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 30^th because investors are quickly building out their portfolios for 2011.

Sol Systems invites interested solar developers to attend a SolMarket webinar on Thursday, September 1^st, Friday, September 2^nd, or Tuesday, September 6^th at 11 am EST.  For more information, please email info@solmarket.com 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.

Contact:

Ms. Sudha Gollapudi, Director of Strategic Partnerships

info@solmarket.com

888-765-1115 x1

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.

SREC Prices

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.

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.

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.

“A hard work ethic, leadership ability, and passion for the solar space are characteristics that are hard to find when searching for new employees,” said Yuri Horwitz, President and CEO of Sol Systems. “Andrew has all three traits and more. During the course of his internship, he has proved to be a valuable and committed employee and we are excited he will be joining us full-time. I’m confident our customers and partners will enjoy working with Andrew.”

Andrew comes to Sol Systems from Georgetown University, where he recently graduated magna cum laude with a degree in Science, Technology, and International Affairs and also a certificate in Business Diplomacy. While at Georgetown, Andrew spearheaded launching and running the Georgetown Solar Co-op, a student run organization created to ease the solar procurement process for homeowners. Under his leadership, the Georgetown Solar Coop educated hundreds of prospective customers on the benefits of solar, negotiated price discounts from solar vendors, led numerous homeowners through the solar procurement process from start through installation completion, and participated in local lobbying efforts for shaping the D.C. renewable portfolio standard.

With this incredible growth, it is useful to examine the key drivers behind the acceleration of the solar market. One key driver is the continuous reduction in PV cost, as prices for solar panels have declined by around 75% in the past 10 years. Solar panel prices in the U.S. specifically are set to drop by U.S. $0.20 per watt in 2011, bringing the average panel price to U.S, $1.40 per watt.

The second key driver is government policy and incentives. German and Japanese governments have been two of the leaders in the solar industry because they have legislated high incentives for solar deployment at the federal level. In the United States, however, state policies and utilities have played a larger role in growth, which has been impressive. In fact, the U.S. solar industry experienced a year-over-year growth of 67 percent. Furthermore, this growth is no longer simply due to California; over 16 states installed more than 10 MW in 2010. Solar Energy Industries Association (SEIA) CEO, Rhone Resch said, “the Mid-Atlantic region is beating California as the largest market in the U.S. for PV installations”.

Solar growth in the Mid-Atlantic and Northeastern region is due primarily to policies at the state level, which include both incentive programs and Renewable Portfolio Standards (RPS). These state programs award money to owners of solar systems to help offset the initial cost of the system. Renewable Portfolio Standards that include specific requirements for solar (i.e. solar carve-outs) mandate energy suppliers and utilities to generate or procure a certain percentage of electricity from solar or risk paying a steep Alternative Compliance Penalty (ACP).

Both measures have been effective, but solar carve-outs in the RPS represent a sustainable, market-based approach to solar financing. These solar carve-outs make Solar Renewable Energy Credits, or SRECs valuable, allowing solar system owners to realize the financial benefits associated with clean energy production. The percentage of solar electricity that energy suppliers must obtain increases each year until 2025 for most states with an RPS, guaranteeing that there will be a market for SRECs. Furthermore, an RPS is budget-neutral, and thus state governments do not have to worry about running out of funds prematurely, which has happened to several state solar rebate programs.

The Mid-Atlantic and Northeastern U.S. will have need for more than 3 gigawatts (GW) of new photovoltaic capacity by 2015, which is due in large part to these state solar carve-outs. The new capacity will be a mix of residential and business systems as well as utility-scale projects. Furthermore, with continued reductions in PV cost, there may actually be more solar deployment than is needed to satisfy the RPS. This makes the value of SRECs hard to predict in the short and long term; however, it does not change the fact that SRECs will remain an important piece of the solar financing puzzle for the next decade.

Looking forward, consistent and stable policies coupled with technical improvements will allow the solar industry to continue its remarkable growth.

The central part of the speech was an analysis of U.S. dependence on foreign oil and ways in which that can change. President Obama listed natural gas powered vehicles, biofuels, electrical vehicles, and an overall decrease in oil demand as ways to reduce the amount of oil America has to import. Towards that aim of reducing foreign oil dependence, Obama revealed two new targets. First, by 2025, Obama wants the U.S. to have cut the amount of foreign oil imported by one-third. To put this in perspective, when Obama took office, the U.S. imported 11 million barrels of oil a day. Second, by 2015, President Obama is calling for all federal vehicles (around 600,000) to run on alternative fuel. President Obama defined both these targets as ambitious but achievable goals that would significantly increase American energy security.

President Obama also addressed the role of renewable energy such as solar in America’s future. He not only cited the environmental benefits of renewable energy, but also stated, “the nation that leads in the creation of a clean-energy economy will be the nation that leads the 21st-century global economy”. In a speech given to predominately college students, Obama urged young people not only to be more environmentally aware than previous generations but also to break into the clean energy industry in terms of future careers. Within the solar industry alone, there is a projected 26% increase in jobs over the next year. President Obama made it clear that growth in clean energy industries will be one of the pillars of an overall American recovery.

