Posts Tagged ‘New Jersey’

NJ Solar RPS Increase – New Jersey Assembly and Senate Pass AB-3723 / SB-2314

Posted April 13th, 2018 by SRECTrade.

On Thursday, April 12th, the New Jersey Assembly and Senate passed Assembly Bill 3723 (AB-3723) and Senate Bill 2314 (SB-2314). The bill now sits on the desk of Governor Phil Murphy (Dem) waiting to be signed, after passing the Assembly by a margin of 49-20-2 and the Senate by a margin of 29-8. The bill requires a number of action items to be carried out, including:

  • Requiring the New Jersey Board of Public Utilities to:
    • Administer an energy storage analysis
    • Advance, increase, and extend the solar carve-out schedule and reduce and extend the solar alternative compliance payment schedule
    • Introduce structural changes to the state SREC program
    • Implement energy efficiency and peak demand reduction programs
    • Implement a “Community Solar Energy Pilot Program”
    • Offer tax credits for specified offshore wind facilities
  • Requiring the Department of Labor and Workforce Development to establish job training programs for professionals in manufacturing and maintenance of offshore wind facilities

The bill requires 21% of statewide electricity sales to be derived from Class I renewable energy sources by January 1, 2020, 35% by January 1, 2025, and 50% by January 1, 2030. The cost of this requirement shall not exceed 9% of the electricity purchased by all NJ ratepayers for each energy year 2019-2021 and shall not exceed 7% in each energy year thereafter. In addition, all facilities filing SREC applications after the bill’s enactment date will be subject to a reduced SREC eligibility term of 10 years, down from 15.

No later than 180 days after the enactment of the bill, the board will implement rules to close the SREC program to new systems upon reaching the 5.1% solar carve-out target. The legislation intends to close the existing SREC program to new projects on or before June 1, 2021. Within 24 months from signing the legislation, the Board of Public Utilities will be required to conduct a study that evaluates how to modify or implement a new solar incentive program. A variety of market stakeholders will be consulted in the process to determine the next best steps forward for the NJ SREC market.

As shown below, the bill brings forward and raises the state’s solar carve-out requirements beginning with EY2019 and extends the requirements through EY2033. The requirement peaks at 5.10% in EY2021-2023 before gradually declining through EY2033. The reduction mechanic was introduced to account for solar facilities that will be reaching the end of their SREC production eligibility term.

The bill also reduces the solar alternative compliance payment (SACP) beginning with EY2019 and extends the SACP schedule through EY2033. The SACP level drops to $268 in EY2019 and then gradually decreases by $10 each year following.

For more information on the historical progress of the bill, please view our previous blog post on the topic here. SRECTrade will be publishing an updated New Jersey Supply and Demand Analysis to its blog shortly in consideration of this bill.

New Jersey Senate Passes Concurrence on S-2276

Posted January 10th, 2018 by SRECTrade.

Update: Governor Chris Christie pocket vetoed Senate Bill 2276 (S-2276) when he left office on January 16, 2018.

Please note that the original blog post was slightly revised on January 11, 2018.

On Monday, January 8th, the New Jersey Senate passed the amended Senate Bill 2276 (S-2276), following the Assembly Telecommunications and Utilities Committee’s amendments from mid-2017. The bill now rests on the desk of outgoing Governor Chris Christie (R) for a decision. Although it appears likely that Gov. Christie will pocket veto the legislation when his term ends on Tuesday, January 16th, Governor-Elect Phil Murphy (D) has his eyes set on New Jersey accomplishing 100 percent clean energy by 2050 and leading New Jersey to regain its status as a national leader in solar.

The bill passed by a considerable margin (26-8), demonstrating a strong consensus for support of the Garden State’s renewable energy industry, and also sending an important message to Governor-Elect Murphy regarding the urgency of this legislation.

