The SREC market in Washington D.C. has seen a change in trends due to changing market conditions associated with COVID-19. Our enclosed analysis provides an update on these market conditions and evaluates future market dynamics.
Compared to our last market update – posted on May 22, 2020, we project a greater oversupply in 2020 & 2021 and our new analysis shows 2022 now slightly oversupplied in high build rate scenarios. Despite this, we expect the market to flip to undersupplied in 2023, or sooner in low build rate scenarios.
This change in dynamic can be attributed to several factors
including:
COVID related decline in electricity sales resulting in lower SREC demand
Higher build rates resulting in higher forecasted SREC production
1.65 Last Twelve Month Avg. (MW/mo) (May Analysis) vs.
2.49 Last Twelve Month Avg. (MW/mo) (Current Analysis)
In this time of uncertainty, there are several fundamental considerations that could impact the final supply and demand figures over the next coming months. Final 2020 DC SREC production, Q4 build rates, and actual grandfathered load will need to be analyzed to determine the degree of oversupply and more accurately project future market conditions.
Should you have any questions regarding the enclosed analysis or need transaction and management services, please contact us.
On April 12, 2020, Governor Ralph Northam signed the Virginia Clean Economy Act (VCEA). This Act was passed as House Bill 1526 and Senate Bill 851. Dominion and Appalachian Power Company (APCo) now have a mandatory Renewable Portfolio Standard (RPS) in their service territories. The goals of the VCEA are to establish renewable portfolio and energy efficiency standards, advance offshore wind, and advance solar and distributed generation.
Dominion and APCo may use RECs from any renewable energy facility within Virginia or the PJM territory from the years 2021-2024. Beginning in 2025, 75% of all RECs used by Dominion must come from RPS resources within Virginia. All RECs are eligible to be sold for 5 years. Dominion must be 100% carbon-free by 2045 and APCo must be 100% carbon-free by 2050.
An additional component of the VCEA is that 1% of Dominion’s RPS compliance obligation must come from in-state distributed generation solar resources (DG) smaller than 3 MW in nameplate capacity. This requirement will represent approximately 90 MW in 2021 and increase to approximately 250 MW by 2030, thus supporting the development of about 160 MW of DG solar over the next nine years. At this point in the RPS’s development, it is not clear if the carve-out will result in an openly traded SREC market or if a central procurement program will be established.
Regarding the market’s potential SREC value, the solar alternative compliance penalty (SACP) has been set at $75 in 2021 for the DG solar carve-out portion of the market and will increase by 1% annually thereafter. The SACP is the value the utilities must pay per MWh if the appropriate number of RECs are not purchased, thus acting as a soft price ceiling for the market. With an SACP of $75, SRECs in Virginia have the potential to trade at a significant premium to the Pennsylvania Tier I REC market, which is currently the only REC market that Virginia-sited solar systems can sell into. This increase in value should spur additional development and make distributed generation solar more affordable in Virginia.
It is anticipated that the certification process for solar systems will begin in 2021, but a clear process has not been established at this point. We will continue to monitor the RPS’s implementation and update our partners and stakeholders accordingly.
Earlier today, SRECTrade hosted a webinar for New Jersey Transition Incentive (TI) Program stakeholders. The webinar presented an overview of the TI Program, which features fixed-price, factorized Transition Renewable Energy Credits (TRECs), and also outlined SRECTrade’s services and onboarding process.
For access to the presentation slides, please click HERE.
SRECTrade, Inc. is hosting a webinar to review the New Jersey Transition Incentive (TI) Program and SRECTrade onboarding process on Thursday, October 1st, at 2:00pm ET. The new program features fixed-price, factorized Transition Renewable Energy Credits (TRECs). SRECTrade is currently accepting NJ TREC facility applications, which can be submitted from your account on the SRECTrade online platform.
As part of the California Global Warming Solutions Act (AB32), which aims to drastically reduce greenhouse gas emissions in the state, the California Air Resources Board (CARB) established the Low Carbon Fuel Standard (LCFS) program in 2009. The current goal of the program is to reduce the carbon intensity of transportation fuels in the state of California by 20% by 2030. Let’s take a closer look at the nuances of the program:
With most low carbon liquid fuels, LCFS credits accrue to the fuel producer. However, for electricity and gaseous fuels, such as hydrogen, the LCFS credits accrue to the charging or fueling station owner. Fuel producers and fleet owners utilizing fuel that falls below the carbon intensity benchmark in that year generate LCFS credits. The volume of credits issued is based on the quantity of fuel produced or consumed and its carbon intensity. Conversely, participants that produce or import fuel above the carbon intensity standard are required to purchase LCFS credits to make up for their deficit.
