Posts Tagged ‘Proposed solar legislation’

A Secondary Market for SRECs In California?

Friday, August 13th, 2010

In California, the environmental attributes of solar electricity are bundled with the electricity; in fact, they are not allowed to be separated. For this reason, the environmental attributes of solar-generated electricity, or Solar Renewable Energy Credits are not tradable as compliance commodities. This means there is no secondary market for Solar Renewable Energy Credits (“SRECs”) in California. However, this may change.

The people of California have been trying to create an SREC market since 2006 when the California Assembly passed Senate Bill 107 (the “Bill”). This Bill granted authority for the California Public Utilities Commission (CPUC) to develop and administer a secondary market for Tradable Renewable Energy Credits (TRECs).

Three years later, in March 2010, the CPUC issued a decision establishing the rules and regulations that would structure California’s future secondary SREC market. The regulations proposed an alternative compliance penalty of $50.00 for 2010 and 2011; this amount would effectively serve as the ceiling value for the TRECs. (This is a relatively low value when compared to more robust SREC markets such as New Jersey and Maryland). However, the CPUC sidelined their decision in May 2010, and that is where the secondary SREC market sits today in California. The decision was sidelined in response to concerns expressed by investor owned utilities (IOUs) and energy suppliers.

However, a new bill in the State Assembly proposes a legal framework for a secondary SREC market in California. The details of this new bill are not firm enough to offer a good viewpoint on what a future SREC market may look like in California.

In the meantime, California solar energy system owners must sell their electricity and attributes bundled.  Systems sited outside of the state of California can enter into Power Purchase Agreements with California IOUs, to sell their bundled electricity and attributes.  However these systems must be located within the Western Regional Energy Generation Information System (WREGIS).  If, and when, California’s laws change, Sol Systems will be there to develop the SREC market for our customers.

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Update on Proposed Changes to Solar Investment Tax Credit and Section 1603 Grant Program

Friday, August 6th, 2010

A discussion draft of the Domestic Manufacturing and Energy Jobs Act of 2010 was introduced by acting Chairman of the House Way and Means Committee last week. The Chairman’s discussion draft (the “Bill”) proposes significant changes to the current federal incentive structures for renewable energy.

One major change is that the Bill allows the Section 1603 Grant program to expire. Section 1603, which was funded through the American Recovery and Reinvestment Act (ARRA), allowed companies who installed solar energy systems to receive a cash grant in lieu of Investment Tax Credits or Production Tax Credits. In other words, a business investing $100,000 in a solar energy project could receive a one-time payment from the Treasury for $30,000. This allowed businesses who did not have a tax appetite (due to the recession of 2009-2010) to receive the same financial benefits as they would have received with a tax credit. (Click here for more information on Sec. 1603 Grants).

In place of renewing Section 1603, the Bill would allow the taxpayer to elect a refundable deemed tax payment in lieu of the Investment Tax Credit or Production Tax Credit. Using the example above, a deemed tax payment means that the $30,000 cash grant would be treated as a $30,000 tax payment. In the event that $30,000 exceeds the actual tax liabilities of the business, the taxpayer could file for a refund. Treating the ITC and PTC as refundable deemed tax payments means the system owner will likely need to wait longer to receive the value of the federal incentive, but would not need to have the full tax appetite to fully utilize the subsidy.

Sol Systems will continue to track this and other solar legislation.

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The Future Outlook of the Connecticut SREC Market

Wednesday, July 28th, 2010

Earlier this year, Connecticut state legislators Rep. Vickie Nardello and Sen. John Fonfara introduced an energy reform bill that was posed to change the Connecticut renewable landscape and establish a market for Solar Renewable Energy Credits (SRECs). Solar enthusiasts celebrated the potential of ‘Bill 493 – An Act Reducing Electricity Costs and Promoting Renewable Energy’ to reduce consumer electricity rates, create green jobs, and reduce CO2 emissions. It was passed in both the House and Senate, but was ultimately vetoed by Governor Jodi Rell when it reached her desk. The governor expressed her support of the intent behind the bill, but concluded that the proposed legislation would in fact increase electricity costs, estimating a $1.4 billion price tag for the bill that would be footed by Connecticut taxpayers.