If signed into law, the bill would establish the New Jersey Solar Energy Study Commission and increase the state’s solar renewable energy portfolio standard. The commission is intended to analyze all aspects of New Jersey’s solar industry and report findings and recommendations to the Governor and Legislature, specifically:

  1. As to whether New Jersey’s solar renewable portfolio standard (RPS) should be modified and extended through a prescribed period, but at least through energy year 2031;
  2. The current trends in utility interconnection study processes and costs; and
  3. The status and future of the state’s solar renewable energy credit market

In the bill, the Legislature speculated that New Jersey’s current statutory solar RPS could result in the loss of over 120 MW of solar per year through 2021, over $240 million per year in lost solar projects, and 5,000 clean energy jobs per year. To ensure the continued success of New Jersey’s solar industry, it is critical that the state pass both interim and future long-term measures to stabilize the industry and promote long-term, sustainable growth.

SRECTrade will continue to provide updates on this and other New Jersey legislative efforts.

New Jersey SREC Update – November 2017

Posted November 22nd, 2017 by SRECTrade.

With the announcement of new NJ solar build data last week, we wanted to provide an update on the current status of New Jersey SREC supply and demand. Since our last update in June 2017, build over the last 6 months (through September) has declined, pacing at 22.7 MW/month. That is approximately a 23.7% decrease against the last 12 month (LTM) rate of 29.8 MW/month. Additionally, the 3 months ending September 2017 saw a 45.5% decline in total build to 48.1 MW for the quarter, against 88.2 MW for the 3 months ending June 2017.

Electricity load served for reporting year 2017, ending May 2017, is estimated to be up 1.3% over RY2016 to 75.2 million megawatt hours. This is a shift in the flat to declining trend the market has experienced since reporting year 2012. Given current build and scenarios based off the 29.8 MW/month LTM rate, the NJ SREC market can expect an oversupply of approximately 500,000 SRECs during reporting year 2018 (approximately 20-25% over the estimated RY2018 requirement).

With regards to pricing, since the beginning of September pricing in the spot and forward markets have experienced appreciation. Pricing for NJ2018 and NJ2019 vintages has risen by approximately 12-14%, while pricing for NJ2020 and NJ2021 vintages has increased by approximately 30%. Price increases for the current vintages could be attributed to slightly lower than expected build rates and annual activity taking place ahead of the basic generation service (BGS) electricity auction, scheduled in early February 2018. Looking forward, price appreciation could also be due to early BGS activity, but also potentially attributed to the possibility of increased RPS requirements, particularly in light of the recent election of NJ Governor Phil Murphy and his stance on clean energy initiatives.

For a complete update on the supply and demand outlook, see our presentation here.

SRECTrade will continue to provide updates as available. Thank you and wishing everyone a Happy Thanksgiving!

NJ SREC Market Update Webinar Slides and Recording Posted

Posted March 12th, 2014 by SRECTrade.

The slides from SRECTrade’s March 12, 2014 New Jersey SREC market update webinar are available here. Steven Eisenberg, Alex Sheets and Sam Rust present SREC issuance and pricing numbers. Additionally, three supply vs. demand scenarios, that assume a high, low, and consistent build rates, are discussed to illustrate potential SREC market supply and demand over the next few years.

A recording of the webinar can be watched by clicking on the image below.

NJ SREC Update

New Jersey SREC Market Update Webinar: Wednesday, 3/12/14 @ 2 pm EST

Posted March 6th, 2014 by SRECTrade.

SRECTrade will host a webinar covering the latest pricing and supply numbers for the New Jersey SREC market. Like all SRECTrade market update webinars, it will be open to the public.

The webinar will be held on Wednesday, 3/12/14, at 2 pm EST.

Click here to register

March 12 NJ Webinar

NJ Governor Christie Signs Bill to Increase Solar Requirements

Posted July 23rd, 2012 by SRECTrade.

