By Josh Garrett for Sol Systems
In preparation for the MDV-SEIA Conference in Washington DC on November 28, we will be previewing some issues and trends to be addressed at the conference. This blog is a brief examination of the solar market conditions in Maryland, Virginia, and Washington, D.C.
In today’s highly fragmented U.S. solar market, regional solar energy incentives run the gamut from highly supportive to non-existent. In the mid-Atlantic region, we have seen fairly strong support for growth, but the level of support certainly varies from state to state. Both DC and Maryland have encouraged the solar renewable energy credit (SREC) market by increasing the SREC requirements. DC has also introduced new pieces of legislation that would provide additional incentives to push DC residents towards solar. Meanwhile, Virginia is creating new incentive programs. Below, we provide an overview of policy and SREC market conditions in Maryland, Virginia, and Washington D.C. as a way to explore the overall prospects of each state’s solar industry.
Over the last year, the Maryland legislature has proven its support of solar. It remains to be seen the impact the Maryland legislature will have on solar in 2013; however, previous legislation encourages a promising outlook.
Policy: The Maryland legislature showed continued support for solar in 2012, when Governor Martin O’Malley signed the Renewable Energy Portfolio Standard for Solar Energy and Solar Water Heating Systems Bill (SB 791 and HB 1187) into law. This legislation amended Maryland’s existing renewable portfolio standard (RPS) for solar generation, requiring 2% of the state’s power to come from solar by 2020 instead of 2022. To meet the accelerated schedule, Maryland’s Renewable Portfolio Standard will increase beginning in compliance year 2013 and continue through 2020. The period of greatest demand growth from the RPS is anticipated to be 2016 through 2020. While the new law will have a significant impact on the Maryland solar market over the next eight years, the Maryland legislature has not introduced any further legislation to incentivize the solar market.
SREC Market: Considering the lack of introduced legislation and the oversupply that existed in the 2012 MD SREC market, prices for vintage 2012 SRECs in Maryland have declined year-to-date by 2%, with bids at approximately $160 per SREC and offers at about $185. However, the volume of trading in SRECs at these price levels is limited. Trading of 2013 SRECs is taking place at higher prices, around $215 per credit, most likely as a result of the boost to the solar RPS requirement in May 2012. This legislation will truly begin to show its impact starting in 2013. Sol Systems’ analysis and modeling shows that 2012 will see an oversupply of SRECs, but that 2013-2015 will shift toward undersupply.
For a state without its own SREC market, Virginia has begun to show more support for solar over this past year; however, it is important to note that Virginia is reliant on the SREC market in Pennsylvania, thus legislation in Pennsylvania will continue to have an impact on the Virginia solar market.
Policy (in the state of Virginia): Currently, most Virginia utilities meet their RPS mandates by purchasing RECs from existing facilities, leaving little to no room for creating new solar jobs and expanding solar capacity in the state. However, the State Corporation Commission of Virginia is currently considering two solar energy programs proposed by Dominion Virginia Power that seek to expand solar capacity within the state. The first program would allow the utility to directly finance new solar installations totaling 30 MW of capacity on large rooftops inside the Commonwealth. The second program is a residential solar purchasing plan capped at 3 MW of capacity, which has been dubbed a “demonstration program.” These programs will look to expand solar outside of the mandated RPS requirements to create an additional incentive for VA system owners to go solar.
Policy (in the state of Pennsylvania): Many Virginia solar energy systems that are eligible to produce SRECs must sell into the Pennsylvania SREC market, as DC and Maryland recently closed their borders to out-of-state systems. These Virginia system owners could be affected by Pennsylvania’s Senate Solar Bill (SB 1350), a three-part bill that was introduced in the state legislature but has not yet reached committee consideration. The Solar Bill would increase the solar carve-out requirements in Pennsylvania’s Alternative Energy Portfolio Standard (AEPS) during compliance years 2013 through 2015, hold them steady from 2016 to 2019, and reduce the requirements in 2020 while extending the overall AEPS through 2025. The bill would also raise the price of Alternative Compliance Payments (ACPs) to $285 per SREC during compliance years 2013 through 2019 before reducing solar ACPs by 2% per year thereafter. Finally, the Solar Bill would enable solar thermal facilities to qualify for SREC production. If carried forward into next year, the bill could combine with its counterpart introduced in the state House of Representatives in 2011 to promote changes to the AEPS and solar carve-out, which would in turn increase SREC prices in Pennsylvania.
