Earlier this month, Sol Systems hosted an event to celebrate solar energy at the Christ Church Harbor Apartments, home to a 196kW rooftop system financed by Sol Systems with our partners RER Energy Group and WGL. Christ Church is a low-to-moderate income senior living facility located on the Baltimore Harbor. Baltimore Mayor-Elect Catherine Pugh, a longtime solar champion, was the keynote speaker. Mayor-Elect Pugh spoke on the benefits of solar energy for the community, the state, and thanked the residents for their support throughout the installation process.
“[Christ Church’s] 196kW solar array has produced enough solar to offset carbon dioxide emissions from over 12,000 gallons of gas or 120,000 pounds of coal,” said George Ashton, President of Sol Systems and Chair of the Maryland Clean Energy Center, who spoke at the event. “These numbers are telling, but they don’t tell the other story; the story of an energy independent Baltimore creating its own clean, green, solar energy from its own rooftops.”
It has been a challenging year for the Maryland solar industry. Solar renewable energy credit (SREC) pricing – an important driver for solar growth and economic development in the state – dove as the market experienced oversupply. In May, Governor Hogan vetoed legislation that would have expanded the state’s foundational solar energy policy, the renewable portfolio standard. This could impact the viability of the state’s pilot program for community solar.
“Community solar is a way that renters, people with shaded roofs, and low income Maryland residents can take advantage of the benefits of solar without installing it on their roofs,” said Ashton, “which is critical to a place like Baltimore.”
Many are hopeful that a veto override will take place in early 2017. Mayor-Elect Pugh spoke on this during her keynote address, ensuring the group that the override would move forward.
Sol Systems is grateful for the residents and team at Christ Church for their leadership on sustainability in the city of Baltimore, and for hosting us last week at their facility.
ABOUT SOL SYSTEMS
Sol Systems, a national solar finance and development firm, delivers sophisticated, customized services for institutional, corporate, and municipal customers. Sol is employee-owned, and has been profitable since inception in 2008. Sol is backed by Sempra Energy, a $25+ billion energy company.
Over the last eight years, Sol Systems has delivered more than 500 MW of solar projects for Fortune 100 companies, municipalities, universities, churches, and small businesses. Sol now manages over $650 million in solar energy assets for utilities, banks, and Fortune 500 companies.
Inc. 5000 recognized Sol Systems in its annual list of the nation’s fastest-growing private companies for four consecutive years. For more information, please visit www.solsystems.com.
On August 1, New York regulators unanimously approved a Clean Energy Standard that requires 50% renewable energy use by 2030, affirming and laying groundwork for Governor Cuomo’s mandate. The New York State Public Service Commission estimates it will reduce greenhouse gas emissions by 80% by 2050. In order to achieve the ambitious goal, the standard’s implementation schedule has been made to be an aggressive one, with a 26.31% renewable requirement in 2017 increasing to 30.54% by 2021, and so forth.
A Clean Energy Standard, Not Quite an RPS
While the standard looks similar to a renewable portfolio standard (RPS), the word “clean” in place of “renewable” denotes the inclusion of nuclear power. Nuclear falls into the Tier 3 category and will be subsidized through Zero Emission Certificates (ZECs). The plan comes at a crucial moment for three nuclear facilities in particular which have experienced financial difficulty.
No Solar Carve Out
The standard builds on New York’s existing regime, including the NY-Sun initiative, which has helped installed renewable capacity grow by 300% between 2011 and 2014. However, despite the solar industry’s impressive growth in New York, the Clean Energy Standard does not include a solar carve-out or sub-tier, which have driven development in other top solar states such as New Jersey, Massachusetts, and Maryland. Solar will therefore compete with all other “Main Tier” or Tier 1 resources such as wind, hydro, anaerobic digesters, and fuel cells.
ABOUT SOL SYSTEMS
Sol Systems is a leading solar energy investment and development firm with an established reputation for integrity and reliability. The company has financed 493MW of solar projects, and manages over $500 million in assets on behalf of insurance companies, utilities, banks, and Fortune 500 companies.
Sol Systems works with its corporate and institutional clients to develop customized energy procurement solutions, and to architect and deploy structured investments in the solar asset class with a dedicated team of investment professionals, lawyers, accountants, engineers, and project finance analysts.
