Posts Tagged ‘SREC aggregation’

Maximizing SREC Returns

Posted December 12th, 2012 by SRECTrade.

Who is watching your SREC account? We came across the story of a municipality that fell behind on managing its SREC account and had to implore large commercial and municipal solar owners to consider joining the 80+ MW of customers in our aggregation services!

A recent New Jersey article about a township and the SRECs that their Water Utility Division was selling titled “Water utility expected to rake in close to $100,000 to benefit ratepayers.” The utility expects to sell 1,500 SRECs that it has accrued since June of 2011. The market price today for those SRECs is roughly $80. So yes, that does result in over $100,000 in SREC revenue.

That said, the article could also be titled “Water utility loses close to $180,000 in SREC value” because if it had been selling its SRECs at market prices in regular intervals as they were issued since July of 2011, the total value of those SREC sales would have been over $280,000. And that does not even account for the time value of money.

Customers on the SRECTrade platform have their SREC accounts automatically updated and tracked to ensure that the SRECs are sold at regular intervals. We automate payments direct to bank accounts and even offer a service where we’ll actively manage the customers account. For a 500kW to 1MW facility, the customer would have paid a 1.0% in additional service fees on $280,000 in SREC transactions. In addition, if they had sold in our auction, the total fees, including the service fee, of 1.5%. That said, the fees don’t matter at all when a passive SREC management approach results in $180,000 in lost revenue!

If you have a commercial solar facility, you may feel like you can stay on top of the SREC market when you first get started, but it is not uncommon for other priorities to overshadow the management of your SRECs, two, five or ten years down the line. Especially in the case of municipalities, where approval processes can take forever. SRECTrade works with dozens of municipalities in a way that allows them to reduce the need for onerous approval processes, allowing them to stay on top of a rapidly changing SREC market. The fees are minimal and it is a no-brainer to make sure that you have someone ensuring that you are maximizing your returns!

NJ 2011 Energy Master Plan – Solar RPS on Track

Posted June 10th, 2011 by SRECTrade.

On June 7, 2011, New Jersey Governor Chris Christie announced the issuance of the state’s draft of the 2011 Energy Master Plan (EMP). By way of background, the EMP is a road map describing the energy goals of the state’s executive branch. The plan is required to be issued and updated every 3 years.  For details of the 2011 draft please click here. For details on the 2008 EMP click here.

Overall, the report outlines the continued implementation of the NJ Renewable Portfolio Standard (RPS) solar carve-out. As the report stands, there is no commentary made that would indicate a substantial change to the existing program. The following provides more insight into the aspects of the report that touch specifically on the RPS solar requirements.

The currently legislated RPS target in New Jersey is 22.5%. Of the several goals set forth in 2008 EMP, one sought to surpass this RPS target by achieving 30% of the state’s electricity needs from renewable sources by 2020. The recently released 2011 Draft EMP lays out 5 goals, one of which is to “Maintain support for the renewable energy portfolio standard of 22.5% of energy from renewable sources by 2021.”

The 2011 Draft EMP demonstrates support for behind-the-meter PV installations, highlighting solar’s ability to achieve reduction in carbon emissions and supporting a solar industry in the state,  while also taking into consideration the cost associated with solar incentives to ratepayers. The document does not call for a reduction in the existing solar carve-out, but does indicate the following,

“As the all-in capital costs for diverse solar technologies continue to decline, the Board should take action to reduce the SACP through 2025.  Doing so will not undermine new solar projects that are worthwhile, but will reasonably minimize the cost burden borne by nonparticipants.”

The Christie administration explains the benefit of larger scale solar projects while noting that they “…should be considered in addition to, not in lieu of, smaller-scale, grid-connected applications.”

The document highlights the fixed SREC requirements implemented by the Solar Energy Advancement and Fair Competition Act (SEAFCA) introduced in January 2010. Instead of a percentage-based solar requirement, this act insulated the requirement from fluctuating electricity usage by implementing targets in fixed gigawatt-hour terms. This proves beneficial, as part of New Jersey’s energy goals include demand response and energy efficiency initiatives that plan to reduce overall electricity usage.

Solar Alternative Compliance Payment (SACP):

1) The current SACP extends through 2016; the SEAFCA requires the BPU to set the schedule through 2026.

2) No time frame is required, but industry stakeholders suggest the implementation of a schedule to provide certainty to debt and equity investors enabling solar development.

EMP Policy Direction and Recommendations regarding the solar carve-out are as follows:

1) Reduce the SACP: One proposal recommends the reduction of the SACP by 20% in 2016 and 2.54% each year thereafter.

