Archive for December, 2019

CA LCFS Update – December 2019

Posted December 27th, 2019 by SRECTrade.

2019 has proven to be a dynamic year in the California Low Carbon Fuel Standard (CA LCFS) market. The beginning of the year brought the implementation of a new rule making followed by continued growth in a variety of low carbon fuels including Renewable Diesel, Ethanol, Electricity and others. Credit pricing remained strong throughout the year and in Q4 2019 spot pricing experienced sustained levels over ~$200 per credit. The enclosed update provides highlights on news impacting the market, a recent price trend overview, and a closer look at the Q2 2019 credit and deficit report by fuel type. Q3 2019 credit issuance is just around the corner and we look forward to continuing to work with market participants in the new year.

SRECTrade offers LCFS credit management and brokerage services to electric vehicle (EV) fleet operators, OEMs, EV charging station owners, and other clean fuel asset owners. We help our clients navigate the entire LCFS process including asset registration, ongoing reporting requirements, transacting, settlement, and remittance of funds. Our domain expertise in environmental commodity markets allows us to provide our clients with industry leading regulatory and market knowledge. Please reach out to cleanfuels@srectrade.com for more information.

New Jersey Board of Public Utilities Approves Solar Transition Incentive Program

Posted December 18th, 2019 by SRECTrade.

On Friday, December 6th, the New Jersey Board of Public Utilities (BPU) issued an order approving a new SREC program to aid in the transition from the current SREC program to the yet-to-be-determined “Successor Incentive” program. This “Transition Incentive” program will feature a factorized, fixed-price, 15-year Transition Renewable Energy Certificate (TREC). All projects that submitted complete SREC Registration Program (SRP) applications after October 29, 2018, but do not reach commercial operation at the time the BPU determines the 5.1% target has been reached, will qualify for TRECs.

The BPU will hold a cost-cap proceeding in early 2020 to finalize the annual value of the fixed-price TREC. Specifically, the BPU will evaluate two pricing scenarios: 1) a flat 15-year price of $152 and 2) a lower price of $65 for the first three years followed by a higher price of $189 for the last twelve years.

The different TREC project types and factorizations are displayed below:

TRECs will have a useful life of two energy years, including the energy year in which they were generated. If a TREC is not issued or sold during its two-year useful life, it will become an NJ Class I REC. The order further clarifies that Transition Incentive projects will be eligible to generate NJ Class I RECs after their 15-year TREC Qualification Life.

The BPU order also directs electric distribution companies to procure a TREC Administrator. Although the exact mechanics for how TRECs will be transacted are still being determined, the TREC Administrator will ultimately purchase all generated TRECs and allocate them to load-serving entities for compliance based on their market share of retail sales.

SRECTrade will continue to monitor the development of the final TREC levels and the Successor Incentive program.

NJ Market Nearing Closure and Transition Program

Posted December 2nd, 2019 by SRECTrade.

The Clean Energy Act, signed by New Jersey Governor Phil Murphy in May 2018, states that new rules and regulations will be adopted to close the NJ SREC program upon attainment of 5.1 percent of the kilowatt-hours sold in the state by solar electric power generators. Based on recent build rates, the NJ SREC market is expected to reach the program’s maximum capacity of 5.1% by mid-2020, at which point, the New Jersey Board of Public Utilities (NJ BPU) will transition the state to a new program. While the NJ BPU released a straw proposal in 2018 on the anticipated market closure, the exact strategy of determining the 5.1% attainment and eventual transition program is yet to be confirmed.

The enclosed analysis further details the implications of this market close and SRECTrade’s estimated market dynamics through 2022. The analysis assumes flat load through 2022 and utilizes a capacity factor of 12.56%, the approximate running average capacity factor across NJ certified solar facilities since 2012. In each depicted build scenario, the market will close to new capacity once 3,460 MW is hit, or on June 1, 2021, whichever occurs first.

On September 6, 2019, the NJ Board of Public Utilities (“BPU”) released a memo that detailed Basic Generation Service Provider (“BGS”) load exemptions in 2019. This exempt load dynamic has an impact on market demand through EY 2023 and is further detailed in the analysis.

Data from the New Jersey Office of Clean Energy (“NJOCE”) shows that solar build rates have increased slightly over the past six months in comparison to the past twelve months, increasing by 3.6% in that time frame. With this data from NJOCE and credit data from GATS, SRECTrade estimates that the market is over-supplied by 7.5% for the 2020 Energy Year. Assuming flat load growth and no drastic increase in build rates, the market will likely become under-supplied in 2021 and 2022.

In line with this market dynamic, NJ SREC pricing has seen an upward trend over the past twelve months. The enclosed analysis further details the current standing as well as future scenarios for the NJ SREC market.