Posts Tagged ‘New Jersey’

NJ Governor Christie Signs Bill to Increase Solar Requirements

Posted July 23rd, 2012 by SRECTrade.

Today, New Jersey Governor Chris Christie signed into law legislation to increase the state’s solar goals by amending the Renewable Portfolio Standard (RPS). Both Senate Bill 1925 and Assembly Bill 2966 were passed on June 25, 2012. The bill, which attempts to address the state’s SREC oversupply, adjusts the Renewable Portfolio Standard (RPS) Solar requirements by amending the following:

1) Solar RPS Requirements Increased beginning in Reporting Year 2014: Beginning June 1, 2013 the market will see an increase in SREC requirements, shifting the state’s solar goals from a fixed megawatt hour requirement to a percentage based requirement. Although the requirements increase in the near term, later dated requirements decline over the current solar goals.

2) New Solar Alternative Compliance Payment (SACP) Schedule: Beginning in the 2014 energy year, the SACP will be reduced to $339 declining to $239 by 2028.

3) Grid Supply Projects Capped at 80 MW Per Year in 2014-2016: In 2014, 2015, and 2016 only 80 MW of aggregated grid supply solar can be installed. Certain exemptions for landfills and parking lots have been made. The capacity of a single project shall not be greater than 10 MW.

4) SREC Life Extended to 5 Years: SRECs will be eligible to meet compliance obligations the year in which they are generated and the following four compliance periods.

5) Rules Set for Public Entity Net Metering Aggregation: The bill implements regulations for aggregate net metering for public entities such as schools, counties, or other municipal agencies.

NJ Solar RPS in 2014 and Beyond: Summary of Solar % Requirements and SACP

The charts below demonstrate the % Solar Requirements set under the new bill as well as the proposed SACP schedule. It is important to note that the existing 2012 and 2013 reporting year (RY) requirements do not change under this piece of legislation. RY2012 and RY2013 have an SREC requirement of 442,000 and 596,000 SRECs, respectively. Additionally, the SACP for RY2012 and RY2013 are $658 and $641, respectively.

Slow Down New Jersey, You’re Installing Too Much Solar – The NJ SREC Market Looking Forward

On July 19, 2012, the New Jersey Office of Clean Energy estimated installed solar capacity to be 831.6 MW as of 6/30/12. This represents an increase of approximately 29 MW from the prior month. Also, the state’s solar project pipeline increased by approximately 30 MW to 590 MW as of 6/30/12 from 560 MW the month prior.

As of the latest SREC issuance data in PJM GATS, we estimate the RY2012 market to be oversupplied by approximately 230,000 SRECs. Taking into consideration this oversupply and installed capacity through 6/30/12, the RY2013 market will be oversupplied by more than 600,000 SRECs without any new projects installed in the remaining compliance period (July 2012 – May 2013).

Looking forward to 2014, the state needs to realize a substantial reduction in installed solar capacity on a monthly basis to see the market come into balance in future reporting years. Using similar forecast cases from our prior analysis, Case 1 shows oversupply by approximately 97,000 SRECs through 2015. This is under a scenario in which install rates decline to 18.8 MW/month; representing half of the last twelve month (LTM) average – now 37.6 MW/month through June 2012.

The legislation signed into law today is a step forward to allow ongoing development of solar projects in the Garden State. This bill was needed to ensure companies servicing the NJ solar market are able to continue forward, existing solar projects see some stabilization, and rate payers are protected from excessively high SREC prices. The future development of projects needs to be monitored closely by all stakeholders as this bill requires current install rates to decline in the near term for the market to come into balance with the revised RPS requirements in future reporting years.

A Break In The Clouds? – NJ Legislature Passes S1925/A2966

Posted June 26th, 2012 by SRECTrade.

Introduction

On June 25, 2012, S1925/A2966, now aligned with each other, passed the New Jersey Senate and House. Next, the bill needs to be signed into law by the Governor, which given his recent public support is expected to be completed within the next couple weeks. The bill, which attempts to address the state’s SREC oversupply, adjusts the Renewable Portfolio Standard (RPS) Solar requirements by amending the following:

1) Solar RPS Requirements Increased beginning in Reporting Year 2014: Beginning June 1, 2013 the market will see an increase in SREC requirements, shifting the state’s solar goals from a fixed megawatt hour requirement to a percentage based requirement. Although the requirements increase in the near term, later dated requirements decline over the current solar goals.

2) New Solar Alternative Compliance Payment (SACP) Schedule: Beginning in the 2014 energy year, the SACP will be reduced to $339 declining to $239 by 2028.

