Posts Tagged ‘Connecticut SRECs’

Connecticut solar bill adds new twist to the SREC concept

Posted June 23rd, 2011 by SRECTrade.

On June 17th, Connecticut passed legislation that consolidates the development and implementation of Connecticut’s environmental and energy policy within a new, expanded Department of Energy and Environmental Protection (DEEP). Although it is still waiting to be signed by the governor, signs point towards approval as he has spoken out in support of the bill.  The bill will affect the solar market on two different levels: residential solar production and commercial facilities less than one megawatt.  The original bill known as “Bill 1243” can be found here (http://www.cga.ct.gov/2011/ACT/Pa/pdf/2011PA-00080-R00SB-01243-PA.pdf ) (see section 106-108) and a summary of the Bill can be found here (http://www.murthalaw.com/files/summary_of_public_act_1180_bill_1243_copy1.pdf) (see page 4 of the summary of the effects of the residential portion of this bill).

Residential

The new Residential Solar Program mentioned in the bill requires the Clean Energy Finance Authority (CEFIA) to create a solar investment program that will produce a minimum of 30 megawatts by the end of 2022, a relatively modest goal, but it is specific to residential solar.

In order to achieve this goal of 30 megawatts by 2022, the CEFIA will offer panel owners the choice between a performance-based incentive or a one-time upfront incentive based on estimated future system performance, known as expected performance-based buydowns.  The actual amount received by panel owners from these incentives will be determined on an individual basis and, if panel owners elect to receive these one-time upfront incentives, panel owners will forfeit the credits they earn from excess energy production.

This expected performance-based buy down program will encourage the buying and installation of new solar panels, but does not set the groundwork for a traditional SREC market. Connecticut’s Renewable Portfolio Standard (RPS), enacted in 1998, mandates that a percentage of retail electricity be renewable, of which a portion is required to be Class 1 (i.e. solar, wind etc.).  These new incentives in combination with low Alternative Compliance Payments (ACP) will result in prices remaining below $55 per REC in the Connecticut market in the future.

In summary, there are three main takeaways from the portion of the new legislation that effects residential solar:

1. There was a “pro-solar” bill passed
2. It’s goals are modest relative to other states
3. The bill doesn’t create a viable SREC “market”

Commercial/Distributed REC Program

The bill also lays out a program that will require energy distribution companies (EDCs) to spend a given amount of money to buy RECs from renewable energy facilities under 1 MW. This is essentially geared towards distributed solar since wind and hydro projects below 1 MW are not as common as for solar. Therefore, we’ll refer to them as “SRECs” for now. According to the bill, electric distribution companies must solicit 15-year SREC contracts from qualified facilities, spending $8M in the first year. Each year thereafter, for the first 4 years of the program, the EDCs must add $8M in annual expenditures through additional solicitations for 15-year SREC contracts. This essentially means that the program will double in size for each of the first 4 years.

At the end of these initial 4 years there are two possibilities: either a) the costs of the relevant technologies have been reduced, or b) the costs have not been reduced.

a)     If the cost of technologies have been reduced (determined by PURA), electric distribution companies will be required to continue the eight million dollar increase in spending per year in years five and six. In years seven through fifteen, the required spending will remain at 48 million per year and will decrease by eight million dollars in years sixteen through twenty-one (as the contracts signed in years 1-4 roll off).

b)    If the cost of technologies haven’t been reduced, electric distribution companies will be required to continue to spend thirty-two million dollars per year in years five through thirteen. In years fourteen through nineteen the required expenditure will decline by eight million dollars per year.

Essentially what this means is that the program will either peak in year 4 and remain at a high of $32M in annual REC purchases or it will be expanded after year 4 to a peak of $48M.

The obligation for electric distributors to buy these RECs will be determined based on the size of their respective distribution system loads and the price of each of these RECs will be capped by the Public Utilities Regulatory Authority (PURA) at $350 per REC.  In addition, PURA retains the ability to reduce this price ceiling by 3-7% per year based on a comparison with actual bid prices from the annual solicitation of contracts and foreseeable reductions in the cost of technologies.

These solicitation plans required of the EDCs will be broken down into three separate categories by facility size: under 100kW, 100-250kW, and 250-1000kW. Systems less than 100kW do not need to participate in the solicitations, but will be eligible to receive a price per REC equal to 10% more than the weighted average in the competitive solicitations for projects in the 100-250 kW range. All systems larger than 100 kW will use a competitive solicitation run by the EDCs and focused on getting the most out of the $8M required to be spent.

For example, if the EDC is required to spend $500,000 a year on the program:
$500,000 / $300 per REC / 1200 = 1.39 MW can be installed

If the price is “bid down” to $200:
$500,000 / $200 per REC / 1200 = 2.08 MW can be installed

As the price gets bid down by producers who are willing to sell their SRECs for less than other producers, the percentage of the EDC’s energy production that is Class I renewable will increase (assuming their overall distribution remains roughly the same).

Finally, if EDCs fall short of spending the required amount of money, they will be forced to make a non-compliance payment of 125% of the difference between what was required and what was spent.

Connecticut SREC Program On Hold After Governor Rell Veto

Posted June 7th, 2010 by SRECTrade.

Connecticut Governor M. Jodi Rell vetoed Senate Bill 493, which would pave the way for an SREC Program in the state.  Rell argued that the Bill, titled An Act Reducing Electricity Costs and Promoting Renewable Energy, will fail to accomplish both aspects of its stated intent. The Bill declared that “The Division of Research, Energy and Technology shall, in accordance with the comprehensive plan approved pursuant to section 16a-3a of the general statutes, as amended by this act, (1) increase the state’s energy independence and security by promoting conservation and efficiency and the use of diverse indigenous and regional electric resources; [and] (2) encourage the use of renewable energy resources and new electric technologies, particularly technologies that support economic development in the state and promote environmental sustainability.” While the Bill never directly mentioned SRECs among a wide variety of energy related topics, Rell’s veto will slow the process of the creation of an SREC market in Connecticut.

The Bill’s proponents claim that the legislation would reduce energy costs, spark growth in the state’s renewable energy industry, create jobs, and stabilize the state’s electricity market. Senator Rell argues that these claims are “eerily reminiscent” to those made on a bill in Connecticut a decade ago, which has since failed to reduce utility prices or help spawn renewable energy in the State. Rell claims that the bill “is not in the best interests of the ratepayers or taxpayers of our state.” Rell never directly mentioned any effect on an SREC market, instead attacking the fiscal irresponsibility of the Bill.

The effect of the veto is being felt heavily in the state’s solar power industry. When asked about the prospects of solar power in the state, Mike Silvestrini, president of Middletown-based Green Skies Renewable Energy replied, “There is absolutely zero opportunity in Connecticut without the energy bill. Eventually we will have to make a decision on whether we can remain in this state.” The legislation would have provided the solar industry with incentives to build large projects on commercial facilities, much bigger business than small residential jobs. The idea was to bring in enough business that Economies of scale could kick in and the business could become self-sustaining.

Although Rell has vetoed the Bill, it could still pass if Democrats are able to drum up enough of a majority to override the veto. If they are unsuccessful, any hopes for an SREC market in Connecticut will have to be put on hold until the next round of legislative sessions.

Meanwhile, SRECTrade is exploring ways to help solar owners in Connecticut generate and sell SRECs outside of the state until the government puts a local market together.