Posts Tagged ‘carve out’

New Jersey Senate Passes Concurrence on S-2276

Posted January 10th, 2018 by SRECTrade.

Update: Governor Chris Christie pocket vetoed Senate Bill 2276 (S-2276) when he left office on January 16, 2018.

Please note that the original blog post was slightly revised on January 11, 2018.

On Monday, January 8th, the New Jersey Senate passed the amended Senate Bill 2276 (S-2276), following the Assembly Telecommunications and Utilities Committee’s amendments from mid-2017. The bill now rests on the desk of outgoing Governor Chris Christie (R) for a decision. Although it appears likely that Gov. Christie will pocket veto the legislation when his term ends on Tuesday, January 16th, Governor-Elect Phil Murphy (D) has his eyes set on New Jersey accomplishing 100 percent clean energy by 2050 and leading New Jersey to regain its status as a national leader in solar.

The bill passed by a considerable margin (26-8), demonstrating a strong consensus for support of the Garden State’s renewable energy industry, and also sending an important message to Governor-Elect Murphy regarding the urgency of this legislation.

If signed into law, the bill would establish the New Jersey Solar Energy Study Commission and increase the state’s solar renewable energy portfolio standard. The commission is intended to analyze all aspects of New Jersey’s solar industry and report findings and recommendations to the Governor and Legislature, specifically:

  1. As to whether New Jersey’s solar renewable portfolio standard (RPS) should be modified and extended through a prescribed period, but at least through energy year 2031;
  2. The current trends in utility interconnection study processes and costs; and
  3. The status and future of the state’s solar renewable energy credit market

In the bill, the Legislature speculated that New Jersey’s current statutory solar RPS could result in the loss of over 120 MW of solar per year through 2021, over $240 million per year in lost solar projects, and 5,000 clean energy jobs per year. To ensure the continued success of New Jersey’s solar industry, it is critical that the state pass both interim and future long-term measures to stabilize the industry and promote long-term, sustainable growth.

SRECTrade will continue to provide updates on this and other New Jersey legislative efforts.

Australia Creates Separate Target for Small-scale Renewables

Posted July 26th, 2010 by SRECTrade.

On June 28th, the Australian government decided to split the REC trading environment within the country into two parts: one REC market for large-scale technologies like wind (LRECs) and one market for small-scale technologies like solar (SRECs). The law will go into effect on January 1, 2011. Of the original Australian target—45,000 GWh by 2020—LRECs are to account for 41,000 GWh and SRECs 4,000 GWh. This separation is theoretically akin to the “carve out” for solar energy development seen in several US states, but has been created with the opposite intention: to aid large-scale renewable energy development that would otherwise be dampened by a tendency toward small-scale systems.

The original Australian Renewable Energy Target law was passed last year with a target of 20% renewable electricity generation by 2020, along with a system for requiring utilities to buy all Renewable Energy Certificates (RECs – equivalent to 1 megawatt-hour, like in the US) created within the country.

The government also created a “Solar Credits Multiplier” which effectively multiplied by 5 the number of RECs produced by solar installations less than 1.5kW. This program, however, quickly flooded the market with RECs from small household solar thermal heaters and pumps. These government-discounted systems ultimately lead to a steep decline in REC prices. At values as low as $29 per REC (~$25 USD) large-scale renewable technology developers could no longer take on the financial risk of new projects. The Australian government, aware that larger wind and solar projects have greater potential to provide baseload power, decided to reinvigorate incentives for investment in large-scale renewable energy technologies.

Under the amended law, small-scale SRECs can be sold at a fixed price of $40 per MWh in a clearinghouse set up by the government. These SRECs will be sold quarterly in the order that they are produced. If supply of SRECs is greater than demand, then the government can lower this fixed price or reduce the Multiplier. Yet, if demand outpaces supply, then the government can sell “advance” SRECs to keep the price stable at $40.

The government does allow for SRECs to be traded outside of this clearinghouse, but this will most likely only attract sellers who do not want to wait if their SRECs are too far down the “first-come, first-served” list. Their SRECs will not be purchased for more than the fixed price clearinghouse, as utilities will be able to buy “advanced” SRECs at $40 if necessary. Without a true market for these SRECs, an efficient market price in Australia will be impossible to establish.

In the other market, LRECs will be sold and purchased annually, but it is important to note that those RECs that are produced from small-scale systems before January 1, 2011 will still be eligible. Critics have pointed out that the oversupply of RECs from 2010 will keep prices in both markets low until around 2014 when utilities will need to replenish their supply.

This decision was an important step for the Australian government in creating a more balanced mix of renewable energy technologies within the country. Nonetheless, one of the most pervasive elements of the initial law was the Solar Credits Multiplier. This policy instrument, coinciding with high rebates for solar thermal systems that were also eligible to create RECs, created too much overcapacity in the market. This multiplier provided the overwhelming incentive to install small solar installations. With a REC market flooded by credits that did not accurately represent the electricity produced from small systems, REC prices faced continued downward pressure. With both large- and small- scale renewable developers looking to this same pool of RECs as a means of financing their projects, most large projects (solar and wind alike) were pushed aside.

Multipliers have also been utilized within the United States as well, yet nearly always create an imbalanced mix of renewable technologies within the state’s portfolio. For Australia, it was small-scale solar that overtook the market. The government was forced to amend the law to create a “carve out” for larger-scale projects such as wind. This “carve out” mechanism has worked in the United States to provide the necessary developmental period for high-value, nascent technologies to become competitive in an otherwise hostile market. Yet, Australia may soon find that it’s support will simply create a new dominant technology. The Australian government has opted to favor large-scale projects in proposing that they should inhabit 90% of the total renewable target. These projects, given the current economic superiority of large-wind in a separated LREC market, will most likely be filled entirely with wind power.