Washington, DC: September 14, 2011 – Less than two weeks after launch, Sol Systems is proud to announce that its new solar finance platform, SolMarket, has increased from $350 million in available investment dollars to $400 million.  In addition, reception by solar installers and developers across the country has been overwhelmingly positive.  SolMarket’s network now includes over 180 companies and 300 users.

SolMarket is a financing platform that will catalyze investment in solar energy projects nationwide by transforming how solar projects are financed.  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 is currently seeking projects ranging from 50 kW to multi-megawatts in size.  Solar developers are encouraged to submit their projects prior to September 30^th, when investors will get their first look at projects.  Projects entered prior to this date increase their visibility and the likelihood of getting included in the investors’ 2011 portfolios.

Sol Systems invites interested solar developers to attend a SolMarket webinar, hosted every Tuesday, Wednesday, and Thursday during the month of September at 2 pm 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.

Since the start of 2011, the New Jersey Clean Energy Program has:
• been receiving approximately 575 new applications per month
• been approving about 50 MW of SRP & REIP Applications per month
• seen an average of 16 MW of system completions per month.

The New Jersey Board of Public Utilities Board is proposing the re-adoption of some amendments to its Renewable Energy and Energy Efficiency rules at N.J.A.C. 14:8 (Chapter 8). These rules lay the groundwork for New Jersey’s SREC program.

Some of the tenants and requirements of the Chapter 8 Readoption Proposal are summarized below for the convenience of our readers.

SREC Lifespan
An SREC associated with energy generated on or after July 1, 2010 shall be used to comply with RPS requirements for any one of the following three energy years:
• The energy year in which the underlying energy was generated
• Either of the two energy years immediately following the energy year in which the underlying energy was generated

An SREC based on energy generated before July 1, 2010 shall be used only to comply with the requirements of this subchapter for the energy year during which the underlying energy was generated, and/or the subsequent
energy year.

Once an SREC has been submitted for compliance, the SREC shall be permanently retired.

SREC Generation
In order to measure SREC generation, the Board or its designee shall accept either of the following measurement methods:

• Periodic readings of a meter that records megawatt-hour production of electrical energy. The readings may be taken or submitted by any person, but shall be verified by the Board or its designee, or
• For a solar electricity system with a capacity of less than 10 kilowatts, annual engineering estimates and/or monitoring protocols

SREC Registration Process
In order to qualify to produce SRECs, systems need to go through the SREC Registration Program (SRP) and be issued a New Jersey State Certification Number.

The SRP process requires:
• The submittal of an initial registration package- generally 10 business days after execution of the contract for purchase or installation (whichever comes first) of the photovoltaic panels to be used in the solar facility.
• Construction of the solar facility to not begin until after Board staff has issued a conditional registration for the facility.
• Construction of the solar facility to be completed and local code approval granted prior to the expiration of the conditional registration.

If the applicable submittal deadline is met, SRECs shall be usable for compliance with this chapter immediately upon the issuance of a New Jersey State Certification Number for the facility. However, if the applicable deadline is not met, any SRECs based on electricity generated by the solar facility shall not be usable for compliance with this chapter until 12 months after the solar facility has received authorization to energize in accordance with the Board’s interconnection rules.

Registration of a solar electric generating facility requires completion of the following process:

1. The registrant shall submit an initial registration package to the Board.

2. If the initial registration package is incomplete or deficient, Board staff shall notify the registrant in writing of the deficiencies.

3. Once the registration package is complete, Board staff shall review the package to determine whether the solar facility meets the SREC eligibility requirements of this subchapter. If the facility does not meet these requirements, Board staff shall notify the registrant. The registrant shall revise the package and resubmit it within one year of this notice. Failure to resubmit within this time will result in cancellation of the registration process, in which case a complete new registration process shall be required for the solar facility to obtain a New Jersey State Certification Number.

4. If the solar facility as described in the initial registration package meets SREC eligibility requirements, Board staff shall issue notice to the registrant of a conditional registration for the facility. The notice of the conditional registration shall:
• State that, if the solar facility is constructed as described in the initial registration package, Board staff will issue a New Jersey State certification Number for the solar facility upon construction completion and inspection; and
• Include an expiration date 12 months after the date of the notice

5. After issuance of the notice of conditional registration, construction of the solar facility as described in the initial registration package may begin. Construction of the solar electric generating facility shall be completed prior to expiration of the conditional registration.

The registrant may request one extension prior to the expiration of the conditional registration, and shall include an updated schedule for completion. Board staff may authorize one extension for the project on a case-by-case basis, based on the likelihood of timely and successful completion of the solar facility. If the conditional registration or extension expires before construction is complete, the registrant shall begin the entire registration process again by submitting an initial registration package and the Board staff shall treat the new registration package as if it were a first-time submittal.

