Sol Systems has put together a prospective view of the supply and demand dynamics of the SREC II market in Massachusetts, based on the DOER’s recent presentation of proposed policies for the program. The principle takeaway for solar developers in the MA market is that the SREC Factor they bid in a competitive solicitation for projects in the ‘Managed Growth Sector’ will need to be determined at the time of bidding, as the SREC-II market dynamics will be ever-evolving. They should do this by analyzing the market using the project and SREC data that the DOER is promising will be extensive in the SREC-II program. This should give project owners assurance that they will not have to blindly determine a competitive SREC Factor to bid for their projects.
Updates to the Massachusetts 400-MW Solar Carve Out Program that You Didn’t Hear at the June Stakeholder Meeting
In the excitement of the recent stakeholder meeting that the Massachusetts Department of Energy Resources (DOER) held on June 7, which focused on the emergency regulation to address the over-subscription of the 400-MW solar carve-out program and the proposed policy for the post-400 MW program, some important updates to the current 400-MW program have not received due attention. As of June 7, 2013, the proposed changes to the 225 CMR 14.00 regulation went into effect, with no changes made to the red line version that the DOER proposed to the House at the end of April. Here, we summarize some of the most pertinent changes relevant to solar developers and investors who operate in the Massachusetts market.
Adjustment to the Rules of the Solar Credit Clearinghouse Auction
The updated regulation now states that “Any entity that owns Solar Carve-Out Renewable Attributes is eligible to make deposits” of SRECs into the annual July auction run by the DOER. Previously, the DOER restricted the type of entity who could deposit SRECs to only system owners or operators; essentially, unless you were the first entity to receive the SREC into your NEPOOL account following generation, you were excluded from the auction. Now, you simply must have possession of an SREC in your NEPOOL account to participate in the auction. This change will open the auction up to a much larger number of participants, and may result in a greater number of SRECs being deposited into the auction. The 2013 auction has been closed to further deposits, and will begin with the first round on Friday, July 26th.
Prior to the revisions to the regulation, market participants generally understood that any SRECs that do not clear in the first, second, or third rounds of the auction and thus re-mint with a 3-year shelf life are not eligible to be placed into future years’ auctions. The DOER has inserted a clause into the regulation that explicitly states this rule, which was not formally included prior to the revision.
10-Year Opt-In Term for the 400 MW Program
The revised regulation removes the control mechanism previously in place for the length of the Opt-In Term. Before this change, the DOER was mandated to reduce or increase the original Opt-In Term set at 40 quarters in 2010, as follows:
- Each time the number of SRECs deposited into the annual auction reached 10 percent of the current year’s compliance obligation, the Opt-In Term assigned to projects that qualified for the 400-MW carve-out program following the annual announcement at the end of July would be reduced by four quarters
- Each time the amount of compliance obligation met with ACP payments reached 10 percent of the current year’s compliance obligation, the Opt-In Term assigned to projects that qualified for the 400-MW carve-out program following the annual announcement at the end of July would be increased by four quarters
In addition, the regulation set bands around this mechanism; the Opt-In Term could not be reduced by more than eight quarters in any given year, and for 2010-2016 there was a minimum Opt-In Term of five years.
The revised regulation fixes the Opt-In Term to 40 quarters (10 years), for all projects, regardless of whether they come online during a period of oversupply or under supply in the market. This is good news for commercial project developers and financiers, and for homeowners, as it removes the difficulty of trying to predict when a reduction in the Opt-In Term may occur, the result of which would be decreased revenue and a longer payback timeline on the system.
Increase to the SREC Demand in 2013
The DOER has increased the Total Compliance Obligation for the 2013 compliance year, from 135,495 MWh, or SRECs, to 189,297 MWh/SRECs. The increase is thanks to the removal of the component of the compliance obligation formula that subtracted the MWh volume of compliance met with ACP payments from two years prior. This adjustment exemplifies the DOER’s commitment to supporting SREC prices; however, even with this increase the market will be oversupplied in 2013 due to the substantial acceleration of solar installation in Massachusetts in 2012 and the first quarter of 2013.