Today, New Jersey Governor Chris Christie signed into law legislation to increase the state’s solar goals by amending the Renewable Portfolio Standard (RPS). Both Senate Bill 1925 and Assembly Bill 2966 were passed on June 25, 2012. The bill, which attempts to address the state’s SREC oversupply, adjusts the Renewable Portfolio Standard (RPS) Solar requirements by amending the following:

1) Solar RPS Requirements Increased beginning in Reporting Year 2014: Beginning June 1, 2013 the market will see an increase in SREC requirements, shifting the state’s solar goals from a fixed megawatt hour requirement to a percentage based requirement. Although the requirements increase in the near term, later dated requirements decline over the current solar goals.

2) New Solar Alternative Compliance Payment (SACP) Schedule: Beginning in the 2014 energy year, the SACP will be reduced to $339 declining to $239 by 2028.

3) Grid Supply Projects Capped at 80 MW Per Year in 2014-2016: In 2014, 2015, and 2016 only 80 MW of aggregated grid supply solar can be installed. Certain exemptions for landfills and parking lots have been made. The capacity of a single project shall not be greater than 10 MW.

4) SREC Life Extended to 5 Years: SRECs will be eligible to meet compliance obligations the year in which they are generated and the following four compliance periods.

5) Rules Set for Public Entity Net Metering Aggregation: The bill implements regulations for aggregate net metering for public entities such as schools, counties, or other municipal agencies.

NJ Solar RPS in 2014 and Beyond: Summary of Solar % Requirements and SACP

The charts below demonstrate the % Solar Requirements set under the new bill as well as the proposed SACP schedule. It is important to note that the existing 2012 and 2013 reporting year (RY) requirements do not change under this piece of legislation. RY2012 and RY2013 have an SREC requirement of 442,000 and 596,000 SRECs, respectively. Additionally, the SACP for RY2012 and RY2013 are $658 and $641, respectively.

Slow Down New Jersey, You’re Installing Too Much Solar – The NJ SREC Market Looking Forward

On July 19, 2012, the New Jersey Office of Clean Energy estimated installed solar capacity to be 831.6 MW as of 6/30/12. This represents an increase of approximately 29 MW from the prior month. Also, the state’s solar project pipeline increased by approximately 30 MW to 590 MW as of 6/30/12 from 560 MW the month prior.

As of the latest SREC issuance data in PJM GATS, we estimate the RY2012 market to be oversupplied by approximately 230,000 SRECs. Taking into consideration this oversupply and installed capacity through 6/30/12, the RY2013 market will be oversupplied by more than 600,000 SRECs without any new projects installed in the remaining compliance period (July 2012 – May 2013).

Looking forward to 2014, the state needs to realize a substantial reduction in installed solar capacity on a monthly basis to see the market come into balance in future reporting years. Using similar forecast cases from our prior analysis, Case 1 shows oversupply by approximately 97,000 SRECs through 2015. This is under a scenario in which install rates decline to 18.8 MW/month; representing half of the last twelve month (LTM) average – now 37.6 MW/month through June 2012.

The legislation signed into law today is a step forward to allow ongoing development of solar projects in the Garden State. This bill was needed to ensure companies servicing the NJ solar market are able to continue forward, existing solar projects see some stabilization, and rate payers are protected from excessively high SREC prices. The future development of projects needs to be monitored closely by all stakeholders as this bill requires current install rates to decline in the near term for the market to come into balance with the revised RPS requirements in future reporting years.

A Break In The Clouds? – NJ Legislature Passes S1925/A2966

Posted June 26th, 2012 by SRECTrade.

Introduction

On June 25, 2012, S1925/A2966, now aligned with each other, passed the New Jersey Senate and House. Next, the bill needs to be signed into law by the Governor, which given his recent public support is expected to be completed within the next couple weeks. The bill, which attempts to address the state’s SREC oversupply, adjusts the Renewable Portfolio Standard (RPS) Solar requirements by amending the following:

1) Solar RPS Requirements Increased beginning in Reporting Year 2014: Beginning June 1, 2013 the market will see an increase in SREC requirements, shifting the state’s solar goals from a fixed megawatt hour requirement to a percentage based requirement. Although the requirements increase in the near term, later dated requirements decline over the current solar goals.