3) Grid Supply Projects Capped at 80 MW Per Year in 2014-2016: In 2014, 2015, and 2016 only 80 MW of aggregated grid supply solar can be installed. Certain exemptions for landfills and parking lots have been made. The capacity of a single project shall not be greater than 10 MW.

4) SREC Life Extended to 5 Years: SRECs will be eligible to meet compliance obligations the year in which they are generated and the following four compliance periods.

5) Rules Set for Public Entity Net Metering Aggregation: The bill implements regulations for aggregate net metering for public entities such as schools, counties, or other municipal agencies.

Summary of the Legislation’s Solar % Requirements and SACP

The charts below demonstrate the % Solar Requirements set under the new bill as well as the proposed SACP schedule.

More Solar Now, Less Solar Later – How Does This Compare to the Current RPS Solar Requirements?

While S1925/A2966 increases the RPS requirements in the near term, by 900,000 or more SRECs each year in the 2014-2020 reporting years, beginning in 2024 the bill reduces the SREC requirements. The table below shows the current RPS requirements vs. the number of SRECs estimated to be required under the new legislation.

Oversupply Likely Through at Least 2014, Possibly Longer – What Does This Mean For the Market Moving Forward?

While increasing the RPS requirements is needed to address NJ’s current solar oversupply, the requirements implemented under S1925/A2966 do not necessarily put the market back into under supply. The days of SRECs trading up against the SACP at levels of $600+/SREC are long behind us for 2 reasons: 1) The SACP will naturally push pricing down to levels below $339 when it comes into effect in 2014 and 2) current installed capacity points to oversupply should the market continue at recent rates. This means that if the market is to see an under supplied scenario (i.e. a seller’s market), the amount of solar installed needs to slow down. We would naturally expect to see this take place given the removal of certain federal incentives and a decline in SREC prices, but this decline has been taking somewhat longer than expected in the first half of 2012 (i.e. likely a result of projects being wrapped up from the end of calendar year 2011).

The table below demonstrates the current RPS requirements vs. the estimated requirements under S1925/A2966 assuming no new additional capacity is installed after the NJ Office of Clean Energy’s May 31, 2012 capacity estimates.

It is important to note that the table above shows that regardless of the impact of the new legislation, the 2013 compliance period is oversupplied by approximately 575,000 at a minimum (i.e. the unlikely case of no build throughout the period).

Below, similar to our prior posts, 3 scenarios are analyzed. The first assumes future build continues at half of the last twelve month (LTM) average rate, 38.6 MW/month through May 31, 2012. The second assumes the market continues to build at its LTM average rate and the third case assumes install rates grow adding 1.5x the LTM average rate.

The table below shows the impact of the three scenarios presented above as compared to the estimated SREC requirements under S1925/A2966. If installation rates are able to decrease to half of the LTM average rate, the market will see a slight under supply beginning in 2014. Cases in which the market continues at current rates or increases above current monthly capacity installed show substantial oversupply in each of the periods forecast.

In conclusion, it is important that the solar industry recognizes that if this legislation is signed into law, it does not allow for the rate of installs to see continued growth. The bill merely helps address the oversupply by increasing the near term requirements and putting some limitations on larger scale solar projects. It will be necessary that all industry stakeholders track the market’s progress closely to clearly understand how supply is pacing relative to the SRECs required during that compliance period.

New Jersey Legislation Update: A2966

Posted June 7th, 2012 by SRECTrade.

***UPDATE: As of the close of June 7, 2012, the NJ legislature noted A2966 passed out of the Assembly Telecommunications and Utilities Committee. The bill will now move on to its second reading.***

On Thursday, June 7, 2012 at 10 a.m. ET the New Jersey Assembly’s Telecommunications and Utilities committee will review Assembly Bill 2966. A2966, sponsored by Assemblyman Chivukula, is the assembly’s version of S1925, which passed out of the Senate on 5/31/12; 23 (Yes), 9 (No), 8 (Not voting). While both bills propose to revise NJ’s Solar Renewable Portfolio Standards (RPS), A2966, proposes slightly different revisions as compared to S1925. For a detailed review of S1925, see our prior note here. Should A2966 pass out of committee, the bill will be voted on in the Assembly. If it passes out of the Assembly, A2966 and S1925 would have to be reconciled prior to its review by the Governor’s office before ultimately being signed into law.

Summary of A2966

Similar to S1925, A2966 proposes a few substantial changes that would influence New Jersey’s RPS requirements beginning in the 2014 compliance year (June 1, 2013 – May 31, 2014). The chart below demonstrates the proposed % based Solar requirement outlined in A2966 vs. S1925. Under A2966, the Solar RPS requirements would change beginning in the 2014 compliance year, with a requirement of 1.99% increasing to 4.63% by the 2028 energy year. Additionally, the second chart below shows the proposed Solar Alternative Compliance Payment (SACP) schedule in A2966 vs. S1925.