Timeline and Queue for Applications to Get Into the Second Solar Carve-Out Program
The regulation has been revised to begin to handle the transition between the first and second solar carve-out programs. The DOER has created a new concept, the Assurance of Qualification, which will in a way act as a soft Statement of Qualification until the rules for applying into the second program are drafted, approved, and implemented. In other words, projects that do not qualify for the first program, assuming they meet the requirements specified in the regulation and in the Assurance of Qualification Guidelines, will be given assurance by the DOER that they will be eligible to produce SRECs in the second program.
In order to encourage complete and accurate applications, the DOER will introduce a new timeline for the expiration of a Statement of Qualification issued to a project. The details have not been finalized, but are expected to be released in the final version of the Assurance of Qualification Guidelines.
A Lot of DOER Tinkering but Progress in the MA Solar Market
Each of these changes will help to provide clarity for the market in the coming years, for both the current program and the post-400 MW program. The proposed policy for the second solar carve-out program, although not finalized, has hopefully provided comfort, if not certainty, to developers and project owners on how to apply and become qualified for the next program, so that they can continue to develop projects with confidence.
About Sol Systems
Sol Systems is a boutique financial services firm that offers investor clients direct access to the renewable energy asset class and provides developers with sophisticated project financing solutions. Founded in 2008, Sol Systems focuses on meeting the most critical needs of the industry, including SREC monetization, capital placement, tax equity, and New Market Tax Credits. To date, the company has arranged financing for thousands of projects and facilitated hundreds of millions in investment on behalf of Fortune 100 companies, private equity, family offices and individuals.
For more information, please visit www.solsystemscompany.com.
Investors, developers, SREC aggregators, and other stakeholders in the Massachusetts solar market gathered at the State House today for meetings relating to the state’s RPS Solar Carve-Out Program. The Department of Energy Resources (DOER) sought public comment for two pivotal changes to the solar policy regime currently underway—the establishment of a post-400 MW solar program, and the ongoing rulemaking to address changes to regulation 225 CMR 14.00.
Policymakers noted the success of the Solar Carve-Out program in “aggressively growing solar installation and businesses in Massachusetts”, pointing to the rapid pace at which the state has neared Governor Deval Patrick’s goal of 250 megawatts of solar capacity by 2017. The latest DOER data from this month shows nearly 215 megawatts of solar capacity qualifying for the Solar Carve-Out Program, 195 megawatts of which is already operational. With this pace of growth, everyone is asking, “What will happen to incentives for solar development once current capacity meets the 400 megawatt cap of the Solar Carve-Out Program?”
On February 22, the DOER announced their intent to actively develop policy to maintain the growth of the solar PV market in Massachusetts, beyond the 400 MW cap of the current RPS Solar Carve-Out. The DOER released a statement Wednesday, March 13 providing further notice to all stakeholders of two public meetings that will take place this Friday, March 22.
At a morning stakeholder meeting, the DOER will unveil the policy objectives and potential changes under consideration for a post-400 MW solar policy in Massachusetts. The meeting will give market participants a chance to provide comments ahead of any final decision on this key policy. A legislative public hearing will follow in the afternoon, to separately address the on-going rulemaking of the 225 CMR 14.00 regulation of the current Solar Carve-Out Program.
At the end of each quarter, Sol Systems takes the weighted average sales of the SRECs from our 3,300+ customers to calculate our final clear prices. These SREC clear prices are then posted to Sol Brokerage page of our website. Sol Systems publishes our quarterly SREC clear prices in order to help provide transparency to the SREC marketplace for both our Sol Brokerage customers and developers in the solar industry.
As the oldest and largest SREC aggregator in the country, Sol Systems’ portfolio management team leverages our SREC expertise to transact in the SREC market on a daily basis when we see strong opportunities for selling our customers’ SRECs at the highest market values.
The Sol Systems approach differs from other SREC broker services and auction-based platforms in that we have in-house expertise that is constantly monitoring SREC markets, communicating with SREC buyers (utilities and energy suppliers) and achieving the highest sales prices available for our customers by selling bundles of SRECs on the spot market. Using an aggregation approach instead of selling SRECs individually, we often secure higher spot prices than competitors.
Please see below for our most recent spot market clear prices for SRECs generated in compliance years 2012 and 2013. Our next clear prices will be posted after the Q4 payment cycle, which is at the end of February and encompasses all generation between October and December for PJM customers and July to September for Massachusetts system owners.
2013 Compliance Year SRECs
2012 Compliance Year SRECs
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.
For more information, please visit www.solsystemscompany.com.