For anyone working in the renewable sector, Obama’s speech was familiar rhetoric. He has demonstrated his commitment to clean energy by requesting substantial funds in each of his budget requests and making a goal in this year’s State of the Union for “80% clean energy by 2020.” Given the federal government’s deficit issues, however, the renewable sector cannot rely on heavy government support despite Obama’s views. That is why state programs, and especially ones that are budget-neutral, become so important in making sure that the U.S. remains competitive in the clean-energy economy.

Renewable Portfolio Standards (RPS) are increasing as an important state mechanism and have demonstrated the ability to increase the deployment of renewable energy without costing state or federal governments millions of dollars. An RPS mandates that energy suppliers must procure a certain percentage of their electricity from renewable sources, and many states have specific solar carve-outs, which give value to Solar Renewable Energy Credits, or SRECs. An SREC is a tradable credit that represents all the clean energy benefits associated with 1 MWh of solar-generated electricity. These credits allow solar system owners to monetize their clean energy production, thus decreasing the payback period on a system and incentivizing more homeowners and businesses to go solar.

After the speech, I was able to talk briefly with Secretary of Energy Steven Chu who is very excited about the growth prospects for clean energy but still stressed the importance of continued innovations in solar panel production. It is certainly encouraging that the current Administration is embracing clean energy as a means to protect the environment and also increase energy security. However, it is still important to utilize programs like state RPSs to ensure that the clean energy sector grows at the pace desired by the Obama Administration.

A solar REC, or SREC is a tradable credit that represents all the clean energy benefits associated with 1000 kWh of solar generated electricity. Solar system owners can monetize these SRECs because energy suppliers must procure a certain percentage of their electricity from a solar source or pay a steep Alternative Compliance Penalty (ACP). Therefore, energy suppliers look to buy large sums of these SRECs for each compliance year and naturally will attempt to buy these SRECs at a low cost. However, energy suppliers understand that the SREC market, like almost any commodity market, can be volatile and subsequently the majority of energy suppliers hedge their risk by buying some SRECs through the spot market, and some SRECs through forward contracts.

Since there is good reason to believe that SREC prices will trend downwards over time, energy suppliers will typically be able to negotiate lower prices for the SRECs they are purchasing in multi-year contracts than the ones they buy on the spot-market. However, for various reasons, energy suppliers and utilities don’t typically meet all their SREC needs with multi-year contracts (perhaps they want some flexibility for their solar obligations in case SREC spot market prices drop dramatically or they plan to build solar power plants so that they can generate their own solar energy). Thus there are two distinct markets for SRECs: the spot market and longer-term agreements.

For an individual owner of a solar energy system, the decision of which market to enter is all about risk preference and their view of future SREC prices. Customers who are willing to accept more risk because they believe SREC prices will remain high are going to prefer a spot market solution, like the Sol Brokerage option, where Sol Systems acts as a broker and seeks out the highest SREC price. The spot market option allows customers to maximize their revenue from SRECs provided there is strong SREC demand in the market into which they are selling. Furthermore, it does not lock them into an agreement that will prevent them from taking advantage of an unexpected increase in SREC prices.

Other potential customers may be more risk adverse and would prefer for Sol Systems to take on the majority of the market risk. In that scenario, the customer may find it more appealing to lock into a fixed price per SREC, through an agreement like Sol Annuity, for the next 3 or 5 years. A fixed price allows clients to more accurately calculate their payback period as well as shifting risk away, even though they may be giving up some revenue per SREC.

However, in states like Pennsylvania and D.C., customers who entered into long-term contracts with Sol Systems several months ago will be receiving higher prices per SREC that those available on today’s spot market because the market in those states became oversubscribed. Thus in these examples, the multi-year contracts will actually maximize revenue over the course of the agreement. States like New Jersey and Massachusetts currently have very robust SREC markets and high spot prices, meaning many customers are likely to prefer Brokerage agreements because they can see those rates are higher than the Annuity prices. Yet, if those states follow the trend of DC and Pennsylvania and become oversubscribed, the solar REC price may drop substantially at some point.

For the individual customer, there is no “right choice” on how to sell SRECs. It truly depends on their risk preference and market outlook. However, for the SREC market overall, long-term contracts are more desirable because they provide stability, consistent volume, and liquidity. At Sol Systems, we have been able to enter into multi-year agreements with energy suppliers for the sale of SRECs, which has allowed us to become a preferred supplier instead of the supplier of last resort. This is important because it allows us to back up our contracts to solar system owners with agreements and provide them with reliable ways to ensure their solar energy investment pays off.

President Obama has made it clear that, although his priority is to trim the federal deficit, he is not willing to sacrifice funding for clean energy research and development. For the 2012 fiscal year, Obama unveiled a $29.5 billion budget request for the Department of Energy (DOE), which includes $3.2 billion for the DOE’s Office of Energy Efficiency and Renewable Energy (EERE)– a 44% increase over the current appropriation. This request includes an 88% increase in funding for the solar EERE program specifically.