How Does A2966 Impact New Jersey’s Future SREC Requirements?

The table below shows the SREC quantities required under the current RPS versus the estimates required under the A2966.

Similar to S1925, A2966 takes the steps needed to prop up the NJ SREC market, but a closer look suggests that even if this bill is signed into law the market could continue to be oversupplied. The table below shows the current RPS and estimated requirements under A2966 through 2017. Both scenarios demonstrate what the markets look like given installed capacity through April 30, 2012, and assume that excess, eligible SRECs from prior periods are used to meet the compliance obligations in the current period. Under the current RPS requirements, assuming no new build, the market is oversupplied through energy year 2016. Applying these same figures to the estimated SRECs required if A2966 is implemented, the market is short approximately 198,000 SRECs in 2014 (the equivalent of approximately 165.0 MW operational all year long).

Although the requirements under the current installed capacity and proposed changes under A2966 put the EY2014 market at under supply with no new build, the likelihood of that is minimal. Over the last twelve months (LTM), through April 2012, the average MW installed per month has been 36.8 MW. That figure over the last 6 months has reached 46.6 MW/month. Given the recent historic build rates, we have analyzed 3 different scenarios in which the following cases are assumed:

1) Case 1 – shows half of the LTM average MW added per month throughout the course of the annual forecast periods;

2) Case 2 – shows the LTM average MW added per month remains the same throughout the annual forecast periods;

3) Case 3 – shows 1.5x the LTM average MW added per month throughout the annual forecast periods.

Note, for the purpose of obtaining an ending balance of MW capacity as of May 31, 2012, the table below assumes another 36.8 MW is added in the month of May 2012.

Under A2966, the market is less oversupplied or under supplied depending on the case displayed above. One of the main differences between the table above and our estimates under S1925, is that if installations slow down to half of the LTM monthly average rate, Case 1, the market would be oversupplied though 2015; whereas Case 1 under S1925 would see under supply in 2015. It is important to note that each case assumes all excess, eligible SRECs from the prior period are utilized to meet the current year RPS requirements.

As demonstrated in the scenario analysis, the market would need to substantially slow down current monthly build rates to allow supply to come in line with demand in the future RPS compliance periods. A2966 attempts to lessen the impact of oversupply, but even under the scenarios above, all three cases show oversupply through at least 2015. Additionally, the trade-off of an increased Solar RPS % comes at the cost of reducing the SACP. Thus, although the NJ solar industry can continue to build projects at a reduced rate, new installs will have to be underwritten with the understanding that less value will be derived from SRECs.

Note: Percentage based SREC requirements have been forecast based on EIA Report updated 11/15/11 “By End-Use Sector, by State, by Provider”. Projected SRECs required utilizes the most recent EIA electricity data applying an average 1.5% growth rate per forecast year. The state’s RPS Solar requirement is then multiplied by forecast total electricity sales to arrive at projected SRECs required. Projected capacity required is based on a factor of 1,200 MWh per MW in New Jersey.

Trade-offs Begin – NJ S1925 Update

Posted May 18th, 2012 by SRECTrade.

For a PDF copy of this post click here.

Yesterday, the Senate Environment and Energy Committee passed S1925 out of committee. Coming out of the session, the bill was revised to increase the Solar Renewable Portfolio (RPS) % requirements and decrease the Solar Alternative Compliance (SACP) schedule. Next, the bill will move on to a second reading in the Senate. The charts below demonstrate the difference between the original and revised versions of S1925.

How Does This Impact New Jersey’s Future SREC Requirements?

In our last research note on S1925, we took a look at a summary of the bill and provided analysis on how it could impact the New Jersey SREC market. Given the revision of the Solar RPS % requirements, below is an update to the original analysis.

The table below shows the SREC quantities required under the current RPS versus the estimates required under the revised version of S1925. Although S1925 increases the RPS requirements in the near term, the % requirements estimate a decrease vs. the current requirements beginning in 2024.

While the revised version of S1925 takes the steps needed to prop up the NJ SREC market, a closer look suggests that even if this bill comes to fruition the market could continue to be oversupplied. The table below shows the current RPS and revised S1925 requirements through 2017. Both scenarios demonstrate what the markets look like given estimates of installed capacity through April 30, 2012, and assume that excess, eligible SRECs from prior periods are used to meet the compliance obligations in the current period. Under the current RPS requirements, assuming no new build, the market is oversupplied through energy year 2016. Applying these same figures to the estimated SRECs required if the revised version of S1925 is implemented, the market is short approximately 411,800 SRECs in 2014 (the equivalent of approximately 343.2 MW operational all year long).

