On February 6, 2017, Pennsylvania lawmakers introduced Senate Bill 291 concerning Alternative Energy Portfolio Standard (AEPS) revisions that aimed at promoting and advancing in-state solar energy project development. As introduced, the proposal seeks to jump-start solar development in the state by restricting eligibility under the AEPS to PA-sited only facilities and expanding the solar requirements to stimulate more build. Senate Bill 291 aims to boost the current solar AEPS requirements to 1.5% by 2023 from the current mandate of 0.5% by 2021.
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.
To ensure the reliability of the Mid-Atlantic grid, earlier this year PJM instituted the Capacity Performance (CP) plan. This created a regime with higher capacity revenue expectations, accompanied by more rigorous plant performance criteria and greater penalty payments. Given the 2018/2019 Base Residual Auction (BRA) results, how well has the CP achieved its goals? Can similar results be expected in future auctions? What are the broader market implications from the CP program change? In the quiet between the storm of PJM auctions this summer and end of year EFOR-D assessments, Karbone’s Research Group and Power Market Brokerage Desk have taken the opportunity to explore these considerations below.
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.
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.
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.
The following research brief will focus on the recent developments in the NJ SREC market, including pricing and installation trends, followed by comparisons against the MA SREC market.