Archive for the ‘Arizona’ Category

Importing and Exporting SRECs across Registries

Posted July 21st, 2010 by SRECTrade.

With the launch of the North Carolina Renewable Energy Tracking System (NC-RETS), North Carolina is paving the way for what could be the future for SREC markets. For the first time, an SREC created in one region’s registry will be transferable to a buyer in another region’s registry. This cooperation amongst registries could be the first step towards a permeable nationwide SREC market.

North Carolina is currently working with other renewable energy certificate tracking systems to approve a process for importing and exporting SRECs. The approval of exporting SRECs from other tracking systems and importing them into NC-RETS would allow solar system owners located in states without viable SREC markets to sell into the North Carolina SREC market. This is all possible because almost all of the registries were built with similar technology developed by APX.  More information on all of the registries can be found here: APX Primer on REC Registries.

NC-RETS is working with the parties responsible for maintaining the other regional registries to develop the importing and exporting process.  Here is a list of those registries and an update on the status of importing and exporting:

NARR: The North American Renewables Registry (NARR) was developed by APX to serve the needs of states and regions that have not implemented a REC tracking system.  This covers most of the Southeastern U.S., Alaska and Hawaii.  NARR has already established importing/exporting procedures with NC-RETS.

MRETS: The Midwest Renewable Energy Tracking System (M-RETS), the registry that tracks the generation of SRECs in 8 Midwest U.S. states and the Canadian province of Manitoba, has approved the exportation of SRECs and is implementing the necessary software upgrades.

GATS: Generation Attribute Tracking System covers the Mid-Atlantic states and currently tracks the majority of SREC volume due to member states like New Jersey, Pennsylvania and Maryland.  GATS is expected to allow importing/exporting soon.

WREGIS: The Western Renewable Energy Generation Information System (WREGIS), the registry that tracks the generation of SRECs in 14 Western U.S. states, Baja California, and the Canadian provinces of Alberta and British Columbia, is capable of managing exports and is in the process of making a policy decision to allow the system to export SRECs.

ERCOT: Texas, the sixth state to adopt an RPS in 1999, was the first to implement a procedure for meeting the RPS.  The Electric Reliability Council of Texas (ERCOT) was the first registry of its kind.  Unfortunately, it does not currently have the capability to export SRECs and it may require legislative approval to make the necessary changes to the system’s software. However, NC-RETS and APX are working with ERCOT to come up with a solution.

Arizona – Utility Solar Incentives

Posted July 1st, 2010 by SRECTrade.

Note: Refer to our Arizona SREC page for specifics about any SREC potential.

There is currently no viable SREC market in Arizona as the state Renewable Energy Standard does not have a solar carve-out. The Renewable Energy Standard in Arizona requires the utilities to acquire renewable energy bundled with RECs.

While trading AZ SRECs in an an online auction is currently not a viable option, some Arizona utilities offer upfront and performance based incentive programs to encourage the installation of solar. Below is an overview of the incentives currently in place.

Tucson Electric Power Company (TEP):

  • Owners accepting the upfront incentive sign a 20 year REC agreement with the utility.
  • The residential (systems up to 20 kW) incentive through TEP for 2010 is $3.00/watt for grid tied systems and $2.00/watt for off-grid systems.
  • The small commercial (systems up to 100 kW) incentive through TEP  for 2010 is $2.50/watt for grid tied systems
  • The large commercial (systems greater than 100 kW) incentive through TEP for 2010 differs from the upfront incentive payments for the residential and small commercial programs. Large commercial solar installations are provided with a performance based incentive (PBI), which means that customers will receive a fixed price for their SRECs over a set period of time. This PBI is offered to commercial grid tied systems as follows:
    • 10-Year REC and Payment Agreement for 18.2 cents / kWh (1 SREC for $182)
    • 15-Year REC and Payment Agreement for 16.7 cents / kWh (1 SREC for $167)
    • 20-Year REC and Payment Agreement for 16.2 cents / kWh (1 SREC for $162)
  • The total upfront incentive can’t be greater than 60% of the total system cost. The incentive amounts for 2011-2014 are scheduled at the 2010 rates, but are still to be approved. Also, TEP incentives in combination with all federal and state tax credits can be no more than 85% of total the project cost. A customer must cover at least 15% of the total project cost.