Although the requirements under the current installed capacity and proposed changes under the revised version of S1925 put the market at under supply with no new build, the likelihood of that is minimal. Over the last twelve months (LTM), the average MW installed per month has been 36.0 MW. That figure over the last 6 months has reached 44.9 MW/month. Given the recent historic build rates, we have analyzed 3 different scenarios in which the following cases are assumed:

1) Case 1 – shows half of the LTM average MW added per month throughout the course of the annual forecast periods;

2) Case 2 – shows the LTM average MW added per month remains the same throughout the annual forecast periods;

3) Case 3 – shows 1.5x the LTM average MW added per month throughout the annual forecast periods.

Note, for the purpose of obtaining an ending balance of MW capacity as of May 31, 2012, the table below assumes another 36.0 MW is added in the month of May 2012.

Under the revised version of S1925, the market is less oversupplied or under supplied depending on the case displayed above. One of the main differences between the table above an our original estimates is that if installations slow down to half of the LTM monthly average rate, Case 1, the market could be under supplied as early as 2015. It is important to note that each case assumes all excess, eligible SRECs from the prior period are utilized to meet the current year RPS requirements.

As demonstrated in the scenario analysis, the market would need to substantially slow down current monthly build rates to allow supply to come in line with demand in the future RPS compliance periods. The revised version of S1925 attempts to lessen the impact of oversupply, but even under the updated table above, all three cases show oversupply through at least 2014. Additionally, the trade off of an increased Solar RPS % came at the cost of reducing the SACP. Thus, although the NJ solar industry can continue to build projects at a reduced rate, new installs will have to be underwritten with the understanding that less value will be derived from SRECs.

Note: Percentage based SREC requirements have been forecast based on EIA Report updated 11/15/11 “By End-Use Sector, by State, by Provider”. Projected SRECs required utilizes the most recent EIA electricity data applying an average 1.5% growth rate per forecast year. The state’s RPS Solar requirement is then multiplied by forecast total electricity sales to arrive at projected SRECs required. Projected capacity required is based on a factor of 1,200 MWh per MW in New Jersey.

Proposed New Jersey Solar Bill May Not Solve SREC Woes

Posted May 16th, 2012 by SRECTrade.

For a PDF copy of this post click here.

Introduction

Senators Bob Smith and Stephen Sweeny recently introduced New Jersey Senate Bill 1925. The bill proposes to amend New Jersey’s current Solar Renewable Portfolio Standard (RPS) requirements in attempt to help stabilize the oversupplied SREC market. The bill is currently in draft form and is scheduled to be heard by the New Jersey Environment and Energy Committee on Thursday, May 17, 2012.

Based on the information presented below, the proposed version of S1925, while increasing the near term Solar RPS requirements, will likely still leave the market oversupplied. This note summarizes the key points in the draft legislation and quantifies the near term and long term impacts it would have on the SREC market if passed into law.

Summary of S1925

Senate Bill 1925 proposes a few substantial changes that would influence New Jersey’s RPS requirements beginning in the 2014 compliance year (June 1, 2013 – May 31, 2014). The chart below demonstrates the change from a fixed SREC requirement under the current RPS to a % based Solar requirement under S1925. The Solar RPS requirements would change beginning in the 2014 compliance year, with a requirement of 1.832% increasing to 3.730% by the 2028 energy year.

Additionally, the table below shows the SREC quantities required under the current RPS versus the estimates required under S1925. While S1925 increases the RPS requirements in the near term, the % requirements estimate a decrease vs. the current requirements beginning in 2023.

Beyond the proposed changes in SREC requirements, S1925 would implement a new fixed Solar Alternative Compliance Payment (SACP) schedule. The schedule reduces the SACP beginning in 2014 to $350/SREC declining to $252/SREC in 2028. The implementation of this schedule will cap SRECs at a price of $350 in 2014 and decrease in future periods. The table below demonstrates the proposed schedule as compared to the current RPS requirements.

In addition to S1925’s proposed SREC and SACP changes, the bill also addresses a few other areas:

1) An SREC’s useful life would extend from 3 to 5 years; giving it eligibility in the year in which it is issued and the following four energy years.

2) During 2014, 2015, and 2016, approved non-net metered grid supply projects cannot exceed more than 100 MW in total aggregated capacity each year. Grid supply projects located on brownfields are not limited under this stipulation. After 2016, the approval of grid supply projects would be subject to review by the Board of Public Utilities (BPU).

