Detailed 2012 SREC Market Update: NJ, MA, PA, CT, IL, DC, MD
7 Months ago we did an SREC 101 Episode for HeatSpring TV. The goal of the first interview was simple: to provide basic information on what SRECs are, the state of the current market, and what installers should know about SRECs to sell projects to their clients.
We’ve decided to provide a regular update with SRECTrade on the status and the development of the SREC markets. We’ll discuss policy updates, events that are impacting the supply and demand of existing markets, and expectations for upcoming markets. For example, last week Maryland changed their RPS requirements.
SRECs are extremely important in specific markets because they impact a contractor’s or developer’s ability to sell projects. However, they are changing rapidly and sometimes it’s difficult to get clear answers.
For this update, I spoke with Steven Eisenberg who is the VP of Business Development with SRECTrade. He manages the relationships between all the buyers of SRECs and the sellers of projects that are larger then 250kW. Because he is at the intersection of clients that are buying and those that are selling SRECs, he has great insights into the dynamics of the SREC market.
(Please note: The interview was filmed on Friday, March 30th and some SREC policies have changed since filming)
Here is the full agenda of what we talked about:
Question: What is happening in each market regarding legislation that will impact SREC prices, supply and demand, in the next couple months?
NJ: Coming from 2011 and prior periods there was an under-supply leading to high prices and this lead to a huge build up and now the market is oversupplied. The market has hit a point that through February 2012, 689MW of capacity can is eligible for SRECS .40MW was installed in February 2012.
There is huge oversupply. NJ state only needs 370MW operational throughout the 2012 compliance year to supply the needed SRECs required by the RPS. The requirement for 2013 and 2014 is LESS THAN what has been installed through February 2012.
There have been a variety of different policy groups looking to increase the RPS requirements to take up some of that supply, but it is uncertain this will happen in the near term.
In our March NJ spot auction, SRECs were traded at $145 per MWh and traded at $135 per MWh in the April auciton. Other transactions have since traded below the $135 level.
Without any legislative change, NJ will be oversupplied for the next few compliance periods.
Question: In some ways, is this news good for the NJ industry? It will drive out unprofitable solar EPC companies?
Answer: Surely the most competitive financiers, developers, EPC contractors, and customers with high energy costs will be in the best position.
The decline in equipment cost is also really helping.
Projects now need to be really competitive to pencil out.