Early last month, Rhode Island’s Gov. Gina Raimondo signed a package of legislation that will expand renewable energy investments by:
- Increasing the Renewable Energy Standard (RES) from 14.5% by 2019 to 38.5% by 2035
- Opening the market to community distributed generation systems and shared solar facilities
- Creating a 30MW Virtual Net Metering (VNM) Program for affordable and multi-family housing for 2017 and 2018
- Streamlining permitting
- Legalizing third-party financing to allow both leases and power purchase agreements (PPAs)
- Extending the Rhode Island Renewable Energy Fund (REF) and Renewable Energy (RE) Growth Program until December 2022
- Exempting residential renewable energy resources from property taxes and asking the Office of Energy Resources and the Division of Taxation to establish standardized property tax rules that will be incorporated statewide. This standardization is key, especially as variance in property tax interpretation at the local level is a barrier to solar financing in many states across the U.S.
- Changing eligible renewable energy system sizes for virtual net metering from 5MW to 10MW
A renewable energy standard – called an RPS standard in some states – on its own is often not enough to guarantee solar investments in a given state. However, coupled with programs that minimize soft costs such as permitting, standardize property tax rules, and jumpstart the local industry through a robust incentive program such as RE Growth, Rhode Island is well under way to becoming a leader in progressive renewable energy policies.
Overall, renewables can look forward to a day at the beach thanks to the legislature and Governor Raimondo’s commitment to driving renewable energy investments in the Ocean State.
ABOUT SOL SYSTEMS
Sol Systems is a leading solar energy investment and development firm with an established reputation for integrity and reliability. The company has financed approximately 450MW of solar projects, and manages over $500 million in assets on behalf of insurance companies, utilities, banks, and Fortune 500 companies.
Sol Systems works with its corporate and institutional clients to develop customized energy procurement solutions, and to architect and deploy structured investments in the solar asset class with a dedicated team of investment professionals, lawyers, accountants, engineers, and project finance analysts.
Late last month, Ohio state Senator Bill Seitz (R – Cincinnati) introduced legislation to extend the freeze on the state’s renewable and energy efficiency standards for another three years.
Unfortunately, that’s not all. The bill – SB 320 – also expands the definition of renewable energy sources that may qualify for the Renewable Portfolio Standard, thereby diluting the demand for solar, wind, and other energy sources that would come to mind when one thinks Renewable Portfolio Standard. In addition to gutting the RPS, the bill introduces some bold net metering provisions that would jeopardize the ability of future homeowners and businesses to choose solar.
Put simply, SB 320 is bad news for the Ohio solar industry and the 235 companies that operate in the Buckeye State.
In June 2014, Ohio made history by becoming the first state to “freeze” its Renewable Portfolio Standard (RPS). Two years after the passage of SB 310, and the solar industry is still feeling its effects. Solar build rates have declined significantly from a high of 48.3MW in 2012, to a mere 10MW installed for 2015. Ohio has also missed out on economic growth as a result of the freeze, and its solar jobs ranking has dipped from #18 in solar jobs per capita across the country to a #22 ranking in solar jobs per capita for 2015.
How Does the Freeze Affect SREC Pricing?
After the passage of SB 310, the price of solar renewable energy credits (SRECs) plummeted immediately by over half, from $70/SREC to $30/SREC. Today, SREC pricing is even lower and has traded down to $13/SREC on the spot market. This is troublesome for solar consumers who have already made good faith investments in their solar installations with certain pricing expectations. The value of these good faith investments were compromised with the passage of SB 310, and would again be diminished if the legislature successfully tampers with current law…again.
SB 310’s pricing impact has been felt not only in Ohio, but also adjacent markets that sell their SRECs into the state given an RPS provision that formerly allowed 50% of compliance needs to come from out-of-state sources. The law removed the 50% cap, and bordering states such as Indiana, West Virginia, Michigan, and Pennsylvania quickly flooded the spot market.
Renewable Portfolio Standards = Good
- Ohio is home to 235 solar companies and employs 4,800 people across the state, ranking 11th nationally in solar employment. Nearly 3,000 of these workers are solar installers, and another 834 solar jobs are in manufacturing. These jobs are at risk if the freeze is maintained.
