Posts Tagged ‘PA HB 2405’

How To Improve Pennsylvania’s Solar House Bill 2405

Posted September 20th, 2010 by SRECTrade.

Last month Governor Edward Rendell wrote an opinion piece supporting an increase to the existing SREC program in Pennsylvania. The Bill is currently off the table, but will likely resurface later this year.  Though we are hopeful that Pennsylvania steps up its solar goals, this Bill, as written sets a scary precedent: it essentially disqualifies any solar facilities from out-of-state that have been previously approved to generate and sell SRECs in the Pennsylvania market.

There is no doubt that the Solar Renewable Energy Certificate programs in Pennsylvania and other states, such as New Jersey, have been a major catalyst for solar development.  Despite the success of these programs, one key challenge remains prominent in the daily efforts of installers and integrators looking to develop projects: long-term SREC financing. This is particularly the case for larger projects that require lending from banks.  Without a long-term SREC project with an accredited buyer, many of these projects do not get done.  Load-serving entities are the only credit worthy counter-parties in this market since they ultimately need to buy the SRECs to comply with state laws.  The problem is that they only have short-term electricity supply contracts into the state and therefore are loath to enter into long-term SREC contracts for risk of exposure to the liability should their electricity supply contracts not be renewed.

Meanwhile, the only projects getting done on a regular basis are small commercial and residential systems that are finance-able without long-term SREC contracts.  Absent a long-term SREC contract, the key to the success of the solar industry in Pennsylvania and other states with similar programs is the faith that the solar owners and financiers place on the SREC market. It is all too easy for someone to walk away from a solar investment because he or she does not trust the government to stand behind the law that created the market-based SREC program.  This is why when Maryland, Delaware and New Jersey recently updated their SREC laws to increase the requirements and raise the fines, the greatest outcome of these changes was not the quantitative effect but the impact it had on the psyche of the industry. These three states all said loud and clear that the SREC program is here and it is here to stay.

Pennsylvania, in many ways, is doing the same with House Bill 2405 by setting a schedule of fines and increasing requirements. However, there is one piece of the legislation that is a step back for the solar industry in general.  When the original SREC program was created in 2004, the law included SRECs from out-of-state facilities. In a pragmatic move to place an emphasis on the local Pennsylvania solar industry, the new Bill, if passed would exclude out-of-state facilities. This is a perfectly fine change for solar projects moving forward… and it may actually be a good thing for the PA SREC market.

However, as written, the Bill would also exclude out-of-state facilities that have already been financed, built and certified by the Pennsylvania AEPS Program to sell SRECs in the state’s market.  These are solar facilities that have been financed to produce SRECs for the Pennsylvania state market, expecting the payback to come from the proceeds of these sales.  They will be shut out of the Pennsylvania SREC market.

Now if you’re a PA resident or legislator, you may not care since it really does not affect you in any tangible way. Out-of-state facilities increase supply, driving cost down, but excluding them opens up opportunity for local solar projects.  If you’re a PA installer, you will likely be happy just to have it passed as it will be a great thing for the PA solar industry.  However, if you are a solar industry advocate in general and/or someone with a penchant for fairness, you are probably holding your breath alongside the solar owners and installers in Virginia, West Virginia and other states that have been lured to solar by Pennsylvania state law.

It would be a setback to SREC programs everywhere to see the first real example of a change to a state law promoting SRECs that leaves its earlier adopters in the dark. Though we’re hoping for an improved solar legislation in Pennsylvania, we are rooting for legislators to not only do what is good for SREC markets, but also what is just plain right for the people who have made an investment based on the 2004 law. The implementation challenges won’t get any easier if you give the skeptics a reason to doubt the program.

In conclusion, Pennsylvania should most definitely pass HB2405, increasing solar requirements, but it should also grandfather in all facilities that were built on the promise of its predecessor.

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PA Bill Could Alter Regional SREC Market

Posted July 9th, 2010 by SRECTrade.

House Bill number 2405, currently waiting for review in the PA house of representatives, contains many changes that would significantly alter the PA SREC market. The Bill has yet to be subjected to a vote, largely because its supporters understand that the bill is a solid 10-15 votes shy of the 102 votes it would need to pass the 203 person house of representatives in Pennsylvania. The House is currently not in session, so the Bill remains stagnant for now, and is most likely not to be voted on before the legislative period ends in November.

Notable changes in the Bill include a six-fold increase in the solar requirement for utilities. The requirement is currently slated to reach .5% by the 2024-2025 energy year, but would be 3% in this same year if Bill 2405 were passed. The Bill would also set an SACP of $450 per credit starting in 2011, decreasing by 3% each year. The SACP as currently stated in PA is double the average price of SRECs in the state for each year ($550 for 2010). The bill would also close the Pennsylvania SREC market, limiting buyers to SRECs exclusively from in-state solar facilities. Each of these changes is geared toward promoting the growth of the solar industry in Pennsylvania, keeping the job creation and other economic benefits local.

Changes from this bill, if it is passed, would be scheduled to be put in place on December 31, 2010. Regarding systems from out of state that have already been approved for the Pennsylvania AEPS program, unfortunately, if this legislation passes, buyers will be unable to purchase SRECs from out-of-state, even if they have previously been accepted into the Pennsylvania AEPS program.  The pending legislation states the change shall apply to “all contracts and short-term purchases made after December 31, 2010.”

This Bill is still a long way from being passed. In order to become law, the Bill would need to gain the extra 10-15 votes it needs in the PA House of Representatives, presumably through key revisions, and then pass the state Senate as well. Because the representatives are currently on summer recess, these changes do not appear to be imminent, but could be on the horizon.

Here is a table detailing the changes made by PA HB 2405, and comparing them to the market under current legislation:

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For more information, click here to see the entire Pennsylvania House Bill No. 2405