Salt River Project Water and Power (SRP) – Earthwise Solar Energy Program:

  • Home owners accepting the upfront incentive sign a 25 year REC agreement with the utility. Small commercial systems sign a 20 year REC agreement.
  • The residential incentive through SRP is $2.15/watt up to $10,750. This incentive level is set through April 30, 2011. Once a total capacity of 4.5 MW (4,500 kW) has been reserved, any additional applications received will be reserved at future incentive levels.
  • The small commercial incentive through SRP is $2.00/watt up to $60,000. This incentive level is set through April 30, 2011. The small commercial incentive currently has funds reserved for 0.5 MW (500 kW). As of 6/10/10,  46 kW has been reserved with another 120 kW pending approval.
  • The large commercial (systems greater than 30 kW) incentive through SRP for 2010 differs from the upfront incentive payments as outlined for the residential and small commercial programs. Large commercial solar installations are provided with a performance based incentive (PBI), which means that customers will receive a fixed price for their SRECs over a set period of time. The large commercial incentive currently has funds reserved for 5.0 MW (5,000 kW). As of 6/10/10,  864 kW has been reserved. This PBI is offered to commercial grid tied systems as follows:
    • 10-Year REC and Payment Agreement for 18.8 cents / kWh (1 SREC for $188)
    • 20-Year REC and Payment Agreement for 14.7 cents / kWh (1 SREC for $147)
    • SRP will receive the solar renewable energy credits for 20 years for both the 10 year and 20 year PBI plans.

APS:

  • System owners entering into an upfront incentive program sign a 20 year REC agreement with the utility.
  • The residential incentive through APS is $1.95/watt; as of June 17, 2010.
  • Non-residential systems can choose between upfront incentives and performance based incentives. Below is an overview of APS’ current offering:
    • Grid Tied:
      • Upfront incentive – up to $2.50/watt, capped at $75,000
      • Production based incentives –
        • 10 Year REC agreement / 10 Year Payment: 18.2 cents / kWh (1 SREC for $182)
        • 15 Year REC agreement / 15 Year Payment: 16.8 cents / kWh (1 SREC for $168)
        • 20 Year REC agreement / 10 Year Payment: 22.5 cents / kWh (1 SREC for $225)
        • 20 Year REC agreement / 20 Year Payment: 16.2 cents / kWh (1 SREC for $162)
    • Off Grid:
      • Upfront incentive – up to $1.50/watt, capped at $75,000
      • Production based incentives –
        • 10 Year REC agreement / 10 Year Payment: 12.1 cents / kWh (1 SREC for $121)
        • 15 Year REC agreement / 15 Year Payment: 11.2 cents / kWh (1 SREC for $112)
        • 20 Year REC agreement / 10 Year Payment: 15.0 cents / kWh (1 SREC for $150)
        • 20 Year REC agreement / 20 Year Payment: 10.8 cents / kWh (1 SREC for $108)
  • For systems under 100 kW, funding is divided into 6 bi-monthly allocation periods. Funding for systems over 100 kW is awarded on a competitive basis two times a year.

SRECTrade Analysis – Upfront Incentive Payment vs. Selling SRECs On the Spot Market:

  • Currently, although there is no market Arizona SRECs can be sold into, SRECTrade has conducted an analysis to determine an approximate SREC value at which solar system owners in Arizona may consider forgoing their utilities’ upfront incentive payment to realize greater value selling in an auction platform.
  • The analysis is made up of the following assumptions:
    1. A market with a great enough demand exists in which AZ solar system owners can sell their SRECs into
    2. The system size is assumed to have a capacity of 5 kW
    3. The low end upfront incentive payment is $1.95/watt (APS) and the high end is $3.00/watt (TEP)
    4. Arizona systems receive approximately 5.5 sun hours per day (assumption from wholesalesolar.com)
    5. The system generates approximately 10 SRECs per year
    6. Both the upfront incentive and the SRECs are considered taxable income; assumed tax rate 35%
    7. 20 year fixed SREC agreement with utility
    8. 10% discount rate to determine net present value of future cash flow from SREC sales
  • After taking these assumptions into consideration, the following valuations would have to be achievable for system owners to consider foregoing the upfront incentive option. Systems that receive an upfront incentive of $1.95/watt would have to sell SRECs into a market that could support a valuation of approximately $115/SREC . Systems that receive an upfront incentive of $3.00/watt would have to sell SRECs into a market that could support a valuation of approximately $175/SREC. Both scenarios result in a simple payback on the upfront incentive of approximately 8.5 years.

SRECTrade is watching the SREC market place to see how our platform can generate more value for Arizona SRECs. We will continue to provide additional information as the landscape changes.