MA SREC Forecast
It is now expected that 2012 will have more credits for sale than demand. Minting for first quarter 2012 will occur on July 15th. Pricing is expected to fall below the “floor” of $285.
Reported production between January – June 2012 is 40,034MWhs. There are currently about 90MWs of systems installed. If there were no additional installations (obviously not going to happen), that would generate approximately 47,000 additional SRECs for the year. So, based just on what is in the ground today, over 87,000 SRECs will be minted, which is well over the 73,400 SRECs required for 2012.
How the Auction is expected to work
Since there were not enough credits to meet the 2011 compliance requirement, it is highly unlikely that there will be a Clearinghouse Auction in July 2012. Unsold credits in the 2012 SREC year, can be placed in the Clearinghouse Auction which will take place July 2013. MA DOER will run the auction up to three consecutive times increasing the value to the buyers after each round. If there are still unsold credits after the third (and final) auction, those SRECs will be re-minted. Re-minted SRECs will be deposited back to the generation unit for sale during the next three years. Those redeposited, re-minted SRECs could actually be “more valuable” than a current year SREC. Note, redeposited SRECs cannot be put into any future Clearinghouse Auctions.
How can credits sell less than the “floor”?
Credits sold in the MA Clearinghouse Auction will be sold for $300 minus a MA DOER administrative fee of $15. This has given the illusion that the minimum selling price for an SREC is $285. As noted above, it is possible that not all credits will be sold in the auction. It is also likely that during a year of expected over supply, generation unit owners would be willing to take a lesser amount to get their credits sold during the current year instead of waiting for the auction the following July.
How long will this continue?
The current SREC program will not qualify new installations once MA reaches 400MWs of approved systems. All systems qualified and approved prior to reaching 400MWs will continue to be eligible for SRECs and to participate in the Clearinghouse Auction until their Opt-In End Date. As of July 6, 2012, there are 89.9MWs of approved systems. The last two months have seen an installation rate just under 9MWs per month. That 20MWs in two month is equal to the total number of systems qualified in all of 2010. The rate of installation is expected to continue to increase each month. We expect that once MA reaches the 400MW the volatility will be greatly reduced and credits will stabilize close to the floor. With the growth and what has been witnessed in other states, this will occur much sooner than originally expected.
How Knollwood Energy is prepared for this uncertain market
Knollwood Energy has been monetizing solar renewable energy credits since 2006. We have experience with the up and down markets in PA and NJ. Knollwood Energy’s approach has always been to help our customers make the most informed decision to meet their financial needs and desires.
Based on current and expected market conditions, SREC prices will be trading below the floor price for the foreseeable future. Please contact us no later than next Friday, July 20 if you would like to set a minimum sale price for your 2012 credits. If we do not hear from you by July 20, we will sell your first quarter credits at the prevailing market rate. If we do not sell all of your credits by the end of the SREC year, they will be placed in the Clearinghouse Auction.
If you have any questions or need further information, please contact Alane Lakritz by email at Alane@knollwoodenergy.com or by phone at 862-432-0259.