SREC Prices/Education

[mbcijim]

SREC = Solar Renewable Energy Credit
1,000 Watts Generated = 1 SREC = 1 Megawatt Hour = 1 MWh
PJM (the grid manager) monitors how much a solar system creates, and issues credits to the generator every month. It's done over the internet.

A little education (and keep in mind my background is Pennsylvania so my experience is based on our state).

Governments required Utility companies to produce so much of their power from renewable resources. And since utility companies are no longer power generation companies, they aren't building solar systems directly. They want the market to build them (solar systems) and they will buy the output. In this case it's the SREC and the electricity. Most times you will have a different buyer for each of the two components.

In Pennsylvania, the current mandate is for about 12,000 SREC's and goes up every July 1. Currently systems are installed that take us all the way through the state mandate of June 2013.

In our state, most of the small systems <200KW were built with an expectation of $300-$400/SREC Prices. The most recent auction value? $149. Couple reasons. The 30% federal grant was new last year. So all the solar systems built prior to 2010 were built at market cost without that separate subsidy. They required $350/SREC prices (in a long term contract) to get built. The people expecting $350/SREC prices with a 30% federal grant thought the free market would just magically allow the profit margin to go up. In 2009 Joe gets a long term contract at $350/SREC but in 2010 Joe gets 30% grant up front, hmmm, I'll take $200 for my SREC thank you. That's exactly what happened.

Additionally, in 2010 Pennsylvania awarded over a hundred million in direct grants to builders of solar systems. The result? We get way ahead of our solar mandated utility purchase and SREC prices crash. We have way more than we need.

I use this page to watch prices.
http://www.flettexchange.com/

Moral of the story: If you're building the system because of SREC prices be sure to sign a long term contract. Otherwise, as grants come and go (eventually the 30% federal grant will go away) prices will fluctuate with the total amount of grants available. If you're building it in NJ because you think you're going to get $600/SREC prices, eventually enough systems will be built under the grants system that prices will be forced to go down if you're a seller on the spot market.

 

[mellow]

That is a cool site. Why is MA so much more than say MD or DE? Less systems being built?

Edit: Found my answer as to why MD SREC prices have dropped.

http://www.solarpvhome.com/
*Current Maryland SREC Price - $249.99 May 2011 - June 2011 might be below $200
Why has the SREC price fallen so much?
There has been a significant uptake in out-of-state facilities being registered in Maryland for the 2011 year. More supply is driving the prices of the SRECS down. However, the current Maryland law going forward should protect the in-state solar market from being affected by these facilities. Those facilities should be ineligible for the market from 2012 onwards, so the long-term outlook for in-state solar should be secure.

Barring any alternative interpretations of the Maryland RPS, the in-state Maryland solar market should be healthy in 2011. There are currently ~13 MW in Maryland and the state needs to have ~30 MW on average in 2011 to meet the requirement of approx 34,000 SRECs in 2011. If the state can get there on its own, then it limits the opportunity for out-of-state facilities. If Maryland falls short, their will be a market for out-of-state facilities but only in 2011.

My recomendation - Hold onto your Maryland SRECs until 2012 when only in state SRECs will be allowed. You take a chance of the law changing but the price should be higher than $249.99. SRECs in Maryland have a 3-year useful life. An SREC is good for the current energy year and the two following years. If you do not sell your SREC now, you can still sell it next year or the year after. If a utility buys your SREC now, it can apply to this year’s requirement or any of the next two years. It is possible we may see the December bump up in prices as we did in 2010. (I was able to sell 4 SRECs at $360 in December 2010 and will be holding onto my 2011 SRECs until 2012.)

 

[SolarAndWood]

Thanks for the education, that is what I got from the NJ website. That is a lot of risk to be holding for a long time when considering that big a capital investment.

 

[Slow1]

MA SREC market is closed to only MA sites. As apparently are so many others - so basically what happens in any one market stays in that market for the most part. Prices in one place really have little meaning in the others and it looks like for the time being there is little effort/incentive to open up the cross-market trade so it will stay that way for a while.

In MA the market is very regulated - there is actually a minimum and maximum price set. The max price was lowered this year in fact from 600 to 550 and can be dropped by 10% each year until it hits the minimum of $300. Have to love regulations eh? So... for calcs here we go with the $285 (300-5% typical commission on sale) as the value for projected income to calculate ROI etc. Anything over that is bonus for the ultra conservative folks... some may adjust a slightly higher rate for a little while, but you can count on the minimum for the next 10 years (as much as you can count on any regulations...)

 

[begreen]

Very interesting information, quite educational. Thanks for starting the thread Jim. The SREC system is quite different than what we have. The whole credit exchange system sounds like it was created by the banking industry or wall street. What safeguards are in place to guarantee stability in this marketplace?

 

[mbcijim]

Very interesting information, quite educational. Thanks for starting the thread Jim. The SREC system is quite different than what we have. The whole credit exchange system sounds like it was created by the banking industry or wall street. What safeguards are in place to guarantee stability in this marketplace?

Well, in Pennsylvania, I'd say none.

Locally we've had 3 large systems built (200KW-1MW) with no contracts signed for SREC sales. Meanwhile the spot market was $300-$350 when they built them and now is down in the $90 range. We had something called a sunshine grant (Penn. DEP) that gave out $100,000,000 towards new solar systems. On top of that the 30% Federal grant went from a tax credit to cash.

Personally, I think the sunshine grant made too many systems get built too quickly. We built more than the utilities were required to purchase. Couple that with the 30% federal cash grant and all of a sudden the SREC's aren't so important to someone building a system.

It definitely caused a boom and now we're getting the bust.

In 2-3 years this will work itself out as the requirements for the annual purchases ramp up and the sunshine grant money is long gone.

Think about it this way. We all have a return on investment we're seeking. Let's say it's 10%. We see those numbers and it motivates us to put the cash up to build a solar system. We don't care if the return is from electric produced, fed grant, sunshine grant, and/or SREC or some combination of them all. Right now fed grant/sunshine grant/electric produced are very high. In fact, they are so high my return on investment on my current planned 100KW system is 52%. That's before I sell a SREC. Do I care what I get for my SREC? Absolutely not.