2) Subject Solar Renewable Incentives to a Cost Benefit Test: The EMP mentions, “Solar generation can contribute to the reliability of the grid…” and continues by stating, “…subsidies should enhance job growth and retention objectives and should contribute to reduction in taxes without inadvertently transferring wealth from non-participants to participants throughout New Jersey.”

3) Promote Solar PV Installations that Provide Economic and Environmental Benefit: Support for community solar power is encouraged, allowing economies of scale to give residents access to what otherwise could be an expensive individual solar system. Community solar projects help provide decreased electricity usage through the local utility and can spread the cost of distribution system upgrades among the ownership group.

Overall, the 2011 Draft Energy Master Plan lays out the goals for a diversified mix of energy sources throughout the state of New Jersey. The existing overall RPS targets and specific solar carve-out requirements appear to be a priority of the Christie administration. It is clear that the Governor’s office is focused on reducing the economic impact of implementing the RPS while enhancing electricity security and job creation. The EMP has no substantive proposals that should cause concern for stakeholders participating in the state’s SREC market, but at the same time does not include any discussion of expanding New Jersey’s solar goals to continue adoption beyond the current targets.

Maintain support for the renewable energy portfolio standard of 22.5% of energy
from renewable sources by 2021.

Pennsylvania legislature commences efforts to fix SREC program

Posted May 30th, 2011 by SRECTrade.

The Pennsylvania SREC market has had its design flaws. After HB 2405 and HB 1128 fell by the wayside last year, the Pennsylvania SREC market took the expected turn for the worst. SREC prices have dropped from a high of $310 to a low of $80 per SREC. Representative Chris Ross, who spearheaded the initial Alternative Energy Portfolio Standard in Pennsylvania has proposed an amendment to address some of the issues facing the Pennsylvania solar industry. Here are the two major changes that he is proposing as an amendment to the original Act:

1. After January 1, 2012, PA will no longer register solar technologies from out-of-state

2. The requirements for the 2013, 2014, 2015 Energy Years will increase from approximately 70 MW, 118 MW and 205 MW to 207 MW, 238 MW and 290 MW respectively.

These two changes would make a positive impact on the market. Closing the doors to out-of-state facilities would allow Pennsylvania to focus the opportunities created by the program on local businesses and local projects. Though the wording is a bit vague, it also seems that facilities registered prior to 2012 will be allowed to continue to sell their SRECs in the state market. This is an important distinction for the facilities that have been financed and accepted into the PA program with the expectation of participating in the market. Meanwhile, the increase in the requirements is a necessary step in order to make SRECs relevant again, though it may not be enough.

The market has been flooded with SRECs from facilities throughout the PJM region. The 2011 Energy Year SREC requirement only had room for about 18 MW of solar. To date, there is 78 MW registered to generate SRECs, with more facilities built and awaiting approval. 33 of the 78 MW are located within Pennsylvania. With the requirement only growing to 44 MW and 70 MW in the next two years respectively, the SREC market in Pennsylvania will face a prolonged collapse in pricing. Even with the proposed increases in 2013-2015, this could still be a problem. The oversupply from the 2011 and 2012 Energy Year will carry into the 2013 Energy Year, meaning that even with an increase to 205 MW of needed capacity in 2013, unsold SRECs from previous years will keep downward pressure on SREC prices.

One of the more fundamental flaws with the SREC program in Pennsylvania was reported on recently by the Central Penn Business Journal. The article accurately highlights how, in addition to out-of-state supply, local incentives skewed the role that SRECs were playing in the solar economics. The most-obvious culprits in the Pennsylvania SREC collapse are the out-of-state facilities that were flooding the market, but if you look at the numbers, Pennsylvania would still be over-supplied if you excluded all the out-of-state facilities. When attractive upfront incentives mitigate the influence of SRECs in the decision to go solar, many facilities will be built without SRECs in mind. When these projects enter the market, they undermine the credibility of the market and out-compete facilities that need to factor in a value for SRECs, driving prices below sustainable levels.

To promote a healthy SREC market, the long-term solution (once the current oversupply has been addressed) is, ironically, to shift towards a greater reliance on SRECs. A greater reliance on SRECs means that market prices will track closely with the value needed to cover the gap between developing solar and utilizing other electricity sources. When that happens the market will act as it should, trending downwards as costs come down, while remaining at levels that sustain development. If Pennsylvania continues to put upfront incentives in front of developers, the SREC market will never rebound.