On December 29, the Massachusetts Department of Energy Resources (DOER) announced a rolling 10 year Alternative Compliance Payment (ACP) Rate Schedule for the RPS Solar Carve-out. The schedule maintains the ACP Rate at its current level through Compliance Year 2013, and then reduces the Rate at 5% per year.
This change to the Solar Carve-out Program will provide much needed visibility with regards to the ACP and should encourage electric suppliers with compliance obligations to participate in long-term SREC contract talks.
The 10 Year Schedule is below. The full announcement can be found here - DOER Announces Forward ACP Schedule.
|Compliance Year||ACP Rate per MWh|
|2022 and after||added no later than
January 31, 2012 (and annually
As the oldest and largest SREC aggregator in the country, Sol Systems currently offers three different types of agreements for Massachusetts homeowners and businesses: Sol Upfront, Sol Annuity, and Sol Brokerage. However, Sol Upfront is only available for systems installed by one of our platinum partners. Please contact your installer or e-mail our Sol team at email@example.com for information on specific pricing.
In order to obtain specific pricing for commercial systems, we recommend that developers load these projects on SolMarket, our new financing platform. In addition to linking solar developers with quality investors, the SolMarket portfolio team customizes SREC pricing indications for commercial projects and distributes them on a weekly basis.
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.
This morning I was speaking with a homeowner in western Massachusetts who had recently taken the plunge and invested in solar energy. Solar Renewable Energy Credits (SRECs) were on his mind. Specifically, he wanted information that would help him come to an informed and clear valuation of the SRECs generated by his system.
Due to the complexities of SREC markets in general and the peculiarities specific to Massachusetts, this homeowner’s interest in understanding how to value his SRECs is a refrain we at Sol Systems are hearing regularly.
Many homeowners are looking to understand the basic framework of the market; and in our mission to provide the resources to make solar simple for homeowners, we have prepared a summary of the major characteristics of the MA SREC market.. This summary will provide information geared specifically for residential system owners so they can make informed decisions on the monetization and valuation of their SRECs.
To begin, SRECs in Massachusetts are used by regulated energy suppliers and utilities to comply with the solar carve-out of the Massachusetts Renewable Portfolio Standard (RPS). For example, if NStar puts under contract 10 million megawatts hours of electricity in 2011 for delivery in 2011, and the solar carve-out for 2011 is set by the Massachusetts Department of Energy Resources at 0.10%, then NStar must purchase 10,000 SRECs (10 million MWH * 0.10%). In the event that NStar does not purchase sufficient SRECs to meet their compliance obligation, they are obligated to pay a penalty of $600.00 for each megawatt hour (1 SREC = 1 MWH of solar). The $600.00 penalty is defined as the Alternative Compliance Penalty (ACP), and this penalty effectively sets a cap on SREC values in Massachusetts.
Homeowners are eligible to sell their SRECs in a variety of ways. One option is to place the SRECs posted to their NEPOOL GIS account into the Clearing House Auction (NEPOOL GIS is a regulatory body that tracks each generator’s production, and mints SRECs to reflect the production). The MA Clearinghouse Auction is an online state-sponsored program that allows homeowners to deposit SRECs into an account in order to auction the SRECs at a fixed price of $300.00, minus a 5% administration fee (i.e. fixed price of $285.00). The Auction occurs once a year, no later than July 31. While the Clearinghouse attempts to create a price floor of $285 for the SRECs, there is no guarantee the SRECs will be purchased.
In the event a homeowner is interested in other options, the MA Department of Energy and Resources has compiled a webpage of market resources. The market resources lists companies, like Sol Systems that can assist homeowners in monetizing their SRECs.
Sol Systems offers customers in Massachusetts a variety of services that can meet their risk and reward profile, while also providing clarity on how to value their SRECs. For those interested in security, Sol Systems can offer a lump sum upfront payment for the sale of the rights to their SRECs. Or, for those interested in the most competitive pricing but little long-term security, Sol Systems can offer a 1-year brokerage service. Depending on the size of your system, the brokerage fee may be waived as well. Or, for those interested in a moderate valuation, Sol Systems also offers a utility-backed 3-year fixed price contract of $400.00 per SREC.