The application will require the following:
• Information identifying and describing the owner, host location, builder/installer and operator of the solar electric generating facility
• Basic information describing the solar facility, including its capacity, manufacturer and expected output
• A technical worksheet detailing the technical specifications of the solar facility
• A construction schedule for completing the solar facility, including significant milestones;
• A signed contract or other binding legal document between the owner and installer of the solar facility
• Basic information regarding the cost of equipment and installation
• A site map of the land upon which the generating facility will be located
• Any other data or information necessary for Board staff to determine whether the solar electric generation will meet the requirements for SRECs.

When construction of the solar electric generating facility is complete, the facility owner (or installer) shall submit a post-construction certification and request an inspection or inspection waiver from the Board staff.

A post-construction certification package would include the following:
• A copy of the conditional registration notice issued by the Board
• A final “as built” technical worksheet, detailing the technical specifications of the completed solar electric generating facility, including any changes from the technical worksheet submitted as part of the initial registration package
• Digital photographs of the site and the completed solar facility
• A shading analysis
• An estimate of the electricity production of the solar facility
• Documentation of compliance with all applicable Federal, State and local law, including eligibility for any tax incentives or other government benefits, where applicable.

The facility owner (or installer) should supply a copy of the initial application to interconnect the facility to the distribution and transmission system, as well as the EDC or PJM approval to interconnect and energize the facility; and a statement that an inspection of the solar facility, or an inspection waiver, has been requested through the Board’s NJCEP website, and the date of the request.

After receiving the inspection request and complete final documentation required, Board staff will conduct an inspection or notify the registrant that no inspection is required (waiver).

If no inspection is required, or if the inspection indicates that the solar electric generating facility has been constructed in accordance with the conditional registration, and/or any Board-authorized changes, Board staff shall assign a New Jersey State Certification Number to the solar facility for use in obtaining SRECs from PJM-EIS GATS.

If, after submittal of an initial registration package, an increase or decrease of more than 10 percent in the solar electric generating facility’s generating capacity is planned, the registrant shall notify Board staff by e-mail

Interconnection Review (for systems under 10 KW)
Once a customer-generator has met the level 1 interconnection, the EDC shall notify the customer-generator in writing that the customer-generator is authorized to energize the customer-generator facility, as follows:
• The EDC shall send the authorization to the e-mail address, and to the U.S. Postal Service mailing address that is listed on the customer generator’s submitted interconnection application form; and
• The EDC shall not condition the authorization to energize on the EDC’s replacement of the customer-generator’s meter.

An applicant shall submit an application Interconnection Application/Agreement Form for level 1 interconnection review.

If a customer-generator facility meets all of the applicable criteria above, the EDC notifies the customer-generator under that the facility will be approved, the EDC shall, within three business days after sending the notice of approval do both of the following:

• Notify the applicant by e-mail or other writing of whether an EDC inspection of the customer-generator facility for compliance with this subchapter is required prior to energizing the facility or that the EDC waives inspection; and

• Return to the applicant a level 1 interconnection agreement, unless: Part 1 of the original application, signed by the appropriate EDC representative.

The EDC does not require an interconnection agreement for customer generator facilities that qualify for level 1 interconnection review; or

The applicant has already submitted such an agreement with its application for interconnection.

An applicant that receives an interconnection agreement shall execute the agreement and return it to the EDC. If the EDC requires an inspection of the customer-generator facility, the EDC shall promptly complete the inspection and the applicant shall not begin operating the facility until completion of the inspection.

Upon receipt of the executed interconnection agreement from the customer generator and satisfactory completion of an inspection, if required, the EDC shall notify the customer-generator in writing that the interconnection is approved, conditioned on approval by the electrical code officials with jurisdiction over the interconnection.

If an EDC does not notify a level 1 applicant in writing or by e-mail whether the interconnection is approved or denied within 20 business days after the receipt of an application, the interconnection shall be deemed approved. The 20 days shall begin on the date that the EDC sends the written or e-mail notice or application receipt required.

A customer-generator shall notify the EDC of the anticipated start date for operation of the customer-generator facility at least five days prior to starting operation, either through the submittal of the interconnection agreement or in a separate notice.

Once an applicant receives Part 1 of the application with the EDC signature, and has installed and interconnected the customer generator facility, the applicant shall obtain approval of the facility by the appropriate construction official.

The customer-generator shall submit documentation of the construction official’s approval to the EDC, along with a copy of Part 2 of the application, signed by the customer-generator.

If inspection of the customer-generator facility was waived, the EDC shall, within five business days after receiving the submittal required under above, notify the customer-generator of authorization to energize the facility. The notice to the customer-generator shall be provided in the format required.

