On August 11, 2017, the Massachusetts Department of Energy Resources (DOER) filed a much anticipated final version of the Solar Massachusetts Renewable Target (SMART) Program regulation. This revised SMART framework proposition includes several components that market participants heavily discussed during three public hearings as critical to the success of this program and its objectives.
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.
The growing demand for renewable energy by corporate off-takers is fundamentally reshaping electric power sales in the United States. Over the past 3 years, approximately 7.8 GW of wind and solar power were contracted through non-utility corporate power purchase agreements (CPPAs). This trend is gathering pace with many more corporates announcing sustainability goals to procure most (and for some, 100%) of their current and forward electricity needs from renewable resources.
On January 31, 2017, Massachusetts policy makers unveiled a much anticipated, revised solar program that radically transitions solar incentives away from the SREC market and towards a structure akin to a feed-in-tariff regime. Nevertheless under the new program, facilities will still generate Class I RECs that could be used to meet MA Class I compliance obligations.
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.
Over the past year, the Massachusetts SREC-II program has been facing significant programmatic risks as both the net metering and the solar carve-out caps were quickly reached. In April, Massachusetts lawmakers finally passed net metering reform that increased the private and the public caps by 3%, allowing the build of a large number of commercial solar projects that had accumulated on the waiting list for months. In the same month, the Department of Energy Resources (DOER) filed an emergency regulation after receiving a quantity of SREC-II applications in-excess of the available remaining capacity under the SREC-II program cap. The emergency regulations contained several key provisions that aimed to address market uncertainty and establishing a smooth transition to the next incentive program beyond SREC-II.
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.
A group of policy makers in Maryland gathered in December to draft a plan to expand and accelerate the state’s existing Renewable Portfolio Standard (RPS) program. Introduced as amendments to the Maryland Clean Energy Jobs Act of 2016, a draft of the proposal circulated in the marketplace early last month. On February 5th, S.B. 921 was introduced in the Senate, proposing to boostthe current RPS to a 25% goal by 2020 from the current mandate of 20% by 2022.
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.
After the recent failure of the Massachusetts legislature to pass a compromise bill to raise the net metering cap before winter recess, many projects are at risk of heading off a cliff. Coupled with the Investment Tax Credit (ITC) step-down from 30% to 10% for commercial projects, the delay in raising the net metering cap may jeopardize the installations of over 115 MW in 2016. In this Report, the Karbone Research Desk addresses the impact of these recent developments on the SREC-II market and discusses forward build rates scenarios, historical pricing trends, and the impact of legislative uncertainty on market fundamentals.