- Four of the five top states in solar jobs per capita have a strong RPS: Massachusetts, Vermont, Hawaii, and California.
- Combined, renewable energy and energy efficiency saved ratepayers 1.4% in electricity bills between 2008 and 2012.
- If no legislation passes this year and the RPS is allowed to continue, economic activity could increase by $5.3 billion over the next 10 years.
- If PUCO’s recent decision to subsidize Ohio’s coal and nuclear fleet is upheld, it could cost ratepayers $6 billion over the next 8 years. Meanwhile, the cost of complying with the RPS is about 0.5% of that figure.
Bottom Line? Don’t Freeze the RPS.
Freezing the RPS would not only be uncool, it would be harmful solar consumers, businesses, and residents in a state that imports $490M in coal from out-of-state each year, according to the Union of Concerned Scientists.
ABOUT SOL SYSTEMS
Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for over 400MW of solar projects on behalf of Fortune 100 corporations, insurance companies, utilities, banks, family offices, and individuals. Sol Systems provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. The company’s tailored financial services range from tax structured investments, project acquisition and SREC portfolio management. Inc. Magazine named Sol Systems on its annual Inc. 500 list of the nation’s fastest-growing private companies for a second consecutive year, ranking it No. 6 in the nation’s top solar companies in 2014. For more information, please visit www.solsystems.com.
Q4 is always the most intense part of the year for the solar industry, as developers and EPCs rush to complete year-end deadlines. This Q4 was no different. In fact, it was even more so. Financiers all rushed to close 2015 deals. Developers rushed to lock in 2016 pipeline. MUSH hosts were rushing to issue RFPs for projects that could be built by the December 31, 2016 ITC placed in service deadline. Rush, rush, rush.
But then, everything changed.
Since the ITC extension passed, developers and host customers alike have stopped to ponder: “Why the rush?” End users that issued RFPs are asking: “Maybe I should put this project on hold and see if costs come down over the next couple years.” More often than not, we’re seeing these potential solar customers as the ones putting the brakes on a deal to retool it, or even re-shop it.
As for developers, some are noticing that in the mad rush to lock in 2016 pipeline by year-end, key diligence items were overlooked. If you have a contract for a 2016 project and missed a key item in diligence (“Shoot, how am I interconnecting this thing again?”), by all means, use this short reprieve to take a step back and get your ducks in a row before shopping your project to a financier. But, don’t wait too long. Contracts expire, SREC values decline, and pricing may change as a result. With much delay, lenders may reallocate funds.
Similarly, if the end user is asking for more time to see where the market goes, tell them there is no time like the present. Since 2010, the cost of a solar electric system has gone down by 70% according to Sunshot. Moving forward, the most potential for dramatic costs declines will come from soft cost reductions (permitting, financing, O&M, customer acquisition, etc.) that are challenging to predict. Moreover, who knows if the cost of capital will continue to drop or begin to climb as interest rates rise and YieldCos pause many of their actions in the market.
Solar has some great momentum right now, but remember: there are many unknowns. As the saying goes, a bird in the hand is better than two in the bush. Rush hour is over, but don’t get left behind.
This is an excerpt from our January edition of SOURCE: the Sol Project Finance Journal, a monthly electronic newsletter analyzing the solar industry’s latest trends based on our unique position in the solar financing space. To view the full Journal or subscribe, please e-mail email@example.com.
ABOUT SOL SYSTEMS
Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for 410MW of solar projects on behalf of Fortune 100 corporations, insurance companies, utilities, banks, family offices, and individuals. Sol Systems provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. The company’s tailored financial services range from tax structured investments and project acquisition, to debt financing and SREC portfolio management. Inc. Magazine named Sol Systems on its annual Inc. 500 list of the nation’s fastest-growing private companies for a second consecutive year, ranking it No. 6 in the nation’s top solar companies in 2014. For more information, please visit www.solsystems.com.
