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It has been 3 months since our last New Jersey SREC market update. During that time SREC prices moved up from the $145 area in December 2013 to a high of $185 in February 2014 and have moved back down to the mid to high $150s. $185 was the highest price for New Jersey SRECs since May 2012. Many of our customers who have been holding off for higher pricing participated on this move and sold many banked SRECs.
Upward price movement and market firmness can be attributed to the compliance requirement of close to 1,600,000 SRECs due this fall. This requirement is significantly higher than last year’s requirement of 596,000. It is the first compliance year covered under the solar legislation passed in 2012.
There will be more than enough SRECs minted and available in GATS to satisfy this fall’s requirement. Here are the existing and expected SRECs:
2012 in GATS= 45,860
2013 in GATS = 763,487
2014 in GATS = 790,029 (June 2013 to Jan 2014 production)
Balance of 2014= 450,000 (estimate of Feb to May 2014 production with Feb light due to snow)
SREC supply for 2014 compliance= 2,049,376 (Estimated available)
Estimated ry 2014 SREC demand= 1,600,000 (based on 78 Gigawatt hours of NJ electric consumption)
Estimated ry 2014 oversupply= 449,376
Based solely on the estimated available SRECs above, it would appear that the market should remain stable to weak as the spring and summer arrive and buyers finish their SREC purchases. However, there are a host of other factors that can have market-moving effects. The following is a list of bullish and bearish factors that may have an impact on pricing in the next 6 to 7 months as we approach compliance:
BULLISH FACTORS:
1. It is hard to buy SRECs in bulk in a short amount of time. If some buyers wait until the end of the year to finish buying for their 2014 compliance they may push the market higher in search of SRECs.
2. Buyers hedging for future years purchase SRECs in the spot market and hold them for future compliance years. This reduces the pool of available SRECs for buyers that need them for the October 2014 deadline.
3. 100% of the SRECs are never sold each year. There are a variety of reasons why. Some buyers feel they are worth more so they don’t sell, some don’t enter meter readings in time and some altogether forget about them (it is hard to believe but some people or businesses don’t need the money right away- must be nice!)
4. Speculative buyers may purchase SRECs from solar owners and force compliance buyers to pay higher prices as the compliance deadline approaches.
BEARISH FACTORS:
1. If prices go up too much compliance buyers who have bought spot SRECs for future compliance years may choose to use those SRECs for this compliance year or sell them to other compliance buyers to do the same.
2. SREC markets are based on law and confidence in the law. If there is any potential change in law that may possibly reduce the need to purchase SRECs in future years then buyers will not buy any more SRECs from solar owners other than what they need immediately.
3. If it appears that a dramatic increase in solar installations may happen like it has in the past, (due to overdevelopment) then buyers will back off of the spot market once they have procured their 2014 compliance needs. (no risk EDC contracts, large grid connect permissions from the BPU and a steady increase in lease installations have a good chance of oversupplying the market)
As you can see, there are many factors that can come into play in the pricing of SRECs going into compliance. We try to give our customers, both buyers and sellers, as much information as possible. You can always see our live pricing on our website along with historical pricing going back to 2007. If you log into your Flett Exchange account you can transact SRECs 24 hours a day, see all of your sales history along with historical graphs. Also, feel free to call us directly with any questions or if you need help transferring SRECs on GATS. As always our sellers are paid the same day via check or EFT – your choice!
DISCLAIMER: This article contains forward looking statements. Actual market action could differ materially from those anticipated. Sellers of SRECs should do their own research. Actual SREC production may differ significantly from those estimates. The company assumes no obligation to update any forward-looking statement.
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