Sometimes homeowners express an interest in negotiating an SREC transaction directly with a regulated entity, and when I speak with people interested in doing this, they often recite their interest in “cutting out the middle man”. While this point of view might be valid (and possible) in some industries, it can lead to loss of value in the SREC space (in any case, most energy suppliers are not willing to negotiate with small system owners). On the other hand, established SREC aggregators (like Sol Systems) who represent thousands of customers can leverage their position with an energy supplier to secure more competitive pricing than would have otherwise been garnered through a one-off transaction between a very large entity and a homeowner with a small number of SRECs for sale.
Sol Systems Reduces Costs of Going Solar in Massachusetts with Upfront SREC Financing and 0% Brokerage for SRECs
Washington, DC: January 12, 2011
Sol Systems, the nation’s largest solar renewable energy credit (SREC) aggregator, is offering a new SREC option, “Sol Upfront,” for solar energy system owners in Massachusetts, and will waive commercial project brokerage fees for its spot market option “Sol Brokerage.”
The upfront payment option allows homeowners and businesses who install solar energy systems to pre-sell 10 years of SRECs in exchange for a lump-sum payment, while the brokerage option allows commercial-sized system owners to seek the highest spot prices for their SRECs with no fees. Both options will improve the economics of going solar for Massachusetts solar project owners.
“Because the Massachusetts’ SREC market is new, and there is an element of risk compared to some other well-established SREC markets, we have created ways for our customers to address this risk in the way that best fits their financial profile,” said Sol Systems CEO, Yuri Horwitz. “Our Sol Brokerage option allows customers to take advantage of the risk with the highest spot prices available, while our Sol Upfront option removes SREC market risk and regulatory risk entirely.”
Sol Systems also offers 3 and 5 year fixed price “Sol Annuity” contracts to Massachusetts customers. Under the annuity arrangement, customers receive a fixed price for each SREC generated over the agreement term and are paid quarterly. The 5 year term pays $275/SREC and the 3 year term pays a guaranteed rate of $400/SREC. Both are backed by long-term utility contracts.
Sol Annuity, Sol Upfront, and Sol Brokerage are available to residential and commercial system owners. However, the Sol Brokerage fees will only be waived for systems that are larger than 20 kilowatts in size.
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 across 13 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.
Director of Strategic Partnerships
Sol Systems, the nation’s largest solar renewable energy credit (SREC) aggregator, today announced a new three year fixed-rate SREC financing option that will help make solar a more attractive investment for Massachusetts residents and businesses.
“We are very optimistic about the solar market in Massachusetts and we are proud that we can offer solar supporters an affordable, secure way to invest in solar,” said Sol Systems CEO, Yuri Horwitz. “Our three year utility-backed SREC contract will help give prospective solar owners the financial security they need to go solar.”
Massachusetts’ solar REC (SREC) market is relatively new, but several states along the East Coast have established solar credit markets which provide cash flow that make solar energy an affordable option for homeowners and businesses. Sol Systems has been a key player in these markets. In Massachusetts, system owners can cover approximately 25% of system costs through an SREC agreement with Sol Systems.
Sol Systems gives homeowners and businesses a variety of ways to harness the value of SRECs. In Massachusetts, the company offers spot market brokerage services (Sol Brokerage) and multi-year guaranteed rate SREC contracts (Sol Annuity). The Sol Annuity product is available for three and five year contract terms.
Sol Systems also operates in 12 other states where it offers brokerage services and multi-year contracts, in addition to “Sol Upfront”, a pre-paid lump sum for the future value of solar credits.
While multi-year contracts are sometimes available through independent SREC brokers, to its knowledge, Sol Systems is the only company that is providing a 3 year offer that is backed by a contract with an energy supplier. Unlike speculators who bet on SREC futures, Sol Systems’ model provides additional security to homeowners and businesses that are concerned about the volatility of the SREC commodities market.
About Sol Systems
Sol Systems is a Washington D.C. based solar energy finance and development firm that was built on the principle that solar energy should be an economically viable energy solution. Sol Systems enables solar developers, homeowners, and businesses to fully realize the value of their solar energy systems by providing them with a range of options for selling their SRECs. To date, Sol Systems has helped over 1,300 customers with projects ranging from 1 kW to over 1 MW realize the value of their SRECs. Sol Systems currently operates in Delaware, Indiana, Kentucky, Maryland, Massachusetts, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Virginia, Washington, D.C., and West Virginia. For more information, please visit www.solsystemscompany.com.