. The visualization is fascinating because it can be read as a story about the growth of the US solar industry over the last decade from both a policy and resource perspective.

Solar is concentrated around population centers where it’s needed most
The distributed, non-centralized aspects of solar are much discussed.  Solar can be deployed right at the load on a home or business without the adverse environmental impact of doing the same thing with say a coal-fired power plant. The NREL visualization proves the distributed nature of solar  in practice at a national level. Over time it appears that solar installations are predominantly clustered in zones that mimic areas of high population. This is evidenced in the early years where most solar capacity is installed in California around the high-density populations zones of the Bay Area and southern California cities. For rough comparison see the map of solar installed as of 2012 relative to the population density map below.


Source:, “2000 Population Distribution in the United States”

Source:, “Solar Installations Over Time”

Solar deployment is driven by state-level policies
Solar deployment can also be tied to both federal and state-level energy policies that were enacted over the last decade (Energy Policy Act of 2005, the Federal 1603 Grant, California Solar Initiative, and SREC markets among myriad others) but the deployment seems to concentrate in some areas over others, suggesting that local and state factors outweigh the current federal incentive structure.  Viewing the NREL visualization it looks like solar installation activity from 2000 to 2004 is predominantly in California  with flashes of activity in Florida, the Rocky Mountain West,  Minnesota/ Wisconsin, and  the Tennessee Valley Authority region. By 2007 solar installations appear to be widespread around major population centers around the country.  The mid-Atlantic and the northeast states appear to explode as their SREC markets come on line in the mid-2000s, while other areas seem to slow down.

As an SREC company we know that each SREC market, dictated by the state policies that created the program, is different from the next. So perhaps not surprisingly we get phone calls and emails on a daily basis asking us about opportunities in states without a comprehensive solar policy such as an SREC program. Our stock answer to suggest that stakeholders reach out to their state legislatures and engage with grassroots activist groups like the Vote Solar Initiative. SREC markets are by no means perfect, but they are a key tool for states to drive solar development in the absence of a national standard. The evidence is in the results. The end of the NREL visualization shows the SREC market states (DC, DE, MA, MD, NJ, OH and PA) covered in solar.