With the recent promulgation of the DOER’s Emergency Regulations regarding SREC-II, last Friday’s issuance of Q1 2016 SRECs, and the upcoming SCCA auction, there has been plenty of activity in Massachusetts’ SREC markets. The last few months have been a dynamic period in terms of state market policy as the state regulatory agencies determine how to move forward following the conclusion of the SREC-II program. This period has also seen growth in both project applications and installations.
On June 22nd, 2016 the Massachusetts DOER updated their list of generation units with Statements of Qualification (SQA). While this list gives us a good view into the bulk of applications that have been processed, the correlation between the number of SQAs issued and the facilities that will ultimately be built is less clear. While the data shows a dramatic increase in volume, only time will tell whether that growth will actually translate into new operational assets by year end.
You can find our most recent Massachusetts SREC-II capacity update presentation here.
The chart below shows the historical growth in cumulative size of the SREC-II market since 2014:
Represented by the green bars to the right, the pool of assets that have been issued SQAs but are not yet operational is significantly larger than all of the qualified and operational assets that have been registered since the market’s inception. This dynamic has created a state-wide “sprint to the finish” as developers work to get as many projects as possible under the SREC-II umbrella before the program deadline on January 8, 2017. Consequently, MA2016 SREC-II supply is far outpacing the RPS demand.
In 2015, the SREC-II program was oversupplied by approximately 70,238 credits, or 57.3% of the exempt load obligation of 122,617. That surplus is carried over to 2016, and added to the 615,413 projected SREC generation to come to a total supply of 685,651 SRECs. 2016 projected SREC generation is based on holding the average TTM build rate of 26.5 MW/month constant through the year, and then applying seasonally adjusted SREC production factors. With a 2016 exempt load adjusted obligation of 327,471, we project an oversupply of approximately 358,180 or 109.4% of the demand obligation.
We will continue to update these projections as new information becomes available. In the coming weeks we will expect to see official results from the 2015 SCCA auction and a new demand number for the 2017 compliance obligation. All of these will have material impacts on the projection for future supply and demand balance in the MA SREC-II market, and we will be sure to issue new analyses as that information is made public. As always, feel free to reach out to your SRECTrade brokerage desk point of contact to further discuss this analysis.
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