SREC Market anyone?

[Slow1]

I'm evaluating a solar array and have run into this "SREC" market concept. Is there anyone (particularly in MA) who has an array and is currently selling these? I'm looking for practical/real world advice and ideas.

As a whole, the thing appears to be a bit of a political/government scam set up to tax the utilities (and utility users by reference) into supporting solar production, but I haven't yet fully evaluated how it works...

If you have no idea what I'm talking about but want to get a clue - here is a site that I've been reading some good info from: http://www.srectrade.com/

Thoughts anyone?

 

[peakbagger]

The SREC market is in rough shape these days and the cost to certify a small facility would be far more costly than the value of the SREC as it is based on Megawatt Hours produced. When researching some energy information for Mass awhile back I think I saw some aggregators that add up a lot of smaller systems into one entity, but I still think its a net loss to the owner. In some areas with net metering, the utility ends up owning the green attributes. Another issue is that some state SREC programs do not recognize SRECs from other states.

I thnk my total net generation is around 8 or 9 MWhr total over several years so I havent spent a lot of time on it.

 

[mbcijim]

Both posts are mostly right. My only comment is my 200KW system is located in Pennsylvania and certified in Ohio. The cost was minimal, just my time, but expect it to take some time. It took me several months.

You need a long term contract for a fixed price. Remember that Obama is preaching that Solar will get cheaper as we build more. If indeed Obama is right, then SREC prices will fall in direct correlation to installed price.

Pennsylvania Solar is booming and the SREC market is in the tank. If you make your decision to build a solar system, a business one, then your decision is based on the amount of subsidy you get. SREC is just one piece of the subsidy puzzle. Many very small systems in Pennsylvania were built on the ASSUMPTION that SREC's were worth $250-$300 and are now worth $150.

In Pennsylvania, our state government decide to award a few hundred million of direct cash subsidy for solar systems. As such the volume built went way up. Supply is up, demand is neutral. If Massachusetts did the same thing, then I would expect your SREC prices to crash.

 

[Slow1]

MA seems to have thrown a bit of an interesting twist into the SREC market. They put a minimum value on them of $300/Mw for a 10 year period (starting last year I believe). Then they also put a maximum too - $600 but at the same time they can lower the max by 10% each year 'if justified' with that being somewhat vague. Last year they did this and lowered the max to $550 which it seems that this year that is the rate that they sold for... so I do wonder if they will keep lowering the max (why exactly I have no idea other than to appease the utilities). Question is can they lower the max below the minimum? Hmm...

Anyway, that is the atmosphere I'm looking at walking into. So for a planning point of view it seems I should be able to plan on a bottom of $300 for the first 8 years (by time I get an array up and running) which really seems to be a financial game changer in the cost/return calculations.

However, I just wonder if the whole thing is nothing more than a bunch of regulations that can be changed at a political whim - in other words can it really be trusted for the next 8 years even?

 

[mbcijim]

However, I just wonder if the whole thing is nothing more than a bunch of regulations that can be changed at a political whim - in other words can it really be trusted for the next 8 years even?

You have it figured out.

Bankruptcy by the buyer of your SREC's would also affect the value.

 

[peakbagger]

The state of Mass is no one you can trust, consider any money you get from SREC's as found money. I expect anything extra you have to invest to qualify for SREC's might be better invested in lottery tickets. There are several biomass power plants in the region who spent millions of dollars to comply with Mass standards for renewable power and they are all most likely going to loose that investment when Mass announced changes in the rules for what is considered renewable. Oh by the way, the new rules were supposed to be out in January and so far no new rules.

I would not be surprised if Mass declares that there isnt enough renewable power in the region and then changes the rules to accept Canadian Hydro as renewable (currently excluded), this will drive the value of SRECS way down. VT has already changed their rules for hydro (its that or keeping VT yankee open) and Hydro Quebec is doing lots of behind the scene lobbying.

 

[mbcijim]

Keep in mind peakbagger their are different types of SREC's. I'm pretty confident SREC stands for Solar Renewable Energy Credit. Their are different tiers of REC's depending on the type of energy. You can't compare a Wind REC with a Solar REC, they aren't the same thing. Someone here will set us straight...

 

[mbcijim]

One last thought on this subject,
- You clearly understand that the SREC market is created (and can be destroyed) by the government's whim.
- When I made a large investment in my project, I considered that, but more strongly I considered WHO I sold my SREC's to.
- I signed a 4.5 year contract with a public utility listed on the NYSE. Our contract mentions nothing about government or it's requirements. It's simply a contract between the public utility and myself for me to provide SREC's. This way government can change their idea's about SREC's and for 4.5 years I don't care! I have a legal, enforceable contract with a public utility. Now that company can go bankrupt, but if these guys are going bankrupt then the world has much bigger problems than this and I'll give the system to the bank and they can deal with it.

 

[Slow1]

You bring up another interesting option - that of pre-selling SRECs. I've been curious just how much of a premium one loses when selling in advance - can you give some sort of clue on this? I put in a query to one broker but haven't received a reply.

 

[mbcijim]

Long term and short term prices don't and shouldn't compare, at least in Pennsylvania.

In Pennsylvania the utilities are doing low bid's to buy the SREC's, those prices are floating around $225 for 10 years. The spot market price is down to $90. The contract I signed last June was for $315 for 4.5 years. Right now I'm looking like a genius. But if that price goes up to $600 next year I'll look dumb. The second the federal tax credit goes away, SREC prices will increase to make up for it - I'd expect it to be around $40-$45 over 10 years.

 

[DaveH9]

You bring up another interesting option - that of pre-selling SRECs. I've been curious just how much of a premium one loses when selling in advance - can you give some sort of clue on this? I put in a query to one broker but haven't received a reply.

The last time I checked Srec Trade was giving $1.70 wp upfront for a 10 year agreement. They will buy after the system is up and running 30 days, (about 60 days after install) it can be looked at as a rebate. Have you looked at Sun Run? They offer a residential PPA, in some cases it's 0 down in MA.

 

[DaveH9]

SREC trade also has an agreement "The fixed-price offer is for $285 fixed + 35% share of the upside (limited to 100 kW or less)." these are of course subject to change. The Srec market seems to be steady in MA, though the cap was lowered from 600 to 550 Jan 1, 2011. The floor is still 300, minus 15 auction fee. So SREC Trade is basically offering the floor price guaranteed in exchange for 65% of the upside. Takes the risk out. But you need to have a web accessed monitoring system.