The status of solar energy financing in Connecticut remains at a standstill with no SREC market in 2010 and limited state rebates. The Connecticut Clean Energy Fund, which provides residential system owners with a state rebate of up to $15,000, has reopened but will soon be fully subscribed. As a result, it is possible that many installers and developers will move into states with solar-friendly legislation including Massachusetts, New Jersey, and Ohio. However, there is still hope for renewable energy and green jobs on the horizon. Dan Malloy, a potential Democratic candidate for Governor, has publicly stated that he would have signed the bill if it had been his decision. The election will take place on November 2nd and if he is chosen to serve the highest office in the Nutmeg State he may be able to reverse Gov. Rell’s decision and forge ahead with a Connecticut SREC market.

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Update on New York Solar RPS

Friday, July 16th, 2010

The New York State legislature recently introduced Bill S7093 (the “Bill”), its response to the growing appetite for solar energy in America.  The Bill contains draft legislation to effectively grow solar photovoltaic capacity to at least 5,000 megawatts (MW) by 2025, with interim targets of at least 500 MW by 2015 and 1,500 MW by 2020.  This is an ambitious target when viewed in comparison to existing capacity of approximately 34 MW at the end of 2009.  In addition, New York is positioning itself as a major player in the solar industry with higher solar PV targets (by capacity) than its neighboring states, with the exception of solar heavyweight New Jersey.  Aside from the obvious environmental benefits, the draft legislation, if enacted, is estimated to create 22,200 new jobs as well as boost GDP by $20 billion.

In terms of specifics, at least twenty percent of each energy supplier’s annual SREC obligation shall be met through the purchase of SRECs from retail distributors of solar energy generation (i.e. less than 50 kW systems), and at least an additional thirty percent of the obligation shall be met through retail distributed energy generation of any size.  As a result, this promotes a more distributed use of solar energy due to the combined 50% SREC purchase requirement from retail distributors.  Furthermore, the Bill requires energy suppliers to purchase at least 75% of their SREC compliance obligation from systems owned by an independent third party. This effectively provides for a robust secondary SREC market.

While this may seem like a win for solar enthusiasts, certain ambiguities contained in the Bill makes it toothless.  Specifically, the alternative compliance payment (ACP) is not mandatory.  According to the Bill, the New York Public Service Commission is charged “… to establish an alternative compliance payment that electric distribution companies may pay in the event they cannot meet their annual SREC obligation [Emphasis added].”  Without tougher language for enforcement, Bill S7093 may be ineffective.  We look forward to tracking the development of this Bill, and will be sure to keep you posted.

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Delaware Senate Passes Amendment to Strengthen RPS

Wednesday, July 14th, 2010

On June 30th, the Delaware House of Representatives voted to pass an amendment to Senate Bill No. 119. The bill would strengthen the RPS requirement and increase penalties for non-compliance. Taken together, these measures will improve the growth prospects for the solar industry.

The legislation ramps up the amount of renewable energy required in Delaware from 20% in 2019 to 25% by 2025. The proposition also raises standards for solar energy, from 2.005% in 2019 to 3.5% by 2025. Short-term solar energy prospects in Delaware are addressed by increases in annual targets for solar that move to .2% by 2011 (previously .048%) and .354% by 2014 (.8%).  The new targets ensure immediate incentives for the development of solar energy and will be seen as welcome news for regional installers and developers as well as Delaware homeowners interested in financing their solar energy systems.

The legislation has different effects on electricity suppliers in Delaware. The fine administered to utilities for non-compliance, known as the ACP, is raised to $400 per MWH (it was previously set at $250). As previously legislated under SB-119, a $50 increase in the ACP will be administered annually to non-compliant utilities.

A new provision in the amendment grants the State Energy Coordinator the authority to adjust the ACP by 20% “to determine reasonableness compared to market-based SREC prices.” Another new provision allows the solar requirement to be frozen if the total cost of compliance exceeds 1% of the retail cost of electricity. These amendments exhibit Delaware’s intent to provide more robust compliance incentives while also safeguarding against unreasonable increases in the cost of electricity.

The amendment to SB-119 is currently awaiting final approval from Governor Jack Markell who is expected to sign the bill this week. The amendment follows similar legislative changes in neighboring Maryland, which has recently expanded its renewable energy targets. Delaware’s proposed bolstering of the RPS is further evidence for the success of RPS programs implemented in several states across the mid-Atlantic region.

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