The NJ BPU Approves Results of Round 6 SREC-Based Financing Program

The New Jersey Board of Public Utilities Approved the Results of Round 6 of the Local Distribution Company Long Term Solar Renewable Energy Certificate SREC contracting. This solicitation was for a total of 20Mw. 5.8 Mw was for JCP&L, 11.9 Mw for Atlantic City Electric ACE, and 2.3Mw for Rockland Electric. The competitive solicitation was performed by NERA.
The results for larger projects (above 50 kW) were as follows:

  • One hundred and five (105) bids were received, totaling 39,082.716 kW;
  • Forty-seven (47) awards were made, totaling 15,788.237 kW;
  • Fifty-eight (58) bids totaling 21,797.641 kW were rejected because pricing was found not to be competitive;
  • The average NPV for the recommended awards is $2,926.34 (corresponding to an average SREC price of $413.83/SREC for a ten-year contract);
  • The lowest NPV for the recommended awards is $2,423.64 (corresponding to an average SREC price of $342.74/SREC for a ten-year contract).

Offers by solar developers were twice the available capacity in the solicitation. This was due to a rush by developers in hopes to cash in on the above market prices achieved during the previous 5 solicitations.
The solicitation is competitive in the sense that the projects are selected from lowest price to highest until the quantity is filled or when the prices become “uncompetitive”. There is no transparency in any part of the solicitation. All offers are blind and all individual contract results are kept confidential. Award pricing varies widely based on the distribution areas of the individual projects.
The long term prices awarded during these solicitations continue be approximately 30% higher than comparable prices in the free market. This premium can be estimated to be a 50% premium if consideration is taken as to the quality of the contract. It is widely understood in the industry that a long term contract with a local distribution company with the blessing of the BPU is stronger than a bilateral contract with an independent power company. Ratepayers make up for the losses in these contracts if the prices of SRECs decline in the next 10 years. In the short run the ratepayer will profit if the LDC companies can sell the SRECs at a higher price in the spot market.
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