Recent shifts in the political landscape indicate that Connecticut will be the next state to legislate a Solar Renewable Energy Credit (SREC) marketplace. A SREC marketplace allows solar energy system owners to trade their SRECs (the environmental attributes associated with 1 megawatt hour of solar electricity production) on a secondary market at a competitive price. Although Connecticut does not currently have a robust SREC market, the state has a Renewable Portfolio Standard with relatively ambitious targets and a newly elected governor who has voiced his support for solar.

Enacted in 1998, Connecticut’s RPS mandates that 23% of the retail electricity load come from renewable electricity by January 1, 2020. Renewable technologies in the RPS are differentiated into Classes 1, 2, and 3, with solar and wind electricity both being designated as Class 1 technologies. Electricity suppliers can comply with Class 1 annual requirements by procuring Renewable Energy Credits (“RECs”) from facilities located within the ISO New England area (i.e. Connecticut, Maine, Massachusetts, Rhode Island, Vermont, and New Hampshire). In addition, RECs from systems located in states outside of the ISO New England area, such as Pennsylvania and Delaware, are eligible for compliance purposes. If electricity suppliers fail to generate or purchase sufficient RECs to meet their renewable energy requirements, they must submit an Alternative Compliance Penalty (ACP). The current ACP in CT is $55.00 per REC or megawatt hour.

In the spring of 2010, Assembly Bill 493 was passed by the Connecticut House and Senate, but vetoed by former Governor Rell. This bill, “An Act Reducing Electricity Costs and Promoting Renewable Energy”, would have defined a specific requirement for solar energy technologies, and would have created a more stringent non-compliance penalty. If passed, the legislation would have increased the value of SRECs. Connecticut’s current Governor, Dan Malloy, has, in the past, voiced support for the passage of this legislation and stated that he would have signed the bill. However, to date, no solar legislation or discussion drafts are available for analysis.

As the solar topic continues to gather steam inside and outside of Connecticut, Sol Systems would like to note a list of provisions that will be central to any new future solar legislation in Connecticut.

1. The Alternative Compliance Penalty (ACP): The ACP largely determines the ceiling value for an SREC. A higher ACP can lead to higher SREC prices, resulting in a better payoff for those investing in solar energy. For example, neighboring Massachusetts is a state that has helped enact an SREC market by creating a $600.00 ACP; as a result, SRECs in Massachusetts are currently fetching prices between $275-$500.

2. System Eligibility: Currently, Connecticut is an “open market” meaning that it’s RPS allows Renewable Energy Credits (“RECs”) from a large region outside of Connecticut to be eligible for compliance. If new legislation retains this “openness” the SREC and REC values will likely be decreased, as was the case with SRECs in the District of Columbia. To ensure the integrity of a future market, advocates for solar in Connecticut should ensure eligibility requirements that would not lead to an oversupply of SRECs on the market.

3. The Solar Carve-Out Schedule: A solar carve-out schedule defines how much solar electricity must be produced each year, and therefore determines the demand for SRECs. To ensure the market is robust, advocates of solar should advance aggressive solar requirements, akin to states such as New Jersey and Maryland.

Sol Systems’ anticipates future SREC legislation in Connecticut, and will be working with other solar advocates towards advancing a robust solar future in the state.

About Sol Systems:

Sol Systems is a solar energy finance and development firm that was built on the principle that solar energy should be an economically viable energy solution. With thousands of customers and hundreds of partners throughout the United States, Sol Systems is the largest and oldest SREC aggregator. We provide homeowners, businesses, solar installers, and developers with sophisticated financing solutions that help make solar energy more affordable. Sol Systems also helps energy suppliers and utilities manage and meet their solar RPS requirements efficiently by providing them with access to diverse portfolios of SRECs. For more information, please visit www.solsystemscompany.com.