3) Solar RPS requirements would automatically increase by 20% for the remainder of the schedule in the event that the following two conditions are met: 1) the number of SRECs generated meets or exceeds the requirement for three consecutive reporting years, beginning with energy year 2014 and 2) the price for SRECs purchased by entities with renewable energy portfolio standards obligations in each of the same three consecutive reporting years is less than the current SREC price in the year prior to the three consecutive reporting years (i.e. if the price in 2014, 2015, and 2016 is less than the 2013 price and the number of SRECs exceeds the requirement in each of these years, the 20% increase in the RPS will be triggered).

What Does This Mean for the NJ SREC Market?

While S1925 takes the steps needed to prop up the NJ SREC market, a closer look at the numbers suggest that even if this bill comes to fruition the market could continue to be oversupplied. The table below shows the current and proposed S1925 RPS requirements through 2017. Both scenarios demonstrate what the markets look like given estimates of installed capacity through April 30, 2012, and assume that excess, eligible SRECs from prior periods are used to meet the compliance obligations in the current period. Under the current RPS requirements, assuming no new build, the market is oversupplied through energy year 2016. Applying these same figures to the estimated SRECs required if S1925 is implemented, the market is short approximately 118,500 SRECs in 2014 (the equivalent of approximately 98.8 MW operational all year long).

Although the requirements under the current installed capacity and proposed changes under S1925 put the market at under supply with no new build, the likelihood of that is minimal. Over the last twelve months (LTM), the average MW installed per month has been 36.0 MW. That figure over the last 6 months has reached 44.9 MW/month. Given the recent historic build rates, we have analyzed 3 different scenarios in which the following cases are assumed:

1) Case 1 – shows half of the LTM average MW added per month throughout the course of the annual forecast periods;

2) Case 2 – shows the LTM average MW added per month remains the same throughout the annual forecast periods;

3) Case 3 – shows 1.5x the LTM average MW added per month throughout the annual forecast periods.

Note, for the purpose of obtaining an ending balance of MW capacity as of May 31, 2012, the table below assumes another 36.0 MW is added in the month of May 2012.

In each of the 3 cases presented above, the market ends up in oversupply through at least 2016. It is important to note that each case assumes all excess, eligible SRECs from the prior period are utilized to meet the current year RPS requirements.

As demonstrated in the scenario analysis, the market would need to substantially slow down current monthly build rates to allow supply to come in line with demand in the future RPS compliance periods. It‘s unlikely that build rates will decline fast enough to protect from future oversupply. This bill does not allow for an increase in build rates (it requires a decrease) and cannot be used as a justification for an increase in PV installation growth.

Reaching the install rates shown in Case 1 (approx. 18 MW/month) should be within reach despite the restrictions put on grid supply projects. Additionally, the potential introduction of new EDC SREC programs, as well as historic build rates in the residential and commercial sectors, will also contribute to meeting the levels outlined in Case 1. Clearly, SREC pricing and availability of forward contracts to support new project development will impact future build rates, but even in markets with an oversupply of solar (i.e. PA), projects continue to be built without much regard for the current SREC environment.

How Does this Impact the 2012 and 2013 energy years?

Under the current draft of S1925, the RPS requirements would be unaffected in 2012 and 2013. The 2012 generation period will come to a close at the end of May 2012. Compliance buyers will have until approximately the end of September to wrap up their purchases before finalizing RPS reports with the BPU. As it currently stands, we estimate the NJ2012 market to see an excess of approximately 180,000 SRECs. Recent over the counter trading has increased to levels between $125 and $135/SREC, up from the last SRECTrade auction clearing price at just above $115/SREC.

The Electric Distribution Companies (EDCs), or regulated utilities, in NJ will be holding an auction on Thursday, May 17, 2012. Recent announcements show that as many as 33,000 NJ2012 SRECs will be available for sale during this auction. Given these volumes, 2012 demand may be reduced after this auction.

In addition to the 2012 energy year, the 2013 compliance period is fundamentally oversupplied. Current estimates show the 2013 period will see an excess of approximately 496,000 SRECs. This estimate takes into consideration the excess SRECs from 2012 and installed capacity estimates through April 2012. The 2013 forward market has recently traded above the 2012 vintage, but given the fundamental oversupply it is likely pricing will trend downward throughout the 2013 compliance period beginning June 1, 2012 (note the first 2013 vintage SRECs will not be issued in GATS and available for delivery until the end of July 2012).

