With the recent promulgation of the DOER’s Emergency Regulations regarding SREC-II, last Friday’s issuance of Q1 2016 SRECs, and the upcoming SCCA auction, there has been plenty of activity in Massachusetts’ SREC markets.  The last few months have been a dynamic period in terms of state market policy as the state regulatory agencies determine how to move forward following the conclusion of the SREC-II program. This period has also seen growth in both project applications and installations.

On June 22nd, 2016 the Massachusetts DOER updated their list of generation units with Statements of Qualification (SQA). While this list gives us a good view into the  bulk of applications that have been processed, the correlation between the number of SQAs issued and the facilities that will ultimately be built is less clear.  While the data shows a dramatic increase in volume, only time will tell whether that growth will actually translate into new operational assets by year end.

You can find our most recent Massachusetts SREC-II capacity update presentation here.

The chart below shows the historical growth in cumulative size of the SREC-II market since 2014:

Represented by the green bars to the right, the pool of assets that have been issued SQAs but are not yet operational is significantly larger than all of the qualified and operational assets that have been registered since the market’s inception.  This dynamic has created a state-wide “sprint to the finish” as developers work to get as many projects as possible under the SREC-II umbrella before the program deadline on January 8, 2017.  Consequently, MA2016 SREC-II supply is far outpacing the RPS demand.

In 2015, the SREC-II program was oversupplied by approximately 70,238 credits, or 57.3% of the exempt load obligation of 122,617.  That surplus is carried over to 2016, and added to the 615,413 projected SREC generation to come to a total supply of 685,651 SRECs.  2016 projected SREC generation is based on holding the average TTM build rate of 26.5 MW/month constant through the year, and then applying seasonally adjusted SREC production factors.   With a 2016 exempt load adjusted obligation of 327,471, we project an oversupply of approximately 358,180 or 109.4% of the demand obligation.

We will continue to update these projections as new information becomes available.  In the coming weeks we will expect to see official results from the 2015 SCCA auction and a new demand number for the 2017 compliance obligation.  All of these will have material impacts on the projection for future supply and demand balance in the MA SREC-II market, and we will be sure to issue new analyses as that information is made public.  As always, feel free to reach out to your SRECTrade brokerage desk point of contact to further discuss this analysis.

Disclaimer. This document, data, and/or any of its components (collectively, the “Materials”) are for informational purposes only. The Materials are not intended as investment, tax, legal, or financial advice, or as an offer or solicitation for the purpose or sale of any financial instrument. SRECTrade, Inc. does not warranty or guarantee the market data or other information included herein, as to its completeness, accuracy, or fitness for a particular purpose, express or implied, and such market data and information are subject to change without notice. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Any comments or statements made herein do not necessarily reflect those of SRECTrade, Inc. SRECTrade, Inc. may have issued, and may in the future issue, other communications, data, or reports that are inconsistent with, and reach different conclusions from, the information presented herein.

Copyright. This document is protected by copyright laws and contains material proprietary to SRECTrade, Inc. This document, data, and/or any of its components (collectively, the “Materials”) may not be reproduced, republished, distributed, transmitted, displayed, broadcasted or otherwise disseminated or exploited in any manner without the express prior written permission of SRECTrade, Inc. The receipt or possession of the Materials does not convey any rights to reproduce, disclose, or distribute its contents, or to manufacture, use, or sell anything that it may describe, in whole or in part. If consent to use the Materials is granted, reference and sourcing must be attributed to the Materials and to SRECTrade, Inc. If you have questions about the use or reproduction of the Materials, please contact SRECTrade, Inc.

On April 8th, the Massachusetts Department of Energy Resources (DOER) filed an Emergency Regulation with the Secretary of the Commonwealth to extend the SREC-II program listed under 225 CMR 14.00. Following this announcement, a public hearing was held to welcome comments on the proposed changes to SREC-II. After reviewing all submitted written comments and oral testimony, the DOER made the following modifications to the Emergency Regulation and filed the final version with the Secretary of the Commonwealth on June 17th. As of July 1st, 2016, the final version of the regulation is officially promulgated and in effect.

Below is a summary of changes made in the final Emergency Regulation:

1. Extension beyond January 8, 2017.

The first change is an extension beyond January 8, 2017 for projects that can demonstrate 50% of their construction costs have been spent by that date. The extension is similar to a regulatory provision that was part of the transition between SREC-I and SREC-II. In response to comments requesting an extension, the DOER made changes to the regulation that will allow for all projects that can demonstrate 50% of construction costs have been expended by January 8, 2017, to receive a four month extension to their construction deadline through May 8, 2017. A Guideline clarifying the process by which projects will be required to document these expenditures will be issued by DOER later this year.

2. Reducing SREC Factors.

The second modification to SREC-II consists of reducing SREC Factors for any projects qualified under an extension to the program. In an effort to reduce the cost impact of any further expansion, the DOER made changes to the regulation such that all systems with a “nameplate capacity equal to or less than 25 kW and receives an authorization to interconnect after January 8, 2017 or that qualifies for an extension under 225 CMR 14.05(9)(s)4.a will receive a lower SREC Factor…”. The DOER will revise the SREC Factor Guideline to reduce SREC Factors for these projects on or before August 31, 2016.

3. Technical Edits and Clarifications.

The final change to SREC-II includes technical edits and clarifications. The DOER made several changes correcting minor technical errors and language inconsistencies in the regulation.

In the same announcement, the DOER reported that it will be conducting Solar Credit Clearinghouse Auctions for both the SREC-I and SREC-II programs this summer. The DOER will make a separate announcement with more details and details regarding the volume of certificates deposited into each auction account sometime this week.

To view the original email from the MA DOER, click here.