New Jersey SREC Prices Make New Highs - October 2013 Solar Capacity Update

Prices for New Jersey solar renewable energy certificates (SRECs) have risen in the past few months. On October 4th the 2014 energy year SRECs settled at $149.63 on the Flett Exchange Trading Platform. This is the highest price yet for the 2014 SRECs on the spot market, 30% higher than the low price of $115 on July 16th and significantly higher than the $60 all-time low SREC price last October. The Electric Distribution Companies (PSE&G, Atlantic City Electric, Jersey Central Power & Light and Rockland Electric) conducted a large SREC auction on October 17th for 76,417 energy year 2014 SRECs. It cleared at $147.00 per SREC. Prices as of this publication are slightly lower.


SREC prices are steady now because of 2 factors:


1. Legislation passed in July of 2012 dramatically increased the amount of SRECs that the energy companies need to procure on a yearly basis. Demand for SRECs this energy year will be close to 1.5 million SRECs which is up from the previous legislation which required 772,000.


2. The pace of solar development was slow in the past year due to the lower SREC prices. There were only 8 Mw of new solar activated per month in August and September. The average amount of solar in the last 6 months was only 14.9 Mw per month compared to 28.5 Mw a month at this time last year. It is estimated that 15-17 Mw is needed per month to achieve a perfectly “balanced” market.



The stable and upward pricing should be tempered eventually by the following:


1. It is expected that the monthly install rate should increase next year due to the rising SREC prices.


2. The New Jersey Board of Public Utilities approved another round of Solar Loans and fixed rate Electric Distribution Company SREC contracts for the next year. These contracts shift all risk away from solar developers and onto the rate-payers so it is virtually guaranteed that the build-rate will increase during the next year.


We don’t expect spot SREC prices to experience a new downtrend much at all during the next 8 to 10 months. SREC demand should remain strong due to hedging activity on the part of the energy companies.


We expect there to be periodic, short-lived rallies during the year. With that in mind, we suggest that SREC producers sell every time the market moves up. In the past, rallies in the SREC market only last a few days because it is usually a result of a buyer procuring large volumes. We suggest that if you have a price that you would like to sell your SRECs you should list them for sale on the Flett Exchange trading platform or call us 201-209-0234 to list them for you. This will ensure that you do not miss the selling opportunities.


The stable SREC prices right now will invoke developers to install solar at an increasing rate so it is highly unlikely for the SREC market to stay at high prices for a prolonged period of time. If the spot SREC prices get too high energy companies will contract directly with new solar developers for their next few years of SRECs. The cost to install solar is very low and new solar can be installed with SREC prices in the mid $100s on reasonably priced projects if the developer can get a 3-5 year contract. If prices move too high in the spot market buyers will hedge in the 3- 5 year market as they have in the past. We highly doubt we will see another 80 mw installed in one month like we did in February of 2012 due to the constraints put on large solar farms but it is relatively easy to maintain 20 to 25 Mw per month. That level of new solar installations on a monthly basis should appear again in about eight months to a year and may reverse this stable SREC market.



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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