SRECTrade will continue to keep a close eye on the S1925 legislative process as it makes its way through the Senate Environment and Energy Committee and the remaining requirements needed before it can be signed into law.

Note: Percentage based SREC requirements have been forecast based on EIA Report updated 11/15/11 “By End-Use Sector, by State, by Provider”. Projected SRECs required utilizes the most recent EIA electricity data applying an average 1.5% growth rate per forecast year. The state’s RPS Solar requirement is then multiplied by forecast total electricity sales to arrive at projected SRECs required. Projected capacity required is based on a factor of 1,200 MWh per MW in New Jersey.

New Jersey SREC Update May 2012

Posted May 7th, 2012 by SRECTrade.

New Jersey SRECs recently traded at $115.16 per SREC in SRECTrade’s May 2012 auction. This follows the dramatic decline in prices that the New Jersey SREC market has experienced since the beginning of the 2012 energy year. Click here for historic data on SRECTrade’s New Jersey SREC market auction pricing.

What’s going on?

The New Jersey SREC market is oversupplied. The state’s  Solar Renewable Portfolio Standard (RPS) targets a fixed number of megawatt hours (MW-hrs) needed to be purchased by electricity suppliers each compliance period. A MW-hr is the equivalent of one SREC, so in NJ we discuss the SREC market both in terms of total capacity installed in MW and total number of SRECs available each year. Under the current RPS, significantly more solar has been installed than is necessary to meet the state’s RPS goals for the next several years.

The 2012 reporting year (June 1, 2011 – May 31, 2012) requires 442,000 SRECs. Our March 2012 capacity analysis (scroll down to see the NJ numbers) shows that as of the beginning of April, total registered installed capacity was 670.9 MW with 386,500 SRECs issued. More recent data from the New Jersey Office of Clean Energy shows the installed capacity, as of March 31, 2012, at 730.3 MW. Additionally, approximately 455,000 SRECs have been issued in GATS from solar PV generation through March 2012. This figure, demonstrates that as of the last issuance period, there are more than enough SRECs available in the market to meet the 2012 reporting year requirement of 442,000 SRECs. The Generation Attribute Tracking System (GATS) is the organization that all New Jersey PV systems must register with in order to create and transact SRECs.

Another factor is that SREC issuance tends to follow a natural lag due to missing meter reading submissions and delays registering systems with GATS.  Given our experience with this data, it’s reasonable to expect a further bump in SREC numbers through March 2012. Also, April and May 2012 SRECs will be issued at the end of May and June, respectively, and will also add to this year’s total SREC issuance figures.

The additional volume to be issued allows us to project that the market is likely 40% to 50% oversupplied for the 2012 energy year. Lastly, when analyzing the 2013 through 2015 energy year current RPS requirements, the figures show that the market will be oversupplied when taking into consideration eligible excess SRECs rolled forward from prior years and the existing amount of installed capacity as of 3/31/12 currently eligible to produce SRECs. The table below demonstrates this in more detail:

Proposals to stabilize the SREC market

Industry stakeholders are working with the New Jersey legislature to come up with a way to stabilize the NJ SREC market. A NJBiz.com article dated May 3rd, mentions a possible bill proposal by Sen. Bob Smith (D-Piscataway), Chairman of the Senate Environment Committee, that would accelerate New Jersey’s solar goals while reducing how much buyers would need to pay for their SRECs if they don’t have enough SRECs in their portfolios at the end of each energy year.

To date, no bill has been made publicly available. Based on the information provided on the NJ State Legislature website, it appears the bill will be slated under the number S1925. The current description listed includes the following, “Revises certain solar renewable energy programs and requirements; provides for aggregating net metering of Class I renewable energy production on certain contiguous and non-contiguous properties owned by local government units and school districts.”

Until then, we must speculate on what the final contents of the bill will be.  An additional consideration is that even if a bill is passed by the NJ legislature, the bill will likely not go into effect until the 2014 energy year which starts in June 2013.

New Jersey Solar Legislation Doesn’t See the Light

Posted January 10th, 2012 by SRECTrade.

New Jersey legislation to modify the state’s renewable portfolio standard (RPS) in order to increase demand to soak up existing excess supply failed to pass the NJ Legislature yesterday. In fact, the bill (S-2371) never even came to a vote because of disagreements among solar advocates, who were not in lockstep over issues such as the mix between distributed net-metered and larger utility scale projects.

Although Governor Christie signaled broad agreement with the majority of the bill in his Energy Master Plan, released in December, several last-minute changes were made in the final 2 days of the session. The complexity of these changes was apparently too great to digest given the limited time available. The view of the new legislature on this issue should not change appreciably with the start of the next session and the Governor’s support is clear.