Prepared in collaboration with Sol Systems Intern Mark Noll
On September 29, the Illinois Power Agency released its draft 2015 Procurement Plan regarding renewable portfolio standard (RPS) compliance for the state’s two regulated utilities, ComEd and Ameren – and then, on the very same day, decided to release a second “Supplemental” Procurement Plan for solar PV. The two plans both share great intentions for the best of interventions – and could bring projects with the right entrepreneurial conditions to glory.
Both plans call for the Illinois Power Authority to procure solar renewable energy credits (SRECs), but that’s where the similarities end. They differ with regard to funding, project eligibility, contract lengths, system requirements, and other factors. Sound confusing? It’s OK. We’re here to clear up the confusion.
The First Illinois Plan: Of the Four Procurements, Only Three Matter
The first, “regular” plan sets out the IPA’s 2015 plan for procuring power from renewables for those customers of the state’s two main utilities who have not “shopped” for electricity (most of Illinois’ residents actually have shopped for energy on their own, thanks to electricity market deregulation, and rely on their retail electricity suppliers for compliance). In addition, the IPA has set up a procedure for spending the hourly “alternative compliance payments” (ACPs) the agency has collected from retail suppliers. This is because unlike in many states, some amount of these ACPs are collected each year whether or not the suppliers are otherwise in compliance. It proposes to use ~ $13M of this funding to procure ~80,000 SRECs in one-year contracts.
Research support provided by Eric Lustgarten.
The New York State Energy Research and Development Authority (NYSERDA) is getting closer to solidifying the next iteration of its solar incentive program with the creation of the Megawatt Block. Perhaps befitting what may be one of the last major new cash incentive programs for solar, it could be one of the best; as proposed, the Megawatt Block incorporates a number of “best practices” for incentive design that should poise the Empire State for strong, steady solar growth.
The current version of the Megawatt Block program awards incentives for solar projects on a per Watt basis. It divides market sectors into residential PV (up to 25kW), small PV (non-residential up to 200kW), and large non-residential PV (over 200kW). The final framework for projects over 200kW should be in place by mid-November, and the program is expected to open in late Q1 in 2015 on a first-come, first-served basis.
Massachusetts solar developers breathed a sigh of relief after last week’s announcement.
After the initial August 26th announcement that the 2016 Managed Growth Capacity Block would be 0MW, the Massachusetts Department of Energy Resources (DOER) opened a public comment period. As expected, solar stakeholders expressed their concern over the 2016 allocation, citing that the DOER had projected overly ambitious growth in Market Sectors A-C. In response to these comments, DOER adjusted the 2016 Managed Growth Capacity Block allocation from 0MW to 20MW .
What is Managed Growth in Massachusetts?
The Massachusetts SREC-II Program, initiated in April, creates differentiated financial incentives for each market sector (“SREC Factor”) to level the playing field. This program makes smaller solar projects more competitive compared to larger ones by ideally giving financial preference to residential and rooftop projects (a higher SREC Factor close to 1.0) and providing less support for larger projects (ground mount, landfill or brownfield projects less than 650kW.) Previously, this program allocated 26MW and 81MW for the Managed Growth sector in 2014 and 2015 respectively. As the legislation mandates, the reconsideration and final decision of the 2016 Managed Growth Capacity Block came from the following formula:
At the direction of President Obama, the U.S. Environmental Protection Agency released the Clean Power Plan, also known as 111(d) on June 2. It is the first time the U.S. government has sought to cut carbon pollution from existing power plants. In summary, by 2030, the EPA’s proposed steps should cut national carbon emission from the power sector by 30% – as measured against 2005 levels.
The proposal provides guidelines for states to develop plans to meet state-specific goals to reduce carbon pollution and gives them the flexibility to design their own programs. States can choose a mix of generation using diverse fuels, energy efficiency, and/or demand-side management. States can also choose to work alone to develop individual plans or with other states to develop multi-state plans.
Ultimately, as we look into our crystal ball, we see a large increase in the number of rate cases that utilities bring before their state’s Public Utility Commissions, and subsequent changes in the way utilities are regulated. We also see the following positive impacts for the solar and energy efficiency industries:
With the signing of Senate Bill 310 (SB 310), Ohio has become the first state to “freeze” its Renewable Portfolio Standard (RPS). Ohio Governor John Kasich signed the bill into law on June 13th, effectively halting the state’s mandates for efficiency and renewables until 2017. Come 2017, these mandates will pick up where they left off when the freeze occurred, as opposed to the annual increases in renewable energy and efficiency measures that would have occurred with the RPS.