The budget passed by the House, however, is more aggressive in its attempts to reduce the federal deficit and would cut billions of dollars from federal energy and environmental programs. In particular, the Advanced Research Projects Agency-Energy, which invests in early stage and risky projects, would be hit hard. Similarly, the EERE would lose 35% of its budget relative to last year, a stark contrast to the White House’s plans. The budget would also cut funding for several DOE loan guarantee programs.

The Solar Energy Industries Association (SEIA) has characterized these cuts as “disastrous”. Currently, solar developers use the DOE loan guarantee programs to help finance solar projects at low interest rates, and these cuts could halt solar projects around the country. However, the chances of the House budget passing into law in its current form are very slim. Senate Democrats and President Obama will likely push back against dramatic reductions in the DOE loan guarantee program.

Despite the fact that House Republicans are currently proposing cuts to clean energy funding, it is important to highlight that a GOP Congress has historically supported solar. The first tax credits for solar were passed in a 2005 Energy Bill by a Republican Congress and later extended by President George W. Bush.

Both parties see the job growth opportunities in the solar industry. Solar employers expect jobs to increase by 26 percent over the next year, and lawmakers from both parties share concerns over the current U.S. unemployment rate.

It is important to note that no matter what happens with the Federal Budget, there will be states that maintain policies promoting solar deployment and allowing for job growth in the renewable energy industry. For example, more and more states are adopting a Renewable Portfolio Standard (RPS) that contains a solar carve-out requiring utilities to procure a certain percentage of their electricity from a solar source. These solar carve-outs create markets for Solar Renewable Energy Credits, or SRECs. An SREC is a tradable credit that represents all the clean energy benefits of electricity generated from a solar electric system. SRECs are a market-based mechanism that do not rely of state or federal funding, so SRECs will help system owners finance their solar energy systems regardless of federal cuts to clean energy programs.

The House resolution on the budget, although likely not to pass in its current form, would certainly be detrimental to the health of the solar industry, particularly the reductions in the DOE loan guarantee program. We hope lawmakers will recognize the job growth and economic opportunity that the solar sector represents, instead of seeing it as a way to trim government spending.

Most market participants are familiar with the three basic drivers of solar renewable energy credit (SREC) prices – SREC supply, SREC demand, and state solar compliance penalties. Most of this information can be found on RTO and state commission websites and analyzing this data yields an adequate view of the current state of the SREC market. However, to fully understand the 2011 SREC markets, a better understanding of the drivers of supply and demand is required.

SREC Supply Forecast:

The price of panels and installation will be an important input in determining the future supply of SRECs. Panel prices and installation margins have decreased considerably over the last year, especially on the East Coast. Cheaper panels and installation margins mean more development and increased SREC supply. However, 2011 will also see the disappearance of many state solar rebate programs. States like Ohio, Pennsylvania, New Jersey, and the District of Columbia are finding their coffers running low for state money to support solar projects. This means that new projects in 2011 will have to rely more heavily on the value of SRECs, which should slow development and SREC supply considerably. We have also seen new interest from traditional banks, particularly in large scale solar projects, which should bring down the cost of financing for large scale developers. Private high yield investors have now moved into the commercial and light commercial space, which means more money for these projects but at a pricey cost. Together these market effects will work to determine SREC supply in 2011. For example, will panel prices and installation costs fall enough to compensate for the termination of many state solar rebate programs? These questions will be important to answer before estimating additional SREC supply in 2011.

SREC Demand Forecast:

SREC demand is legislated by the renewable portfolio standards in each state. Consequently, demand would appear to be easy to determine. However, an increasing number of long term SREC contracts and energy suppliers with their own projects will mean that the demand that appears to be in a market could already be “spoken for”. Furthermore, with compliance entities in some states filing for force majeure, demand that should be in the market may in fact be pardoned. Even with all of these moving parts, demand is remains far easier to predict than supply.

Comparing Supply and Demand:

The standard interstate analysis of supply and demand will become more complicated in 2011 as SREC sellers in states with crumbling SREC markets look to cross state lines to sell their SRECs into other states. Determining the pace of those cross-registrations and the flexibility of the market to move those SRECs from one state to another, keeping in mind that some portion of those SRECs are locked into long term contract, will be important to determining the supply and demand balances in each state. Brokers have also added some complication to the market, as offers and bids are multiplied across the market and often give the appearance of significance amounts of demand or supply. Neither of which is healthy for a developing market.

Legislative Changes:

Increased reliance by projects on SREC prices and increased scrutiny brought upon compliance entities to meet the RPS standards will both cause market participants to look more closely at RPS statutes to determine exactly what will and will not qualify in-state. Additionally, where SREC markets can no longer support solar development, the solar community will apply pressure to politicians to increase demand to support job growth in one of today’s few industries reporting job growth: solar.

In the end, the three primary market drivers will remain the same. But what is more important than today’s supply and demand are tomorrow’s. To get a clearer picture of those dynamics, one will have to combine a historic view of growth with the changing landscape ahead to arrive at any number of varied outcomes. After all, that is what makes a market.