2) New Solar Alternative Compliance Payment (SACP) Schedule: Beginning in the 2014 energy year, the SACP will be reduced to $339 declining to $239 by 2028.

3) Grid Supply Projects Capped at 80 MW Per Year in 2014-2016: In 2014, 2015, and 2016 only 80 MW of aggregated grid supply solar can be installed. Certain exemptions for landfills and parking lots have been made. The capacity of a single project shall not be greater than 10 MW.

4) SREC Life Extended to 5 Years: SRECs will be eligible to meet compliance obligations the year in which they are generated and the following four compliance periods.

5) Rules Set for Public Entity Net Metering Aggregation: The bill implements regulations for aggregate net metering for public entities such as schools, counties, or other municipal agencies.

Summary of the Legislation’s Solar % Requirements and SACP

The charts below demonstrate the % Solar Requirements set under the new bill as well as the proposed SACP schedule.

More Solar Now, Less Solar Later – How Does This Compare to the Current RPS Solar Requirements?

While S1925/A2966 increases the RPS requirements in the near term, by 900,000 or more SRECs each year in the 2014-2020 reporting years, beginning in 2024 the bill reduces the SREC requirements. The table below shows the current RPS requirements vs. the number of SRECs estimated to be required under the new legislation.

Oversupply Likely Through at Least 2014, Possibly Longer – What Does This Mean For the Market Moving Forward?

While increasing the RPS requirements is needed to address NJ’s current solar oversupply, the requirements implemented under S1925/A2966 do not necessarily put the market back into under supply. The days of SRECs trading up against the SACP at levels of $600+/SREC are long behind us for 2 reasons: 1) The SACP will naturally push pricing down to levels below $339 when it comes into effect in 2014 and 2) current installed capacity points to oversupply should the market continue at recent rates. This means that if the market is to see an under supplied scenario (i.e. a seller’s market), the amount of solar installed needs to slow down. We would naturally expect to see this take place given the removal of certain federal incentives and a decline in SREC prices, but this decline has been taking somewhat longer than expected in the first half of 2012 (i.e. likely a result of projects being wrapped up from the end of calendar year 2011).

The table below demonstrates the current RPS requirements vs. the estimated requirements under S1925/A2966 assuming no new additional capacity is installed after the NJ Office of Clean Energy’s May 31, 2012 capacity estimates.

It is important to note that the table above shows that regardless of the impact of the new legislation, the 2013 compliance period is oversupplied by approximately 575,000 at a minimum (i.e. the unlikely case of no build throughout the period).

Below, similar to our prior posts, 3 scenarios are analyzed. The first assumes future build continues at half of the last twelve month (LTM) average rate, 38.6 MW/month through May 31, 2012. The second assumes the market continues to build at its LTM average rate and the third case assumes install rates grow adding 1.5x the LTM average rate.

The table below shows the impact of the three scenarios presented above as compared to the estimated SREC requirements under S1925/A2966. If installation rates are able to decrease to half of the LTM average rate, the market will see a slight under supply beginning in 2014. Cases in which the market continues at current rates or increases above current monthly capacity installed show substantial oversupply in each of the periods forecast.

In conclusion, it is important that the solar industry recognizes that if this legislation is signed into law, it does not allow for the rate of installs to see continued growth. The bill merely helps address the oversupply by increasing the near term requirements and putting some limitations on larger scale solar projects. It will be necessary that all industry stakeholders track the market’s progress closely to clearly understand how supply is pacing relative to the SRECs required during that compliance period.

New Jersey Legislation Update: A2966

Posted June 7th, 2012 by SRECTrade.