SB310 will significantly harm Ohio’s solar industry by driving SREC prices down in both the Buckeye state as well as the surrounding states such as Kentucky, Pennsylvania, West Virginia, Indiana, and Michigan that sell their SRECs into Ohio. The bill faced tremendous opposition from health and environmental coalitions, as well as a group of 70 businesses and organizations, including Honda and Whirlpool, who urged Governor Kasich not to sign the bill.
Below, we have included excerpts from Sol Systems’ June 2014 Solar Project Finance Journal, which is a monthly email newsletter that our project finance team distributes to our network of clients and solar stakeholders. Our newsletter contains solar statistics from current real-life solar projects, trends and observations gained through monthly interviews with our solar project finance team, and it incorporates news from a variety of solar industry resources.
If you would like to receive our Solar Project Finance Journal via email every month, please email firstname.lastname@example.org with a request to be added to our Project Finance Journal distribution list.
The Public Service Electric and Gas Company of New Jersey (PSE&G) will begin accepting applications in less than a month, on February 25, for its Solar Loan program. While no major changes have occurred since the first solicitation late last year, data is now available on pricing from the first round of applications and awards.
The first solicitation of New Jersey’s PSE&G Solar Loan III program began last year and closed the period on November 12th, 2013. The program provides loans that make up significant portions of project construction costs (see an example here). The loans can be repaid through SRECs, with payment plans set at the closing of the loan. Cash can also be used to pay in case of low production. Once the loan has been paid in full, any SRECs produced thereafter belong to the owner of the system. The following capacities are available per each program segment:
At Sol Systems, we realize that our work is a reflection of who we are as individuals, and our success is a direct result of all the different personalities, passions, and talents that your employees bring to the table. Our team has expanded significantly in the last few years, and we are proud to employ some of the brightest talent in the renewable energy industry. On this employee highlight we have Andrew Gilligan, Senior Associate at Sol Systems:
What is your current position at Sol Systems?
I am a Senior Associate and help to lead our Investor Advisory Group. As part of this team, I assist renewable energy investors across the United States to successfully deploy capital into solar projects.
How has Sol Systems changed since you first started at the firm?
Since I started with Sol Systems in early 2011, the firm has undergone a lot of changes. Back then, we were a small start-up company only offering SREC solutions. Today, we have evolved to become a financial services firm that can help with any part of the capital stock for projects in all relevant US solar markets.
The City of Palo Alto Utilities (CPAU) has established various programs in the last few years to encourage solar development in the city. Despite space constraints that limit most projects to roof mounts and carports, the administration promotes two distinct initiatives designed to meet the statewide Renewable Portfolio Standard of 33% by 2015:
- Palo Alto CLEAN, a feed-in tariff program
- PV Partners Program, a rebate program that supports net energy metered (NEM) systems
On March 2012, CPAU launched the Clean Local Energy Accessible Now (CLEAN) program, in hopes to expand the production of cost-effective, clean local energy. This was an important step towards greater energy self-reliance, and for the city’s goal of supplying 33% of its electricity with renewable energy by 2015. The feed-in tariff pilot program was initially capped at 4 megawatts and it was targeted to medium-sized commercial rooftops with a minimum size of 100 kWs per installation. After opening the program for applications in April 2012, no applications were received at the initial rate of $0.14/kWh.
Renewable Portfolio Standards across the nation are under re-examination by state lawmakers, aiming to diminish or eliminate these programs. Despite benefits to local economies and environments, some politicians and lobbyists feel the programs are unimportant. To date, a number of proposals have reached State Senate and House floors throughout the country. Many lawmakers hold that RPS programs across the board create unduly costs for electricity consumers and taxpayers in order to support an industry that should be able to stand on its own. However, organizations funded by oil and gas interests like the American Legislative Exchange Council (ALEC), the Heartland Institute, and others have also played a strong role in fostering anti-renewables legislation across the country. Our company has been tracking the movement in many states and provides an overview of legislative progress thus far.
