New Jersey SREC Market Update: Oversupply and Uncertainty Prevails

Karbone Market Research Briefs

The New Jersey Clean Energy Program reported that installed January capacity jumped by 84 MW, a record monthly installation rate. Including February installation of 39 MW, the total PV installed capacity increased to 689 MW, bringing the trailing 12-month average installation rate to 33 MW. While the January installation far exceeds the prior monthly record of 44 MW from October 2011, the chart below provides an overview of the growth trend in build rates in New Jersey.  Average monthly build rates in RY 2010 were 6.8 MW and grew to 14.5 MW in RY 2011. Many factors have contributed to build rate growth in the state that culminated in the recent record installation number. However, the principal agents have been decreasing costs of solar panels and increased investment activity leading up to the expiry the 1603 US Federal Treasury Cash Grant.

New Jersey SREC Market

Karbone Market Research Briefs

Chairman Chivukula of the Telecommunications and Utilities Committee drafted a new assembly bill to revive the solar market in New Jersey (NJ). A4226 aims to amend the NJ Renewable Portfolio Standard by raising the compliance target in 2013 to 896,000 SRECs, accelerating the required SRECs before 2021 and reducing the total requirement from 2022 to 2026 (see table below). In the interest of reducing the potential impact on ratepayers, the SACP will be lowered in 2012 from $658 to $538, and will decline at 2.54% per year thereafter. SRECs will now have a useful life of 5 years, compared to the initial 3 years. The estimated savings are $200m for ratepayers according to the Ratepayer  Advocate.

New Jersey SREC Market Analysis: Divining the Fundamentals

Karbone Market Research Briefs

Forward SREC prices have slumped recently; we believe this is a result, at least in part, of market concerns over potential oversupply for Reporting Year 2012. A recent New Jersey Board of Public Utilities report indicates that the RY 2012 mandate of 442,000 SRECs may potentially be exceeded. SREC selling intensified after the BPU report. RY 2012 contracts have traded to as low as $375/SREC and have since recovered to $460/SREC. The approximate market valuation for RY 2012-2014 and RY 2012-2016 strips is currently $360/SREC and $275/SREC, respectively. This raises the question about whether the New Jersey SREC market as a whole will be in oversupply in RY 2012. To answer this, first an understanding of the market fundamentals is required, followed by testing the fundamentals to actual market activity in RY 2010. These fundamentals can then be projected into 2011 and 2012.

New Jersey Market Update: Potential SREC Demand Change from S. 2371

Karbone Market Research Briefs

On Wednesday, June 29, 2011 the New Jersey State Senate voted 30 to 7 in favor of Senate Bill 2371, legislation that would increase the amount of electricity that suppliers and providers must purchase from solar power generators. The stated goal of the legislation is to improve and develop the market for long-term SREC contracts. Specifically, S. 2371 moves the solar-carve out requirement up for every reporting year (RY) starting in 2013 (See Table below). For example, in RY13 the solar carve-out requirement would increase from 596 GWh to 772 GWh, representing a 30% increase in demand for SRECs in that reporting year.

New Jersey SREC Market Overview

Karbone Market Research Briefs

With the expectation of the 30% Cash Grant ceasing at year-end, December 2010 installed capacity increased by 25 MW and by 20 MW in January 2011. The build rate has returned to normal in February, with the addition of 11 MW taking capacity to 291 MW.

New Jersey SREC Market Overview and Update

Karbone Market Research Briefs

With the expectation of the 30% Cash Grant ceasing at year-end, December 2010 installed capacity increased by 25 MW to 260 MW. The renewal of the cash grant in the final session of the 2010 Congress extends financing support into 2011, enabling capacity growth to continue at 20 MW in January 2011.