The New Jersey market experienced a knee-jerk reaction following the release of Governor Christie’s latest Energy Master Plan (EMP) report.  Spot prices immediately experienced a double digit rally but the type of stimulus outlined in the white paper appears to be more of a market stabilizer than a solid catalyst that will push prices higher for years to come.  The plan is to accelerate the RPS, reduce the SACP, return to a percentage obligation for solar while promoting economic benefits and increase transparency.

The price appreciation that was sparked by the EMP report has proved resilient in both the spot market and long term contracts.  Currently, NJ SRECs from the 2012 compliance year are trading around the $300 level, up 12% from November and 2012-2014 strips are up 17%.  However, these prices are still substantially lower than all-time highs.  This is mainly a result of the 500MWs of solar installed through energy year (EY) 2013 which exceeds the RPS through the next 18 months.  In 2013, the new RPS requirements reach 596 MW.  Depending on the growth over the next 18 months, the NJ market could move from oversupply and allow prices to increase again.  The accelerated RPS will provide this interim relief for the current SREC market and further provide an opportunity for the industry to adjust.

Table 1.

Energy Year Old RPS Requirement (MWh) New RPS Requirement (MWh) NJ RPS Eligible Certificates (SRECs, year-to-date)
2011 270,000 306,000 284,035
2012 354,000 442,000 240,764
2013 453,000 596,000
2014 574,000 772,000
2015 718,000 965,000
2016 884,000 1,150,000
2017 1,081,000 1,357,000

With the costs of installing solar PV and SREC prices declining in lock step, the 2011 NJ EMP sited the cost of recouping new solar installations to be 5 years for projects 10-1,000kW and 10 years for projects less than 10kW.  This data supports an overall reduction in the SACP schedule, which may allow prices to begin to level out as the NJ market becomes less and less oversupplied and SACP decreases to a reasonable level.  The reduction in the overall schedule for the SACP is warranted to reflect the continuing downward trend in costs.  However, this again may not occur for another couple of years, resulting in lower prices with slight increases in the immediate future.

Table 2. Current SACP and Proposed 2017-2026 Schedules

Energy Year 2009 2010 2011 2012 2013 2014 2015 2016
SACP $711 $693 $675 $658 $641 $625 $609 $594
% Reduction 2.53% 2.60% 2.52% 2.58% 2.50% 2.56% 2.46%
Energy Year 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
SACP $475 $463 $451 $440 $429 $418 $407 $397 $387 $377
% Reduction 20.0% 2.54% 2.54% 2.54% 2.54% 2.54% 2.54% 2.54% 2.54% 2.54%

The obligation for solar is currently measured in GWh which limits the opportunity for new technology to lower the need for solar by decreasing the load in the state.  Another unintended result of this obligation is it skews the prediction and accommodation of likely changes in the economy and energy demand over time.  With the NJ Administration focusing heavily on energy efficiency, if the solar obligation were to stay in GWh, then proportionally this would increase the overall % of solar required compared to the total load which would decrease with energy efficiency (EE).  Therefore, a change towards presenting the solar obligation in % of total energy would allow for the Board of Public Utilities (BPU) to modify the overall percentage of solar required in the event of a noticeable impact from energy efficiency (EE) programs.  This will allow for the flexibility necessary to make changes to the solar obligation as market conditions warrant.

The NJ EMP suggests putting greater emphasis on “dual benefit” systems by modifying the definition of “distribution system” and promoting grid-supply solar and ensuring compatibility with land use, environmental, and energy policies.  Initially, as the New Jersey market began, people neglected the land and open space, through building solar wherever they could.  By forcing installers, developers and homeowners to focus on the “best use” of the land for “dual benefit,” both economically and environmentally, it may limit the rapid growth seen before that caused the large oversupply seen today.

Governor Christie has also laid out plans to increase transparency that will result in superior monitoring.  Through this high touch approach, the state will be able to provide more accurate economic forecasts that will enable more accurate planning for the program.

The final goal outlined in the EMP is to expand opportunities for solar.  To facilitate this, guidelines will promote the avoided use of electricity through the EDC which will reduce the associated GHG and criteria pollutant emissions from fossil fuel generating facilities.  This will enable many New Jersey residents to take advantage of individual PV systems with a centrally located unit, allowing numerous residents to be connected behind-the-meter.  Also, the BPU encourages the extension of the program by which the EDCs can offer long-term SREC purchase contracts to solar system owners in their respective territories.  This will continue to allow electric distribution companies (EDCs) the flexibility to secure the best contracts and prices for SRECs they are obligated to purchase.

Given the combined suggestions from the EMP, the prices of SRECs in New Jersey have improved in the spot market and long-end of the curve.  As noted earlier, Sol Systems has seen a sustained 12% increase in the spot market since the release of the EMP from Governor Christie. Meanwhile, 3 year strips continue to rise.  Most recently traded up 17%.  The accelerated RPS and reduced SACP may have the most immediate effect; however, the modifications to the definition of “distributed system” and other considerations for “dual benefit” systems has the ability to be most impactful on the overall supply in New Jersey.

On Monday, January 19, however, the current New Jersey Solar Bill failed to reach a vote in the last legislative session.  This bill (2-2371) would have modified the New Jersey Renewable Portfolio Standard to increase the solar requirements for electricity suppliers.  Although the current legislative session has ended, there is hope that, with the help of Governor Christie’s Energy Master Plan, this legislation will be introduced at the beginning of the next session.

Sol Systems currently offers three types of SREC agreements for New Jersey solar systems:Sol Brokerage, Sol Upfront, and Sol Annuity. Please email info@solsystemscompany.com or contact your solar installer for more specific pricing.

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 http://www.solsystemscompany.com.

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