***UPDATE: As of the close of June 7, 2012, the NJ legislature noted A2966 passed out of the Assembly Telecommunications and Utilities Committee. The bill will now move on to its second reading.***

On Thursday, June 7, 2012 at 10 a.m. ET the New Jersey Assembly’s Telecommunications and Utilities committee will review Assembly Bill 2966. A2966, sponsored by Assemblyman Chivukula, is the assembly’s version of S1925, which passed out of the Senate on 5/31/12; 23 (Yes), 9 (No), 8 (Not voting). While both bills propose to revise NJ’s Solar Renewable Portfolio Standards (RPS), A2966, proposes slightly different revisions as compared to S1925. For a detailed review of S1925, see our prior note here. Should A2966 pass out of committee, the bill will be voted on in the Assembly. If it passes out of the Assembly, A2966 and S1925 would have to be reconciled prior to its review by the Governor’s office before ultimately being signed into law.

Summary of A2966

Similar to S1925, A2966 proposes a few substantial changes that would influence New Jersey’s RPS requirements beginning in the 2014 compliance year (June 1, 2013 – May 31, 2014). The chart below demonstrates the proposed % based Solar requirement outlined in A2966 vs. S1925. Under A2966, the Solar RPS requirements would change beginning in the 2014 compliance year, with a requirement of 1.99% increasing to 4.63% by the 2028 energy year. Additionally, the second chart below shows the proposed Solar Alternative Compliance Payment (SACP) schedule in A2966 vs. S1925.

How Does A2966 Impact New Jersey’s Future SREC Requirements?

The table below shows the SREC quantities required under the current RPS versus the estimates required under the A2966.

Similar to S1925, A2966 takes the steps needed to prop up the NJ SREC market, but a closer look suggests that even if this bill is signed into law the market could continue to be oversupplied. The table below shows the current RPS and estimated requirements under A2966 through 2017. Both scenarios demonstrate what the markets look like given installed capacity through April 30, 2012, and assume that excess, eligible SRECs from prior periods are used to meet the compliance obligations in the current period. Under the current RPS requirements, assuming no new build, the market is oversupplied through energy year 2016. Applying these same figures to the estimated SRECs required if A2966 is implemented, the market is short approximately 198,000 SRECs in 2014 (the equivalent of approximately 165.0 MW operational all year long).

Although the requirements under the current installed capacity and proposed changes under A2966 put the EY2014 market at under supply with no new build, the likelihood of that is minimal. Over the last twelve months (LTM), through April 2012, the average MW installed per month has been 36.8 MW. That figure over the last 6 months has reached 46.6 MW/month. Given the recent historic build rates, we have analyzed 3 different scenarios in which the following cases are assumed:

1) Case 1 – shows half of the LTM average MW added per month throughout the course of the annual forecast periods;

2) Case 2 – shows the LTM average MW added per month remains the same throughout the annual forecast periods;

3) Case 3 – shows 1.5x the LTM average MW added per month throughout the annual forecast periods.

Note, for the purpose of obtaining an ending balance of MW capacity as of May 31, 2012, the table below assumes another 36.8 MW is added in the month of May 2012.

Under A2966, the market is less oversupplied or under supplied depending on the case displayed above. One of the main differences between the table above and our estimates under S1925, is that if installations slow down to half of the LTM monthly average rate, Case 1, the market would be oversupplied though 2015; whereas Case 1 under S1925 would see under supply in 2015. It is important to note that each case assumes all excess, eligible SRECs from the prior period are utilized to meet the current year RPS requirements.

As demonstrated in the scenario analysis, the market would need to substantially slow down current monthly build rates to allow supply to come in line with demand in the future RPS compliance periods. A2966 attempts to lessen the impact of oversupply, but even under the scenarios above, all three cases show oversupply through at least 2015. Additionally, the trade-off of an increased Solar RPS % comes at the cost of reducing the SACP. Thus, although the NJ solar industry can continue to build projects at a reduced rate, new installs will have to be underwritten with the understanding that less value will be derived from SRECs.

