A rising tide around the Basic Generation Service (BGS) Auction has been lifting all New Jersey SREC vintages, with prices for the forward three years of the curve (EY2017, EY2018, and EY2019) erasing most of their losses from November’s market-wide sell-off.
Despite a post-BGS retreat, New Jersey SREC prices have climbed steadily since the beginning of the spring through much of Q2 2016, retesting four-year highs for front-of-the-curve vintages.
New Jersey SREC pricing has reached four-year highs, recording levels not seen since December 2011. Breaking through what appeared to be 2015’s $250 resistance level in early November, front-of-the-curve pricing and liquidity have strengthened ostensibly through the end of the year and start of 2016. The first week of January saw EY2016 and EY2017 SRECs trade north of $290 before settling in the $285 context by the week’s end. In light of the considerable surplus of SRECs in circulation, this price rally seems to render the market paradoxical.
Behind-The-Meter (BTM) installations continued to drive forward the New Jersey solar market, adding approximately 13 MW last month. July had no Direct Grid- Supply completions, contrary to NJCEP’s estimates of around 13 large-scale projects to be in service by July. New Jersey SREC levels experienced an uptick in price volatility in the first two months of Q3. RY 2015 and RY 2016 prices started the quarter in the mid-$230 area but ultimately traded in a range as wide as $20 since the start of July.
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.
The strength in this spring’s New Jersey SRECs rally has pushed spot prices to their three-and-a-half-year high. Since post-BGS lows of $190, the front of the SREC curve has marched to the high $230s range following the June 9th EDC Auction and monthly solar installation data release for May.
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.
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.
Large projects in the development pipeline have finally impacted the market as preliminary February installation numbers were estimated at 44.1 MW. Large-scale projects accounted for 32.6 MW of this volume and included a 10 MW Subsection Q project that had reached commercial operation in Q4 2013 and two behind-the-meter projects, one at 13.1 MW and another at 9.5 MW.
The following research brief will provide an update on the New Jersey SREC market recent trends, and explain Karbone’s price forecasting in the lead up to the BGS Auction in February 2014.