Following Thursday’s MA DOER email announcing the preliminary 2014 compliance obligation, the DOER sent a follow up email yesterday, 7/26/13, that revised down the 2014 compliance requirement. Additionally, the email announced that the first round of the Solar Credit Clearinghouse Auction (SCCA) did not clear. The SCCA will now go to Round Two on Wednesday, July 31st. Any SRECs deposited in the SCCA are now eligible for three compliance years (2013, 2014 and 2015). The updated web page covering the new compliance obligation can be found here and the updated SCCA page here.
The 2014 minimum standard was revised down because of a calculation error
The DOER revised down the base line 2014 compliance obligation from 498,951 SRECs to 425,654 SRECs. The DOER attributed this downward revision of 73,297 (pre-SCCA results) to an error made in calculating the figures, “whereby the production from Generation Units operating in Q1 2013 was counted twice in DOER’s projection of SRECs that will be generated in 2013.” The revision sets the 2014 requirement to 425,654 SRECs, but if the SCCA reaches Round 3 then the 2014 compliance obligation will be increased to 464,520 SRECs.
The revision means less capacity is needed to meet the 2014 standard
With any compliance obligation announcement in Massachusetts we must adjust our calculations to account for a legal settlement between TransCanada and the DOER. Taking in to account the DOER’s revisions and the TransCanada reduction of 4,369 SRECs from the 2014 compliance obligation, the adjustments equate to 421,285 SRECs prior to any impact from the SCCA. We can convert the compliance obligation to calculate that an average of 363.2 MW or 396.7 MW operational all year long to to produce 421,285 SRECs or 460,151 SRECs depending on whether or not the SCCA reaches the third round. Note, these MW capacity figures only consider retiring 2014 vintage SRECs to meet the compliance obligation. It is possible older vintage SRECs can be used to meet the 2014 requirements, thus further reducing the capacity needed online throughout 2014.
We understand that 245.9 MW is operational (installed through July 25) and qualified for the current SREC program. Depending on whether or not the SCCA reaches the third round, a difference of 117.3 MW or 150.8 MW is needed to be added by the end of 2013 to issue the 2014 SREC requirement. Remember, this assumes the 2014 standard is only met with 2014 vintage SRECs and no additional capacity is added throughout 2014 (likely not the case given oversupply from prior periods and the possibility more MW capacity will be added before the end of 2013 or by June 2014; if eligible). Referencing the recent qualified and pending SQA lists, there are approximately 435 MW eligible but not yet operational. This means that (without taking in to consideration oversupply from previous periods) approximately 25-35% of the eligible, not operational capacity would need to be installed by 12/31/2013 to have enough solar capacity online by the beginning of 2014. See yesterday’s blog post to reference our analysis prior to the DOER’s revision.
The market did not expect round one of the DOER auction to clear
In order for the first round of the SCCA to have cleared today, all 38,866 SRECs needed to be transacted. Since the auction did not clear the SCCA moves to Round Two. The SRECs are now deposited back in to the SCCA with an extended useful life; 2 years increased to 3. Should a third round be needed then the 2014 compliance standard will increase by the number of SRECs originally entered in to the SCCA; 38,866 SRECs. At this point, the new 2014 SREC obligation will be increased to 460,151 net of all compliance exemptions.