Note: Percentage based SREC requirements have been forecast based on EIA Report updated 11/15/11 “By End-Use Sector, by State, by Provider”. Projected SRECs required utilizes the most recent EIA electricity data applying an average 1.5% growth rate per forecast year. The state’s RPS Solar requirement is then multiplied by forecast total electricity sales to arrive at projected SRECs required. Projected capacity required is based on a factor of 1,200 MWh per MW in New Jersey.

Trade-offs Begin – NJ S1925 Update

Posted May 18th, 2012 by SRECTrade.

For a PDF copy of this post click here.

Yesterday, the Senate Environment and Energy Committee passed S1925 out of committee. Coming out of the session, the bill was revised to increase the Solar Renewable Portfolio (RPS) % requirements and decrease the Solar Alternative Compliance (SACP) schedule. Next, the bill will move on to a second reading in the Senate. The charts below demonstrate the difference between the original and revised versions of S1925.

How Does This Impact New Jersey’s Future SREC Requirements?

In our last research note on S1925, we took a look at a summary of the bill and provided analysis on how it could impact the New Jersey SREC market. Given the revision of the Solar RPS % requirements, below is an update to the original analysis.

The table below shows the SREC quantities required under the current RPS versus the estimates required under the revised version of S1925. Although S1925 increases the RPS requirements in the near term, the % requirements estimate a decrease vs. the current requirements beginning in 2024.

While the revised version of S1925 takes the steps needed to prop up the NJ SREC market, a closer look suggests that even if this bill comes to fruition the market could continue to be oversupplied. The table below shows the current RPS and revised S1925 requirements through 2017. Both scenarios demonstrate what the markets look like given estimates of installed capacity through April 30, 2012, and assume that excess, eligible SRECs from prior periods are used to meet the compliance obligations in the current period. Under the current RPS requirements, assuming no new build, the market is oversupplied through energy year 2016. Applying these same figures to the estimated SRECs required if the revised version of S1925 is implemented, the market is short approximately 411,800 SRECs in 2014 (the equivalent of approximately 343.2 MW operational all year long).

Although the requirements under the current installed capacity and proposed changes under the revised version of S1925 put the market at under supply with no new build, the likelihood of that is minimal. Over the last twelve months (LTM), the average MW installed per month has been 36.0 MW. That figure over the last 6 months has reached 44.9 MW/month. Given the recent historic build rates, we have analyzed 3 different scenarios in which the following cases are assumed:

1) Case 1 – shows half of the LTM average MW added per month throughout the course of the annual forecast periods;

2) Case 2 – shows the LTM average MW added per month remains the same throughout the annual forecast periods;

3) Case 3 – shows 1.5x the LTM average MW added per month throughout the annual forecast periods.

Note, for the purpose of obtaining an ending balance of MW capacity as of May 31, 2012, the table below assumes another 36.0 MW is added in the month of May 2012.

Under the revised version of S1925, the market is less oversupplied or under supplied depending on the case displayed above. One of the main differences between the table above an our original estimates is that if installations slow down to half of the LTM monthly average rate, Case 1, the market could be under supplied as early as 2015. It is important to note that each case assumes all excess, eligible SRECs from the prior period are utilized to meet the current year RPS requirements.

As demonstrated in the scenario analysis, the market would need to substantially slow down current monthly build rates to allow supply to come in line with demand in the future RPS compliance periods. The revised version of S1925 attempts to lessen the impact of oversupply, but even under the updated table above, all three cases show oversupply through at least 2014. Additionally, the trade off of an increased Solar RPS % came at the cost of reducing the SACP. Thus, although the NJ solar industry can continue to build projects at a reduced rate, new installs will have to be underwritten with the understanding that less value will be derived from SRECs.