1 LCFS Credit = 1 MT (metric ton) of CO2 equivalent reduced
Eligible Vehicle Types
California vehicles that run on clean fuel (electricity, hydrogen, CNG) are eligible. This includes cars, buses, trucks, forklifts, rail, and more. For electricity as a fuel, in order to generate credits, fleet owners must own the charging infrastructurefor their electric vehicles.
Reporting Requirements – Electricity
For electricity as a fuel, fleet owners must have one of the following* to report energy consumption to CARB:
Dedicated meters (separate utility bill)
Submeters (with kWh readout)
EV charger data monitoring
*Electric forklifts utilize a different methodology for reporting, and are able to utilize kWh calculations based on certain parameters.
Estimated Values per Vehicle Type
* Gross value before costs and fees. Assumes annual consumption of 50 MWh for Class 4-8 EVs and Buses and 10 MWh for Light Duty EVs and Forklifts. Also assumes Zero-CI electricity and a $200 LCFS credit price.
Generate Additional Value with RECs
The overall California energy mix has some carbon intensity associated with it, as the electricity is generated from a variety of resources. By virtually pairing your LCFS credits with Renewable Energy Credits (RECs), participants can demonstrate to CARB that the energy utilized to power their electric fleet is renewable. This mechanism can be utilized even if the owner of the charging equipment does not have renewable energy on-site.
This sounds too good to be true. What’s the catch?
The program is intended to act as an ongoing revenue stream that helps offset fueling costs and encourage further investment in clean fuel vehicles. For electricity, certain vehicle types have general spending requirements.
How much are the credits worth?
The LCFS market is robust and growing, with plans to continue beyond 2030. Since the program is a market-based mechanism, LCFS credit prices fluctuate, but due to CARB’s compliance requirements and strong regulatory oversight, recent prices have remained relatively stable. Over the past year, LCFS credits have been valued between $190 – $200. There is a price cap set for LCFS credits and it is set at $200 (in 2016 dollars) and adjusted annually for inflation. The 2020 cap is $217.97 per credit.
How can SRECTrade help my business?
No matter your fleet size, we can help you generate additional value from your clean fleet. SRECTrade manages the entire administrative process on your behalf, from asset registration and reporting, to credit issuance and sales. We also provide an easy-to-use technology platform for you to easily view and keep track of your assets, credits, and transactions. Our strong understanding of the complexities of the market and ability to leverage our experience in the clean commodities space help you maximize your credit volume and price
Ready to start generating credits? Reach out to us at cleanfuels@srectrade.com or call us at (415) 763-7732 Ext 4.
The second quarter of 2020 was characterized by a steady rebound from the March COVID-19 slump in the California Low Carbon Fuel Standard (CA LCFS) market. Credit pricing remained strong throughout June 2020, with spot pricing sustaining levels over ~$200 per credit. On July 1, the California Air Resources Board (CARB) imposed a maximum cap on LCFS credit prices for 2020 at $217.97 per credit. The enclosed update provides highlights on news impacting the market, a recent price trend overview, and a closer look at the Q1 2020 credit and deficit report released by CARB at the end of July.
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.
On July 13, 2020, the Massachusetts Department of Energy Resources (DOER) announced final SRECs available for auction in this year’s Annual Solar Credit Clearinghouse Auction (SCCA) I and II, as well as the preliminary 2021 Minimum Standards for the SREC I and II programs.
The DOER confirmed that 103 certificates have been deposited for the SREC I auction, and 85 certificates have been deposited for the SREC II auction.
The DOER estimates a 2021 SREC I Minimum Standard of 1.6744% (748,584 MWh) for load executed under contract on or after June 28, 2013. This Minimum Standard applies regardless of which round the auction clears. Load served under contracts executed prior to June 28, 2013 will follow a Minimum Standard of 1.0252%.
The DOER estimates a 2021 SREC II Minimum Standard of 2.2828% (1,020,544 MWh) for load served under contracts executed between April 25, 2014 and May 8, 2016, and 3.8584% (1,724,956 MWh) for load served under contracts executed on or after May 8, 2016. This will only apply if the auction clears in the first two rounds. If the auction clears in the third round, the Minimum Standard will be 2.2830% for load served under contracts executed between April 25, 2014 and May 8, 2016 and 3.8586% for load served under contracts executed on or after May 8, 2016.