At this point it is a matter of priority and the ability to put together a new bill and get it scheduled for a vote early in the new session. Although a setback for the solar industry in New Jersey for now, hopefully increased time to craft and debate the new bill will allow for more transparency and a lead to a better quality piece of legislation.

Governor Christie backs solar in New Jersey’s final 2011 Energy Master Plan (EMP)

Posted December 7th, 2011 by SRECTrade.

Governor Christie’s administration has released the 2011 Energy Master Plan, which can be viewed in its entirety here.  The Plan is generally positive for the stability of NJ SREC markets, and signals overall support by the Governor’s Office for solar in NJ.  The plan specifically lists support for the following:

1. Accelerate the RPS:

A temporary acceleration of the RPS would provide some interim relief for the current market in SRECs and an opportunity for the industry to adjust. This acceleration would require increasing the RPS over the next three years and reducing the outlier years of the RPS schedule to minimize the impact to ratepayers.”

and

2. Give preference to smaller, distributed projects:

Projects that offer a “dual benefit” should take priority for approval and any legislative expansion of SREC eligibility by modifying the definition of “distribution system” should also provide the BPU with the ability to review and approve subsidies for grid-supply projects to ensure compatibility with land use, environmental and energy policies. Additionally, the development of solar projects should not impact the preservation of open space and farmland.

We read that second bullet as support for giving the BPU the ability to manage large utility scale projects so that they don’t flood the SREC market.

Other interesting points include support for extending Electric Distribution Company contracting programs and support for a requirement to set up a supply queue that will give the market insight into pipeline of future non-residential systems.

The Governor also calls for reducing the Solar Alternative Compliance Payment (SACP) schedule to minimize impact of the previous changes to ratepayers.  This seems to be a reasonable concession on the part of SREC sellers, especially given that the current oversupply situation makes the SACP irrelevant.

The EMP by itself does not make policy or change the current NJ renewable portfolio standard.  However, it does signal the Governor’s position on any legislation that he may be asked to sign that would change the portfolio standard law, like Assembly Bill 4226 which contains many of the items listed in the EMP.

The EMP process itself has been illuminating, revealing a Governor’s office that is responsive to stakeholder input and seems to be responsive to data over dogma.  The draft EMP released earlier in the year was far less positive toward solar, however over several public meetings and hundreds of public comments the Governor’s office heard a great deal about the impact of solar on jobs and NJ’s energy supply.  The final Plan reflects much of this input and is a very different document from the draft.

Overall, the 2011 EMP indicates that the Governor supports solar, but he isn’t willing to write the industry a blank check.  The solar industry will need to continue to prove it’s value to New Jersey, and as long as it continues to do so it appears to have the support of Governor Christie.

 Accelerate the RPS
A temporary acceleration of the RPS would provide some interim relief for the current market in
SRECs and an opportunity for the industry to adjust. This acceleration would require increasing
the RPS over the next three years and reducing the outlier years of the RPS schedule to minimize
the impact to ratepayers.

New Jersey Capacity Update – Solar Continues to Push Forward

Posted November 28th, 2011 by SRECTrade.

NJ2012 Capacity Update

The New Jersey Office of Clean Energy (NJ OCE) published an updated installed solar projects list as of September 30, 2011. According to the NJ OCE, as of 9/30/11 the Garden State installed 447.7 MW of solar capacity. This equates to more than 20 MW added in the month of September, putting the state at an average of 27.1 MW per month and a total of 108.2 MW installed for the 2012 compliance year to date. NJ OCE estimates for October 2012 expect 44 MW of additional capacity to be installed, bringing total installed capacity to over 491 MW.

Although the NJ OCE reports 447.7 MW installed as of September 30, 2011, PJM GATS currently shows 431.2 MW registered to produce SRECs as of 11/26/11. It is common to see a difference in registered projects between the NJ OCE and PJM GATS reported figures as there is typically a delay from when systems are interconnected and installed to when they receive their NJ state certification number and become registered in GATS.

New Jersey’s 2012 reporting year solar requirement is currently set at 442,000 MWhs. Assuming a production factor 1.2 MWh per installed kW per year, the state needs approximately 370 MW operational all year long. As of 11/26/11, GATS has reported 163,507 SRECs issued through September 2011 generation. October 2011 generation will be issued on November 30, 2011. Given the volume issued through September 2011, approximately 37% of the required volume has been generated. This leaves a need of approximately 278,500 SRECs to meet the 442,000 MWh RY2012 target.