Maryland General Assembly on Track to Pass Legislation to Accelerate the State’s Solar RPS Requirement
Due to sun-setting Federal incentive programs for solar energy and the current structure of Maryland’s Renewable Portfolio Standard (RPS), Del. Sally Jameson (D-28) and Sen. Rob Garagiola (D-15) proposed legislation that attempts to address this concern. House Bill 1187 will accelerate the solar carve-out expecting utilities in Maryland to achieve the 2% solar energy generation requirement by 2020, instead of the current requirement of 2% by 2022. The belief is that the current standard will create a glut, or oversupply, of SRECs due to a higher annual increase in solar energy after 2016. This could distort supply and demand of SRECs, thus making the market volatile and less predictable. HB 1187 aims to provide stability to a potentially volatile market by “smoothing” out the growth of solar in Maryland.
HB 1187 does not increase the overall solar requirement for Maryland; rather it accelerates the achievement of 2% solar by two years (see chart below for comparison). Moreover, although from 2013-2020 there will be yearly increases in demand, as compared to the current requirements, the end goal and requirements for solar will not be affected.
|Energy Year||Current Requirements||Proposed Requirements|
The estimated benefits of this acceleration could not only create a more stable market with a steadier roadmap of SREC prices, but will also extend into the Maryland economy as a whole. Based upon industry information, HB 1187 could create over 10,000 jobs across the Maryland economy by 2018. Industry predictions state that the legislation could incentivize over $3 billion in investment and $144 million in revenue for the State as a result of job creation.
What does this mean for the ratepayer? The legislation was designed with a 1% price impact on the customer. HB 1187 anticipates a residential compliance cost of $0.19 per month and an average commercial electrical bill increase of 0.11%. However, the proposed RPS will actually create savings for the ratepayer when compared to the costs incurred from the current RPS schedule.
HB 1187 passed the House with unanimous support on March 21, 2012 and is currently proceeding through the Senate. After having initially failed the Senate Finance committee, SB 791 managed to pass through the committee 8-2 upon reconsideration during a vote late March 29, 2012. After a final lobbying effort by stakeholders and advocacy groups, SB 791 passed upon second reading in the Senate on April 2nd and will undergo its third reading tonight, April 4th, when it is likely to become law. Sol Systems will post an update as soon as more information is released on the status of the bill.
Sol Systems currently offers three types of SREC agreements for Maryland solar systems (both photovoltaic and solar thermal): Sol Brokerage, Sol Upfront, and Sol Annuity. Please email email@example.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.
Sol Systems Issues Call for Solar Projects – Launches Project Finance Platform with $350 Million in Available Funding
Washington, DC: August 31, 2011 - Sol Systems today announced the launch of SolMarket, a new financing platform that will catalyze investment in solar energy projects nationwide by transforming how solar projects are financed. SolMarket launches with over $350 million of committed partner funds, actively seeking solar projects in need of financing.
SolMarket provides investors and developers with the tools they need to efficiently originate, evaluate, finance, and construct renewable energy projects. It provides a standardized origination platform, a document library, modeling software, and a standardized document suite. SolMarket will also offer developers group purchase discounts for solar modules and other equipment. There are no costs for developers to participate in SolMarket.
“We talk to hundreds of solar developers about prospective commercial and utility-scale projects, and unfortunately, many of these solar projects are never built due to an inability to efficiently locate financing,” said Yuri Horwitz, CEO of Sol Systems. “We have created SolMarket to help drive efficiencies into the solar market and connect investors and developers effectively. SolMarket will reduce the cost of financing transactions and enhance the tempo of solar project development.”
SolMarket has already attracted funding from a number of investors and is seeking projects ranging from 50 kW to multi-megawatts in size. Solar developers are encouraged to submit their projects prior to September 30th because investors are quickly building out their portfolios for 2011.
Sol Systems invites interested solar developers to attend a SolMarket webinar on Thursday, September 1st, Friday, September 2nd, or Tuesday, September 6th at 11 am EST. For more information, please email firstname.lastname@example.org or visit www.solmarket.com.