We are outraged and heartbroken by the murders of George Floyd, Breonna Taylor, Ahmaud Arbery, Tony McDade, and countless others. These events, associated with deep-rooted racism throughout the United States, are one of many injustices against the Black community that we will not stand for.
Black, Indigenous and People of Color (BIPOC) continue to be disproportionately impacted by climate change. Their communities tend to be overwhelmingly impacted by poor air quality and carbon-intensive energy and transportation resources. As a company committed to doing our part to help clean energy become a reality, we recognize that this means we must be equally committed to addressing racial inequalities.
SRECTrade currently does not reflect the diversity it should. We acknowledge that our company would not be here without the environmental justice movement spurred forward by predominantly BIPOC communities fighting for environmental protection and equity. We are committed to using our platform to drive change and push ourselves to listen and learn more in order to tangibly exemplify our support to the Black Lives Matter movement.
To implement internal change, we have formed a diversity, equity, and inclusion (DEI) committee to continue contributing to open dialogue about racism. This committee will also help us address our human resources, vendor, and engagement practices. We are also reevaluating our recruiting and retention practices to promote hiring of diverse talent and ensuring our culture is inclusive and equitable.
Lastly, our DEI committee is evaluating long term projects to engage our employees to continually show our support to the Black Lives Matter movement.
This statement is a promise that as a company we will put in the hard work and time to hold ourselves more accountable in order to meaningfully contribute to and fight for racial justice.
Despite market disruptions associated with COVID-19, the SREC market in Washington D.C. has remained strong over the first quarter of 2020, with consistent pricing and liquidity. Our enclosed analysis shows the fundamentals behind this dynamic, with a decreasing oversupply in 2020 & 2021, followed by undersupply into the foreseeable future.
Load contracted prior to October 8, 2016, which is obligated to the provisions in the DG Amendment Act of 2011.
Load contracted between October 8, 2016 and January 1, 2019, which is obligated to the provisions in the Renewable Portfolio Expansion Act of 2016.
Load contracted on or after January 1, 2019, which is obligated to the provisions in the CleanEnergy DC Omnibus Bill Amendment Act of 2018
Based on the DC Compliance Reports, in compliance year 2020, 18.7% of the total retail sales is exempt from the RPS Expansion Act of 2016. This load will be subject to ACP levels which are lower than current DC SREC pricing. In this analysis, compliance associated with load in this bucket will pay the compliance penalty instead of purchasing DC SRECs. The analysis also assumes that load contracts exempt from the CleanEnergy DC Omnibus Bill, will roll off in two-year equal increments after compliance year 2021.
Should you have any questions regarding the enclosed analysis or need transaction and management services, please contact us.
April 6, 2020 EDIT: The BPU ordered the following earlier today:
The registration portal for new projects to the SREC Registration Program will be closed on April 30, 2020.
Only previously approved Subsection (t.) projects dated prior to October 29, 2019 will be exempt from the market closure on April 30th.
Projects must have a PTO granted from an electric distribution company by April 30, 2020 to qualify for inclusion in the legacy SREC program. The post-construction (as built) certification package will be due 90 days after the PTO date (not 90 days after April 30th).
The registration portal will be closed on the 91st day after April 30th (July 30th).
All extensions granted by Board staff (either 1st or 2nd extensions) will expire on April 30th. Post-construction (as built) certification package due 90 days after April 30th.
On Tuesday, March 31st, the New Jersey Board of Public Utilities (BPU) announced that it forecasts that 5.1% of state electricity sales will be supplied by operational solar projects around or before May 2020. It is therefore expected that the current SREC program (“Legacy Program”) could close to new applications as soon as April 30th.
In order to qualify for the current SREC Program, solar projects 1) need to obtain a Permission to Operate (PTO) by the SREC program closure date (estimated April 30th) and 2) submit their final-as-built application within 90 days from receiving PTO.
Solar systems that receive PTO after the SREC market closure date will be eligible for the new Transition Incentive program (“TREC Program”). Many details regarding the 15-year, fixed-price TREC Program structure have been finalized, including a flat pricing schedule of $152.00 per SREC. However, many important details surrounding the implementation and administration of the TREC Program Administrator have not been finalized yet. As a result, it is expected that TREC approvals and payments will not be made for several months after the program opens.
SRECTrade will continue to monitor the Legacy Program’s closure and the development of both the TREC Program and the eventual Successor Incentive program.
