With Q3 2018 issuance numbers out, SRECTrade would like to provide an update on the current standing of the SREC-I and SREC-II markets.

SREC-I 

The SREC-I market is not subject to any new capacity and, as such, is largely impacted by electricity load figures and solar production. Given the current Massachusetts Department of Energy Resources (MA DOER) estimates for exempt load, expected increased retail electric load*, and SRECTrade’s projections for final 2018 SREC generation figures, the 2018 SREC-I market will be undersupplied by approximately 91,000 SRECs, or 10.9% of the exempt load adjusted obligation. Currently, SRECTrade projects the 2019 SREC-I market will have a similar dynamic of undersupply, with a shortage of approximately 46,000 SRECs, or 5.8% of the estimated exempt load adjusted obligation. For specific details, please see our full presentation here.

The market seems to have taken this undersupply into account, with 2018 and 2019 SREC-Is bid at approximately $400 and $370, respectively. These values amount to approximately 94% and 91% of their respective ACP levels ($426 and $404, respectively).

SREC-II

The SREC-II market closed to new capacity as of November 26, 2018. While systems under 25 kW DC must have been interconnected prior to the closing date, applications will still be accepted through February 15, 2019. As such, there is still some uncertainty as to how much additional residential capacity will apply into the program prior to February 15th, although it can be reasonably assumed that this capacity will be marginal. In addition, there exists approximately 80 MW of market factor-adjusted commercial (>25 kW DC) capacity that has received indefinite extensions for the SREC-II program. These systems are mechanically complete and will begin their SREC production once they receive Permission to Operate (PTO) from their respective utility. We assume in our analysis that 90% of these systems will receive PTO within a year of the closure of SREC-II (November 26th) in equal monthly increments, and the remaining 10% will receive PTO after 12 months. This puts our projected final market factor-adjusted SREC-II capacity at 1,534 MW.

Using these assumptions, as well as DOER’s estimates for exempt load, electric load projections, and SRECTrade’s SREC generation forecast, the 2018 SREC-II market will be undersupplied by approximately 145,500 SRECs, or 8.3% of the exempt load adjusted obligation. As it stands, SRECTrade projects the 2019 SREC-II market will be more balanced with a slight oversupply of 7,600 SRECs, or 0.4% of the exempt load adjusted obligation.

The markets have seemingly digested the fact that the 2018 SREC-II market will be undersupplied, bid at approximately $325 or 93% of the ACP ($350). The 2019 SREC-II market has trended upwards in tandem with the 2018 market, however remains split between the SCCA price ($244) and ACP ($333), currently bid at approximately $290. This reflects our projection of a balanced dynamic in 2019.

Should you have any questions about the enclosed analysis or need transaction and management services, please contact us.

*See 2016 MA DOER RPS and APS Annual Compliance Report page 21 for historic and projected retail electric load figures. 

On July 26, 2018, the Massachusetts Department of Energy Resources (DOER) announced that all of the MA2017 SREC Is and SREC IIs submitted to the auction account were transacted in the first round of the Solar Credit Clearinghouse Auction (SCCA).

A total volume of 16,812 SREC Is were bid on across 21 unique bidders, creating more than sufficient demand to clear the available auction volume of 1,520 SREC Is.

A total volume of 74,813 SREC IIs were bid on across 16 unique bidders, creating more than sufficient demand to clear the available auction volume of 12,071 SREC IIs.

DOER and EnerNOC are in the process of certifying and finalizing the auction results. More information will be made available on the SCCA auction page in the coming weeks.

If SRECTrade submitted SRECs to the SCCA on your behalf, we will provide further notice on the status of your transaction once the DOER and EnerNOC provide us with finalized auction results.

With the Q4 2017 NEPOOL GIS renewable energy certificate (REC) issuance nearly upon us, we figured it would be a good time to provide an update on the Massachusetts SREC-I and SREC-II markets. The SREC-I market is not subject to any new installed capacity and is capped at 653.3 MW of eligible capacity. The main factors driving supply and demand in the current state of the market are the 1) annual RPS SREC-I compliance obligations, 2) prompt year solar production and any eligible banked or reminted SRECs from prior years, and 3) total electric load served throughout the state. Given current RPS demand, as provided by the Massachusetts Department of Energy Resources (MA DOER) the 2017 compliance year for MA17 SREC-I is likely to be slightly over supplied by approximately 14,000 SRECs, less than 2% of estimated compliance obligation. For more specific details see our full presentation here. Note, this estimate is still subject to change due to final 2017 electricity supply figures and Q4 2017 SRECs issued. Pricing for MA2017 SREC-Is since the beginning of the year has ranged between $300 and $310, with recent transactions trading at the lower end of the range. Our enclosed presentation also provides a preliminary estimate for MA2018 SREC-I supply and demand. The analysis currently suggests under supply of approximately 85,000 SRECs, a little over 10% of the estimated obligation. Pricing for MA2018 SREC-Is since the beginning of the year for has ranged between $330 and $345, with recent transactions executed around $340/SREC.

With regards to MA SREC-II supply, the market is in the final stages of new solar capacity additions. The program will be capped to any new installed capacity once the Solar Massachusetts Renewable Target (SMART) program is finalized and implemented, expected for late Q2 / early Q3 2018. Recent capacity added has slowed month over month, but continues at a decent pace considering the market is limited to new commercial and reduced SREC factors for all project typees. During the last 6 months of 2017, installed capacity has been 37.2 MW per month on average and 92.1 MW for Q4 2017.

The outlook for the MA2017 SREC-II market is one of oversupply for 2017, with an estimate of more than 186,000 SRECs exceeding the estimated compliance obligation by almost 16%. For more details see the presentation here. Pricing for MA17 SREC-IIs has ranged between $265 and $270 as of late. While 2018 is still subject to capacity additions, the compliance period will also be impacted by the SCCA auction and banked SRECs from 2017 and prior. Our estimated outlook for 2018 is one of slight oversupply, almost equilibrium. Estimates point to over 17,000 SRECs in excess, exceeding the estimated compliance obligation by approximately 1%. Pricing for MA18 SREC-IIs has ranged between $270 and $280 since the beginning of the year.

Should you have any questions about the enclosed analysis or need transaction and management services, please contact us.