About Sol Systems
SolMarket is a wholly owned subsidiary of Sol Systems. Sol Systems is a Washington D.C. based solar finance firm, and the largest solar renewable energy credit (SREC) aggregator in the nation, with over 2,300 customers and over 20 MW of solar capacity under management. Through its SREC offerings, it has promoted the development of the solar market by providing long-term financing options for SRECs, facilitating over $100 million in solar development.
Ms. Sudha Gollapudi, Director of Strategic Partnerships
Many definitions of solar renewable energy credits (“SRECs”) say that an SREC is equivalent to one megawatt-hour (1,000 kilowatt hours) of electricity generated by a solar facility. While this is mostly true, it’s not always the case that 1 MWh of solar = 1 SREC. In order for an SREC to be created (or “awarded”), the system must receive certification from the state where that SREC will ultimately be sold – and the system must be registered with the regional transmission organization, such as PJM GATS or NEPOOL GIS. These organizations are the entities that acknowledge solar electricity production of 1 MWH and award the system owner with 1 SREC.
In other words, if a solar energy system is not registered with at least one state and registered with PJM GATS or NEPOOL GIS, the system may produce solar electricity without producing any SRECs. This is important because if no SREC is created, no SREC can be sold.
To further complicate matters, each state has different rules about retroactive SRECs — or how far back SRECs can be awarded. In select situations, SRECs can be retroactively awarded years into the past, whereas other circumstances only allow SREC creation from the state’s certification date forward.
Most often, systems are registered with the state in which they are located, but in certain circumstances, SRECs from one state may be sold into another state which has an open SREC policy and a higher price for SRECs. In cases where the SREC will be sold into a different state, the system must be registered in the state where the SREC will be sold.
In order to ensure that a solar energy system is producing SRECs, the system owner must complete various forms with one or more state agencies. This paperwork can be submitted by system owners themselves, or it may be done through the installer, or an SREC aggregator, such as Sol Systems — the nation’s largest and oldest SREC aggregator.
Once a system is registered and producing SRECs, the SRECs can be sold to entities that are willing to buy them.
Why would anyone buy an SREC?
Some states in the U.S. have created Renewable Portfolio Standards (RPS) that require energy suppliers and utilities to produce a minimum amount of their energy from renewable energy sources. These pieces of state legislation essentially create a marketplace for renewable energy at a premium price and thus stimulate the development of renewable energy markets. Some Renewable Portfolio Standards have specific provisions that require a portion of the electricity to come from solar (a “solar carveout”), and these states typically have strong solar energy markets and robust SREC markets.
When faced with an RPS with a solar carve-out, utilities have three options: build solar power facilities and produce the solar energy themselves, purchase Solar Renewable Energy Certificates (SRECs) or pay a Solar Alternative Compliance Payment (SACP) – a set price for each Megawatt-hour (MWh) of renewable energy they fail to acquire.
The price at which SRECs are sold is dependent on 3 market factors: supply, demand, and the level of the alternative compliance payment (ACP). Demand is driven by state RPS requirements and supply is driven by the number and size of individual solar energy systems which are certified to produce SRECs in a given state. In markets that are undersupplied, the ACP tends to set a ceiling price on the price of SRECs, so a state with a high ACP often leads to high SREC prices – at least until supply catches up to demand. Depending on the intersection of supply, demand, the level of the ACP, as well as the terms of the SREC contract – SREC prices can vary widely.
For more information about SRECs, please visit www.solsystemscompany.com.
Solar Renewable Energy Credit (SREC) markets are comprised almost entirely of solar photovoltaic generators. However, recent legal changes offer opportunities for solar thermal developers to participate in two of the country’s most lucrative programs.
As a background, a solar renewable energy credit is a tradable commodity like a carbon credit. However, unlike carbon credits, an SREC signifies the environmental attributes associated with 1 MWH of electricity, or its thermal equivalent, produced by a solar energy generator.