Note: Percentage based SREC requirements have been forecast based on EIA Report updated 11/15/11 “By End-Use Sector, by State, by Provider”. Projected SRECs required utilizes the most recent EIA electricity data applying an average 1.5% growth rate per forecast year. The state’s RPS Solar requirement is then multiplied by forecast total electricity sales to arrive at projected SRECs required. Projected capacity required is based on a factor of 1,200 MWh per MW in New Jersey.

Proposed New Jersey Solar Bill May Not Solve SREC Woes

Posted May 16th, 2012 by SRECTrade.

For a PDF copy of this post click here.

Introduction

Senators Bob Smith and Stephen Sweeny recently introduced New Jersey Senate Bill 1925. The bill proposes to amend New Jersey’s current Solar Renewable Portfolio Standard (RPS) requirements in attempt to help stabilize the oversupplied SREC market. The bill is currently in draft form and is scheduled to be heard by the New Jersey Environment and Energy Committee on Thursday, May 17, 2012.

Based on the information presented below, the proposed version of S1925, while increasing the near term Solar RPS requirements, will likely still leave the market oversupplied. This note summarizes the key points in the draft legislation and quantifies the near term and long term impacts it would have on the SREC market if passed into law.

Summary of S1925

Senate Bill 1925 proposes a few substantial changes that would influence New Jersey’s RPS requirements beginning in the 2014 compliance year (June 1, 2013 – May 31, 2014). The chart below demonstrates the change from a fixed SREC requirement under the current RPS to a % based Solar requirement under S1925. The Solar RPS requirements would change beginning in the 2014 compliance year, with a requirement of 1.832% increasing to 3.730% by the 2028 energy year.

Additionally, the table below shows the SREC quantities required under the current RPS versus the estimates required under S1925. While S1925 increases the RPS requirements in the near term, the % requirements estimate a decrease vs. the current requirements beginning in 2023.

Beyond the proposed changes in SREC requirements, S1925 would implement a new fixed Solar Alternative Compliance Payment (SACP) schedule. The schedule reduces the SACP beginning in 2014 to $350/SREC declining to $252/SREC in 2028. The implementation of this schedule will cap SRECs at a price of $350 in 2014 and decrease in future periods. The table below demonstrates the proposed schedule as compared to the current RPS requirements.

In addition to S1925’s proposed SREC and SACP changes, the bill also addresses a few other areas:

1) An SREC’s useful life would extend from 3 to 5 years; giving it eligibility in the year in which it is issued and the following four energy years.

2) During 2014, 2015, and 2016, approved non-net metered grid supply projects cannot exceed more than 100 MW in total aggregated capacity each year. Grid supply projects located on brownfields are not limited under this stipulation. After 2016, the approval of grid supply projects would be subject to review by the Board of Public Utilities (BPU).

3) Solar RPS requirements would automatically increase by 20% for the remainder of the schedule in the event that the following two conditions are met: 1) the number of SRECs generated meets or exceeds the requirement for three consecutive reporting years, beginning with energy year 2014 and 2) the price for SRECs purchased by entities with renewable energy portfolio standards obligations in each of the same three consecutive reporting years is less than the current SREC price in the year prior to the three consecutive reporting years (i.e. if the price in 2014, 2015, and 2016 is less than the 2013 price and the number of SRECs exceeds the requirement in each of these years, the 20% increase in the RPS will be triggered).

What Does This Mean for the NJ SREC Market?

While S1925 takes the steps needed to prop up the NJ SREC market, a closer look at the numbers suggest that even if this bill comes to fruition the market could continue to be oversupplied. The table below shows the current and proposed S1925 RPS requirements through 2017. Both scenarios demonstrate what the markets look like given estimates of installed capacity through April 30, 2012, and assume that excess, eligible SRECs from prior periods are used to meet the compliance obligations in the current period. Under the current RPS requirements, assuming no new build, the market is oversupplied through energy year 2016. Applying these same figures to the estimated SRECs required if S1925 is implemented, the market is short approximately 118,500 SRECs in 2014 (the equivalent of approximately 98.8 MW operational all year long).

