The state legislature’s Assembly Telecommunications and Utilities Committee on Thursday approved two bills that seek to reverse a recent sharp fall in the value of the tradable Solar Renewable Energy Certificates.
The New Jersey market price of so-called SRECs has dropped by more than half in the past year as their supply has surged in response to a sharp increase in the number of installed solar systems in New Jersey.
For more on traded SRECs markets, read a contributed piece by Karbone director of analysis Alex Anich on Breaking Energy here.
With more than 11,000 systems, the state now has more commercial installations than any other U.S. state, representing 24% of solar installations nationwide, according to Assemblyman Upendra Chivukula, chairman of the utilities panel.
He said New Jersey is the only US state to have taken corrective action to stabilize the price of SRECs.
The bills, if approved by the full legislature, aim to raise the price of SRECs to around $300 from the current $225, Chivukula said. Such an increase would restore the incentive for continued solar installations and would help New Jersey reach its goal for utilities to purchase 22.5% of electricity from renewable sources by 2020, under its Renewable Portfolio Standards.
“The measures … are intended to ensure continued growth of the solar industry by providing stability to SRECs, an innovative instrument which helps track the manufacturing and purchase of solar and has greatly incentivized the marketplace,” Chivukula said in a statement.
Explaining The SREC (And Its Problems)
SRECs are issued by the state’s Board of Public Utilities to solar array owners for the production of every 1,000 kilowatt hours of solar energy that is delivered to PJM Interconnection, the 13-state grid operator of which New Jersey is a part.
The certificates can be traded in the spot market to companies as a way of complying with a requirement to purchase a minimum amount of energy from renewable sources. The boom in New Jersey’s solar installations has caused supply to exceed demand for SRECs, driving down their price and destabilizing the solar market.
By Nov. 30, 2011, the solar industry had installed 531.72 mw of solar PV, or enough to create 638,000 SRECs annually, according to the BPU. That’s well ahead of the 442,000 SRECs required under the RPS for the energy year 2012.
New Jersey wants to avoid the experience of neighboring Pennsylvania whose solar market was badly hit when its own SREC price dropped to $35, Chivukula said.
The bill would accelerate a schedule that requires electricity suppliers to purchase more power from solar systems, and require non-utility load-serving entities that buy SRECs to do so under contracts that last at least 15 years.
Both provisions are designed to sustain the financial incentive to invest in the solar industry.
“People who are investing are able to secure financing because their business models show that they can recoup their investment,” Chivukula told Breaking Energy after the vote.
Lyle Rawlings, president of the Mid-Atlantic Solar Energy Industries Association, welcomed the fall in SRECs from a high of about $600 but said the price now needs support if the industry is to continue to expand.
“The industry has driven down the cost of solar,” he told the panel. “Now we need policy that can deliver savings to ratepayers.”