Monthly Capacity Analysis_v2-1

Assuming all NJ solar facilities produce at a 1.2 MWh production factor per kW per year, and all systems noted as installed on the NJ OCE installed project list received generation credit from their first full month of operation, the existing installed capacity of 447.7 MW will produce approximately 338,400* SRECs between October 2011 and May 2012. This additional generation will bring the NJ2012 SREC issuance total to approximately 501,900 SRECs, an excess of 60,000 MWhs. Assuming the October 2012 estimates are accurate, the additional of 44 MW in October creates additional oversupply, equating to a forecast of almost 530,600* NJ2012 SRECs minted and an excess of 88,600 MWh. Both of these scenarios only account for the existing installed capacity through September 2011 and estimates through October 2011. Additional supply will continue to come online through the remaining months of NJ2012, with more capacity anticipated to be pushed through at the end of the 2011 calendar year due to the expected expiration of the federal grant incentive. The additional supply coming online throughout the remaining months of NJ2012 will further impact the long SREC market NJ is facing and have an effect on the 2013 market.

NJ2013 SREC Market

As it currently stands, the NJ2013 (June 2012 – May 2013) Renewable Portfolio Standard (RPS) requires 596,000 MWhs of solar generation. This Solar REC requirement equals approximately 496.7 MW to be operational all year long, assuming the NJ2013 requirements are met only using 2013 vintage SRECs. Given the current market, and expected oversupply, the NJ2013 market will start off the year with between 60,000 – 88,600 MWhs already issued and eligible to meet the 2013 requirements. Note, this assumes the September figures and October estimates provided by the NJ OCE are accurate and do not take into consideration any additional capacity to be installed in the remaining months of the 2012 compliance period.

Assembly Bill 4226

Introduced on November 10, 2011, Assembly Bill 4226, sponsored by Assemblyman Upendra Chivakula (District 17), and Assemblyman Daniel Benson (District 14), would implement changes to the current solar RPS requirements. Under the current RPS, the SREC requirements are subject to a 20% increase per year through 2027 should the state meet or exceed its solar requirements three years in a row, while also experiencing a decline in SREC pricing in those same three consecutive periods. The final paragraph of the current format of 4226, states that the 3 year time period would be reduced to 1 year and be applied beginning in the 2013 compliance period.

Should this bill be signed into law, the 20% increase would take effect in 2013. Currently, RY2013 has a requirement of 596,000 MWhs. A 20% increase would adjust the 2013 requirement to 715,200 MWh; equal to an additional 119,200 SRECs required or approximately 99.3 MW operational all year long.

Other solar trade and advocacy groups have actively suggested alternative proposals to the legislation, some of which include a revised SREC requirement schedule as well as a fixed SACP schedule through 2027. We will continue to keep a close eye on the legislative process and provide updates as more information is known and how it will impact RY2013 and future NJ compliance periods.

*This figure uses a PVWatts calculation assuming 1.2 MWh/kW/Year and takes into consideration seasonality for the remaining months left in the compliance period.

NJ Capacity Update

Posted October 10th, 2011 by SRECTrade.

The New Jersey Office of Clean Energy (NJ OCE) recently released installed solar capacity figures as of August 31, 2011. After the first three months into Energy Year (EY) 2012, the state has averaged a rate just over 30 MW/month, bringing the total installed capacity to more than 430 MW, up from 339.6 MW at the end of EY2011. In order to meet the state’s fixed production requirement of 442,000 SRECs this year, approximately 370 MW needs to be online throughout the entire compliance period.

The 2012 spot market traded up to $200+/SREC in recent periods with the October auction clearing at $205. The estimated average installed capacity needed to meet the EY2013 requirement is approximately 500 MW. To reach this target by the beginning of EY2013, the state would have to install an additional 70 MW, or an average of 7.8 MW/month for the remainder of EY2012. This calculation takes into consideration the capacity needed to generate enough EY2013 vintage SRECs, which could be reduced based on EY2012 vintage SRECs used to meet the EY2013 compliance obligation.

The surge in installed capacity is partially due to the anticipated expiration of the federal 1603 grant, an upfront cash payment for commercial projects of up to 30% of system costs, at the end of the calendar year. As more projects aim to take advantage of the grant before it expires, the total installed capacity will continue to approach the EY2013 target.

Upon their return from recess, state legislators will consider an amendment to the RPS to pull 2014 and future year requirements forward one year in attempt to prevent a prolonged oversupply in the SREC market. The chart below demonstrates monthly installed capacity and corresponding increases since December 2010.

NJ Capacity Aug 31 2011

Note: This analysis is based on capacity as of the dates noted and does not take into consideration the impact of EY2012 vintage SRECs used to meet the EY2013 requirement.