Although the requirements under the current installed capacity and proposed changes under S1925 put the market at under supply with no new build, the likelihood of that is minimal. Over the last twelve months (LTM), the average MW installed per month has been 36.0 MW. That figure over the last 6 months has reached 44.9 MW/month. Given the recent historic build rates, we have analyzed 3 different scenarios in which the following cases are assumed:

1) Case 1 – shows half of the LTM average MW added per month throughout the course of the annual forecast periods;

2) Case 2 – shows the LTM average MW added per month remains the same throughout the annual forecast periods;

3) Case 3 – shows 1.5x the LTM average MW added per month throughout the annual forecast periods.

Note, for the purpose of obtaining an ending balance of MW capacity as of May 31, 2012, the table below assumes another 36.0 MW is added in the month of May 2012.

In each of the 3 cases presented above, the market ends up in oversupply through at least 2016. It is important to note that each case assumes all excess, eligible SRECs from the prior period are utilized to meet the current year RPS requirements.

As demonstrated in the scenario analysis, the market would need to substantially slow down current monthly build rates to allow supply to come in line with demand in the future RPS compliance periods. It‘s unlikely that build rates will decline fast enough to protect from future oversupply. This bill does not allow for an increase in build rates (it requires a decrease) and cannot be used as a justification for an increase in PV installation growth.

Reaching the install rates shown in Case 1 (approx. 18 MW/month) should be within reach despite the restrictions put on grid supply projects. Additionally, the potential introduction of new EDC SREC programs, as well as historic build rates in the residential and commercial sectors, will also contribute to meeting the levels outlined in Case 1. Clearly, SREC pricing and availability of forward contracts to support new project development will impact future build rates, but even in markets with an oversupply of solar (i.e. PA), projects continue to be built without much regard for the current SREC environment.

How Does this Impact the 2012 and 2013 energy years?

Under the current draft of S1925, the RPS requirements would be unaffected in 2012 and 2013. The 2012 generation period will come to a close at the end of May 2012. Compliance buyers will have until approximately the end of September to wrap up their purchases before finalizing RPS reports with the BPU. As it currently stands, we estimate the NJ2012 market to see an excess of approximately 180,000 SRECs. Recent over the counter trading has increased to levels between $125 and $135/SREC, up from the last SRECTrade auction clearing price at just above $115/SREC.

The Electric Distribution Companies (EDCs), or regulated utilities, in NJ will be holding an auction on Thursday, May 17, 2012. Recent announcements show that as many as 33,000 NJ2012 SRECs will be available for sale during this auction. Given these volumes, 2012 demand may be reduced after this auction.

In addition to the 2012 energy year, the 2013 compliance period is fundamentally oversupplied. Current estimates show the 2013 period will see an excess of approximately 496,000 SRECs. This estimate takes into consideration the excess SRECs from 2012 and installed capacity estimates through April 2012. The 2013 forward market has recently traded above the 2012 vintage, but given the fundamental oversupply it is likely pricing will trend downward throughout the 2013 compliance period beginning June 1, 2012 (note the first 2013 vintage SRECs will not be issued in GATS and available for delivery until the end of July 2012).

SRECTrade will continue to keep a close eye on the S1925 legislative process as it makes its way through the Senate Environment and Energy Committee and the remaining requirements needed before it can be signed into law.

Note: Percentage based SREC requirements have been forecast based on EIA Report updated 11/15/11 “By End-Use Sector, by State, by Provider”. Projected SRECs required utilizes the most recent EIA electricity data applying an average 1.5% growth rate per forecast year. The state’s RPS Solar requirement is then multiplied by forecast total electricity sales to arrive at projected SRECs required. Projected capacity required is based on a factor of 1,200 MWh per MW in New Jersey.