New Jersey SREC Market Update: Q2 Supply Blues & The Great 2015 Rally

Ali Shajrawi Market Research Briefs

Grid-Supply projects in the development pipeline have finally impacted the market bringing last month’s new solar build number up to approximately 14.4 MW. June had two new Direct Grid Supply projects with total capacity of 5.86 MW – compared to only one Grid Supply project since February, previously the only Grid Supply project YTD. With relatively anemic total build numbers for Q2, New Jersey SREC prices have shown an expected resilience in the front end of the curve from early spring through mid-summer.

NEPOOL Class I RECs: Racing in Reverse – Supply Decelerates More Than Demand

Ali Shajrawi Market Research Briefs

NEPOOL Class I data showed continued generation growth across all states and for almost all technologies. In the most liquid markets of Massachusetts and Connecticut, Class I REC generation in Q1 2015 grew 4.6% and 12.9% against Q1 2014, respectively. In addition, even the less liquid New Hampshire market supply grew considerably by 27% in Q1’15 over Q1’14. Class I REC generation increased slightly at 3.1% in Maine and 9.6% in Rhode Island. Nevertheless, Q1 year-on-year rates of growth have decreased significantly for most states across the board (excluding NH). While the absolute levels of RECs produced in Q1 has increased, harsh winter conditions seemed to affect per-MW productivity for most renewable technologies as generation fell below expectations given installed nameplate capacity.

NEPOOL Class I RECs Q1 2015 Data Release Update

Ali Shajrawi Market Research Briefs

NEPOOL Class I data showed continued generation growth across all states and for almost all technologies. In the most liquid markets of Massachusetts and Connecticut, Class I REC generation in Q1 2015 grew 4.6% and 12.9% against Q1 2014, respectively. In addition, even the less liquid New Hampshire market supply grew considerably by 27% in Q1’15 over Q1’14. Class I REC generation increased slightly at 3.1% in Maine and 9.6% in Rhode Island. Nevertheless, Q1 year-on-year rates of growth have decreased significantly for most states across the board (excluding NH). While the absolute levels of RECs produced in Q1 has increased, harsh winter conditions seemed to affect per-MW productivity for most renewable technologies as generation fell below expectations given installed nameplate capacity.

New Jersey SRECs: BGS & Running of the Bulls

Karbone Market Research Briefs

NJ SREC pricing has appreciated to levels not witnessed since Q1 2012. Breaking past the $200/SREC threshold in the last weeks, forward vintage pricing and liquidity have strengthened ostensibly in advance of the state’s focal Basic Generation Service (BGS) Auction. With the Auction still over two months away however, questions remain as to how high the price rally will reach, and what other forces could be behind it.

MISO Capacity: the Capitulation of Coal

Karbone Market Research Briefs

MISO Capacity pricing has rallied across the board in bilateral markets as a combination of coal retirements and ISO exports threaten capacity deficits by ~2016. In anticipation of these impending shortages, bilateral capacity forward pricing in select zones has already appreciated to levels at or near those in PJM. Karbone expects this trend to continue in the short and mid-term. The following research brief analyzes the primary drivers of this market behavior and outlines potential directional movements.

Explaining the Q3 Excitement: Massachusetts SREC I & SREC II

Karbone Market Research Briefs

Massachusetts solar saw a number of important developments in Q3: SREC I finalized its Program Cap, held the first successful Solar Credit Clearinghouse Auction, and experienced dramatic price appreciation for forward vintage SRECs. SREC II nearly avoided major legislative changes, received an incremental increase in net metering caps, and had DOER growth projections suggest a re-orientation of the market away from Managed Growth-type projects.

New Jersey SRECs Q2 Wrap up & Q3 Outlook

Karbone Market Research Briefs

New Jersey SREC prices held steady throughout Q2 after rallying back from a post-BGS dip in the last week of Q1. RY 14-16 vintage values started Q2 in April at $180 and climbed to the $188 range by the end of May before settling back around $182 at the end of Q2 in June. With the start of Q3 however, prices have begun to fall off, with value for RY 14-16 vintages dropping to the mid-$160s range as of mid-July.

Major Changes in Store for Massachusetts Solar?

Karbone Market Research Briefs

On June 11th, key solar policy decision makers unveiled a Proposal that would radically transition solar incentives in Massachusetts away from the SREC market and towards a more feed-in-tariff type regime. The Proposal outlines a Declining Block Solar Incentive Program that would supplant much of the recently launched SREC II program. If implemented, we estimate that the SREC II market size could be reduced from roughly 1 GW to closer to 300 MW.