Prices for New Jersey SRECs have increased dramatically over the last month from the $140s in early December to current pricing in the low $170s. The RY2014 vintage cleared in our December auction at $138.01 and the January auction just cleared $169 for the same product, but recent over-the-counter deals have been done in the $170s.
Why are NJ RY2014 SRECs trading higher?
In recent months, the monthly build-rate for new solar projects has been relatively restricted and significantly lower than build rates seen in RY2013. The average for the last six months (LSM) is 11.7 MW per month, while the last 12 months (LTM) is 16.9 MW. Lower build rates, mean fewer SRECs than expected, which in turn causes both sellers and buyers to be more aggressive in how they price the market. However, the market remains fundamentally over-supplied in RY2014 when taking into consideration unretired eligible SRECs from previous reporting years and SRECs minted from RY2014 generation.
Impact of Basic Generation Service Procurement on SREC Prices
Another reason that may explain the run-up in prices and volumes-traded is the forthcoming Basic Generation Service (BGS) electricity procurement.
Each year, in early February, the regulated electricity utilities in New Jersey conduct an auction in which wholesale power providers compete to provide Basic Generation Service to consumers in New Jersey. In providing electricity, the wholesale power suppliers must also provide the requisite SRECs corresponding to the electricity load. In short, during the BGS auction period, there is a significant increase in market activity. This alone warrants attention from sellers. Coupled with recent run-up in prices, sellers should be especially poised to act.
With increased prices and increased market activity, now could be an ideal time to lock in your revenue for SREC sales. We’re here to help facilitate the transaction, so please feel free to contact us.