In contrast, New Jersey has moved away from upfront incentives and promoted the SREC-only concept. The importance of SRECs in financing solar projects in New Jersey is why the market won’t see the collapse that some of the skeptics are predicting. Growth in the market will have to slow, but it is unlikely that SREC prices collapse the way they have in Pennsylvania. This is because when SREC prices come down in New Jersey and contracts become scarce, solar projects won’t be built (assuming rational behavior). In Pennsylvania, overly-attractive upfront incentives over the past two years have made SRECs an afterthought. If the market is ever going to function properly, the state will need to either come up with the appropriate combination of SREC values and incentives to promote solar at a rate in alignment with the growth of the RPS, or it will have to take a cue from New Jersey and shift away from the upfront incentives all together.

SRECTrade’s unique Massachusetts aggregation fosters individual control and market diversity

Posted March 30th, 2011 by SRECTrade.

A key (and unique) benefit of the SRECTrade aggregation in Massachusetts is that all facilities produce their own SRECs and can track and control them online. SRECs are created each quarter at a rate of 1 SREC per 1,000 kWh and tagged to each individual facility in the SRECTrade aggregation. Any remainder is then carried forward and added to the generation for the next quarter.

One of the fundamental components of any successful market is diversity of sellers and buyers. The market-based platform that SRECTrade has designed relies on this diversity. In Massachusetts, SRECTrade manages the largest aggregation in the state’s SREC program. One of the key selling points of the SRECTrade aggregation over others is the individual facility’s ownership of SRECs. Unlike other aggregations where the generation of multiple facilities are combined to create “shared” SRECs in NEPOOL GIS, SRECTrade takes additional steps to ensure that each facility has its own separate SREC account in NEPOOL GIS.

By way of background, there are 3 types of entities that make up the SREC ecosystem in Massachusetts. The Mass CEC Production Tracking System (PTS) is responsible for verifying readings and transferring them to the SREC tracking registry. NEPOOL GIS is the SREC tracking registry that every aggregation will use to track and trade SRECs in the market. In addition to providing a market functionality, SRECTrade offers an aggregation service, known as EasyREC, that gives individual solar facilities access to their SRECs and the market in one online account on Verification (PTS), tracking (NEPOOL) and trading (SRECTrade) make these markets work.

Prior to the SREC program in Massachusetts, a similar structure was used for the Class I REC market dominated by wind and other non-solar renewables. A major difference between the Class I REC market and the SREC market is the value per certificate. Class I RECs trade around $10/REC, while SRECs could be anywhere from $300 to $600/SREC. Since the value (and variability) of the Class I REC market is so insignificant, the existing aggregation model was simplified to combine the generation of all the facilities in an aggregation into one REC account. When this happens, the RECs are only tagged to the aggregation and not to any individual facility. This doesn’t work for SRECs since the value is so much greater and individual ownership is therefore much more important.

The problem with the existing model at the implementation of the Massachusetts SREC program was that it limited the diversity of sellers. All the SRECs created by an aggregation would be tagged to the aggregation and not-differentiated. It also created complexity around accountability in the SREC market, where a buyer who purchases from an aggregation will have no way of verifying what facility the SREC comes from and where that facility is located (though PTS does account for this at the generation level). From the standpoint of SRECTrade, it would not be possible to operate a fair and competitive market if the SRECTrade aggregation lumped all of its customers’ generation together to create one large batch of SRECs. The resulting market on would include a couple smaller aggregations and one large seller representing all of SRECTrade’s aggregation. Facility owners would lose control over when, where and how much the SRECs were sold for in the market.

Fortunately, SRECTrade was able to work with the DOER, NEPOOL and PTS to implement a solution that allowed individual facilities to have their own listings in NEPOOL GIS. Their flexibility in allowing aggregations to report for individual facilities meant that any generation reported by a facility to PTS is sent directly to that facility’s record in NEPOOL GIS each quarter, where the SRECs are created for the facility. Since SRECs are created for every 1,000 kWh, any remainder is then carried forward and added to the next quarter. The screenshot of an online account on is a good example of how SRECs are created and the remaining generation is carried forward.

In establishing individual facility ownership of SRECs, SRECTrade has successfully created a diverse platform that gives sellers the control over, and accountability for, their own SRECs in the market. Without this diversity, the open, public and fair market platform would not exist and facility owners would be limited to the options provided by a small group of non-transparent aggregators – a throwback to the early years of the New Jersey SREC programs when the early aggregators could make as much as 40% on trades behind closed doors. Fortunately, the advent of the public SREC markets have transferred much of the SREC value back to the facility owners where it belongs.