The value of an SREC is derived by a state’s Renewable Portfolio Standards (RPS). A RPS is a state-specific statute dictating that certain percentage electricity must come from renewable energy generators. Thirty-one states within the US have RPS statutes on the books. Of these thirty-one states, seven require a percentage of the renewable electricity production come from solar energy technologies (i.e. solar carve-out). These seven states also define a Solar Alternative Compliance Penalty (SACP), or the penalty a regulated utility or energy supplier must pay if they fail to acquire the dictated number of SRECs to meet the RPS. For example, energy suppliers in MD and DC must surrender $400.00 and $500.00, respectively, for each SREC they fail to acquire to meet the solar carve out defined within the RPS. The SACP functions as the price ceiling for an SREC market.
Currently, only a very small number of solar thermal generators participate in these SREC markets, because until recently solar thermal generators did not meet the definitional requirements of a solar energy generator within RPS statutes. However this is changing.
The SREC landscape for solar thermal generators is now open for system owners in MD and DC. Effective January 1, 2012, the Maryland RPS will allow solar thermal generators to earn SRECs. To earn SRECs in Maryland the following conditions must be met: (1) the system must be installed on or after June 1, 2011, (2) if the system is residentially owned, the facility must meet the Solar Rating & Certification Corporation’s (SRCC) OG-300 standards, (3) if the facility is commercially owned, the components installed must meet the SRCC’s OG-100 standards and an OIML certified meter must be installed to measure generation at the facility, and (4) the facility must be located within Maryland. To participate in the DC SREC market, (1) residentially owned systems must meet the SRCC OG-300 standards, (2) commercially owned systems must utilize components that meet the SRCC’s OG-100 standards and have an OIML meter installed to measure generation, and (3) pending new legislation, the facility must be located within the District.
In light of these recent legal changes, solar thermal developers can now participate in two lucrative SREC markets. In 2015 alone, the Maryland SREC market alone will have a ceiling value of over $100 million. Or, put another way, more than 195 MW-eq. of new compliance appetite is legislated in DC and MD over the next 3 years. To learn more about SREC options available to you, please visit www.solsystemscompany.com. As the country’s oldest and largest SREC aggregator, we can craft the solution that is right for you.
New Jersey, one of the nation’s largest and fastest growing solar markets, recently released the 2011 Energy Master Plan (EMP). The 2011 Energy Master Plan (EMP) is a 10-year non-binding proposal that lays out the energy agenda and guides legislators on energy policy decisions. The plan calls to reduce the 2016 Solar Alternative Compliance Payment (SACP) by 20 percent and then by 2.54 percent each year thereafter. Additionally, the EMP suggests lowering the Renewable Portfolio Standard (RPS) target to 22.5 percent of energy generated from renewable sources, down from 30 percent. The SACP is a fee imposed on electricity providers if they fail to meet their solar requirement established in the RPS.
Governor Christie claims that the previous ten-year energy master plan was unrealistic and that a more obtainable set of standards based on the current situation is needed. Christie is concerned about what the RPS, particularly the solar carve out is doing to electricity costs for the average New Jersey customer. Therefore, in this Master Energy Plan, Christie wants a cost-benefit analysis of the Solar Renewable Energy Credit (SREC) market in New Jersey created by the solar carve out. To this end, his EMP proposes reducing the SACP as discussed above. Governor Christie has maintained that the projected plan is not intended to lessen the role of wind and solar energy in New Jersey but rather to set a more realistic target for the next ten years.
Opponents of the plan claim that the previous RPS goal of 30 percent is realistic and contributed to the vast solar development in New Jersey. The solar carve out and SACP created one of the more robust SREC markets in the country. An SREC, or solar renewable energy credit, is a tradable credit that represents all the clean energy benefits of electricity generated from a solar electric system. Energy suppliers must procure a certain amount of solar-generated electricity, either through building their own systems or purchasing these SRECs, and so these SRECs became valuable. NJ system owners were able to sell SRECs and decrease their payback period on solar systems significantly.
With the increasing deployment of solar energy and continually decreasing costs in the solar industry, critics of Governor Christie‘s Energy Master Plan claim now is not the time to reduce solar goals. Although the EMP itself does not impact the current NJ RPS (actual legislation would be needed for that), the proposed EMP could undermine the state’s exceptional leadership in renewable energy development and may lead to doubts on the continuing success of New Jersey’s solar market. The New Jersey Board of Public Utilities (BPU), the lead implementing agency, will hold three public hearings in July and August before Christie issues his final plan.