Pennsylvania SREC Market: Considering that most SRECs from Virginia can only be sold into Pennsylvania, it is important to note for Virginia system owners that SREC prices are in the midst of a steady decline in the Commonwealth of Pennsylvania, with bids currently at $23 per credit. Offers for SRECs in Pennsylvania are at approximately $27 per credit, with most volume trading around $26 per credit. Expectations are that the market will be four times oversupplied (though that estimate does not take into account SRECs that will be retired in neighboring states). Unlike DC and Maryland, the Pennsylvania SREC market may continue to decrease if legislative action is not taken.
With the passage of legislation in late 2011 to increase the RPS and solar requirement, DC set a high bar for solar growth.
Policy: To support solar growth, the DC Council introduced two new solar bills in 2012. The DC Council is currently considering the Community Renewable Energy Act of 2012 (B19-715), which was introduced in March 2012. The bill expands the accessibility of solar energy for D.C. residents by establishing Community Generation Facilities and enabling virtual net metering protocols. If passed, residents could invest in a solar facility in their community and reap the energy savings in proportion to their investment through virtual net metering performed by their electric utility.
In addition, the Council approved the Energy Innovation and Savings Amendment Act (B19-0749), known as the Property Tax Exemption bill, in a first vote on November 1, 2012. If enacted, the new law would exempt solar energy systems from the District’s personal property tax, reducing the tax burden on solar energy systems and further incentivizing the construction of solar energy projects. The bill will potentially require one or two additional approvals from the Council before proceeding to the Mayor for final approval. As we look into the start of 2013, it seems DC will remain a strong market for solar.
SREC Market: The positive effects of the 2011 legislation to increase the solar requirement began to ring true in 2012. With energy suppliers focusing on meeting compliance targets at the end of 2012, prices for SRECs started to climb at a steady rate of 5% per month. As of this month, 2012 SREC bids were consistently above $300 per SREC. The Legislation passed in 2011 will take effect starting in 2013 by increasing the District’s RPS while disallowing SRECs from out-of-district systems (those that were not approved before 2012). We expect those changes to drive 2013 SREC prices even higher with the anticipation of a significant oversupply of SRECs in 2013-2014.
The policy frameworks and market opportunities in Maryland, Washington, D.C., and Virginia present an accurate analogy for state and regional markets across the U.S.: on one hand, there are states that offer strong incentives which are expected to endure for several years; on the other, there are places that offer little to no incentives for solar power and are not home to any SREC markets. An in-depth discussion on the Maryland, Virginia, and Washington DC solar markets will occur at next week’s MDV SEIA conference when the region’s largest solar players come together to discuss the specific challenges and opportunities that the region offers.
About Solar Energy Focus 2012
Sol Systems is proud to be sponsoring the Solar Energy Focus 2012 conference which will host 50+ speakers, 12 breakout sessions, 350+ business leaders, investors, legal experts, developers and policy-makers. The conference will take place on November 28, 2012 at the Marriott at Metro Center in Washington, DC. To register for the conference, please visit www.solarenergyfocusconference.com.
About Sol Systems
Sol Systems is a solar finance firm and a leader in financial innovation in the renewable energy industry. Since its inception in 2008, Sol Systems has partnered with 350 solar installers and developers to bring over 3,000 solar projects from conception to completion by offering innovative financing solutions for residential, commercial, and utility-scale projects.
Sol Systems’ financing programs catalyze investments for a broad set of solar projects by simplifying their origination, diligence, and financing processes. Developers seeking financing for solar projects can access over $2.5 billion in capital through the Sol Systems investor network.
In addition to providing financing, Sol Systems also offers project due diligence, deal structuring, and asset management services – all designed to reduce overhead and transaction costs and quicken project development timelines.