If inspection of the customer-generator facility was not waived, the following process shall apply:

• The customer-generator shall submit the construction official’s approval and signed Part 2, and inform the EDC that the customer-generator facility is ready for EDC inspection
• Within three business days after the customer-generator notifies the EDC that the facility is ready for inspection, the EDC shall offer the customer-generator two or more available four-hour inspection appointments.
• The appointments offered shall be no later than 10 business days after the EDC offers the appointments (that is, within 13 business days after the customer-generator submittal.
• The customer-generator shall notify the EDC which of the offered inspection times the customer-generator prefers, or shall arrange another time by mutual agreement with the EDC.
• Within five business days after successful completion of the EDC inspection, the EDC shall notify the customer-generator that it is authorized to energize the facility.

The official version of the Chapter 8 rules was published in the New Jersey Register on May 2, 2011.

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 www.solsystemscompany.com.

Yuri Horwitz, CEO of Sol Systems, will be speaking with George Ashton, CFO, and Natacha Kiler, Director of Sales & Marketing. The presentation “Financing your solar project with SRECs” will address SREC market fundamentals, various types of SREC transactions, and the benefits of each type of transaction. Specifically, the speakers will address spot market transactions, multi-year aggregator contracts, contracts with compliance entities, upfront SREC payments, and the bankability of SREC contracts.

There will be a question and answer forum after the presentation. The Sol Systems management team will also be available to meet with existing and prospective partners on Monday, April 4th in advance of the presentation. For more information on the PV America conference, please visit www.pvamericaexpo.com. For more information on Sol Systems, please visit www.solsystemscompany.com.

1. When does SREC creation begin?
2. What are New Jersey’s solar meter requirements?
3. When will NJ SREC prices fall?

When does SREC creation begin?
SREC creation does not begin as soon as the system is installed or when the system is capable of producing solar electricity. Rather, SRECs are awarded after New Jersey has awarded the system a certification number and the utility has signed off on the interconnection agreement. Thereafter, one SREC is awarded for every megawatt hour of solar energy that is generated.

The SRECs can be sold after the system has been listed on PJM’s Generation Attributes Tracking System (GATS). PJM GATS is responsible for tracking SREC production for systems located in New Jersey and throughout the PJM region (so that SRECs aren’t double-counted).

When it comes to selling SRECs and collecting money for SRECs, system owners have a variety of options. They can sell on the spot market through an aggregator or broker, they can sell through a fixed price contract with a utility or aggregator, or they can pre-sell their SRECs through an upfront agreement. In all of these arrangements, there will be a slight delay in when the system owner actually receives a payment for their SRECs. One reason for the delay is that GATs does not award a credit for an SREC until one month after the SREC is generated.

What are New Jersey’s solar meter requirements?
The most recent rules from the New Jersey Clean Energy Program require systems to have an ANSI certified solar meter with a 5% accuracy rating for systems 10 KW or less and a 1% accuracy rating for systems larger than 10 KW. (Systems that have received REIP funds and that are 10 KW or smaller in size do not need to meet this requirement.)

A solar meter (often called a “utility-grade meter”) is different than the utility meter, the solar meter is installed with the solar energy system and it is ultimately what measures SREC production. To get credit for each SREC that is generated, system owners who have systems larger than 10 KW must provide a monthly meter reading. This reading can be taken manually, or through a remote monitoring system.

When will SREC prices fall?
Unlike some other SREC markets, New Jersey has historically enjoyed high and stable SREC prices. In fact, SREC spot prices actually rose from September 2008 to March 2009, which led some people to regard SRECs as an appreciating asset. The history of high and stable prices has led many system owners and solar developers to believe that spot market SREC prices are guaranteed to remain stable in New Jersey, but unfortunately, this is not true.

To understand why SREC prices will fall eventually, one must understand why NJ SREC prices are currently high. In today’s world, New Jersey energy suppliers have the choice to:
a. Develop their own solar energy facilities
b. Purchase SRECs from solar energy system owners via the spot market or through long-term fixed price contracts
c. Pay an “Alternative Compliance Penalty” (ACP)

Thus far, most energy suppliers have elected to (b) purchase SRECs from solar energy system owners through the spot market and long term contracts. They have done so because they do not currently have enough of their own solar capacity to meet their obligations and they would rather purchase SRECs (at an amount slightly less than the ACP) than they would pay a penalty fee for non-compliance. However, energy suppliers have plans to develop their own plants, and they know that the ACP declines slightly every year (by approximately $15 every year) which means that, no matter what happens, they will be paying less for SRECs in the future.

In addition, the supply of SRECs in New Jersey is increasing as more solar farms, residential and commercial solar energy systems are built (“SREC supply”). Luckily, New Jersey’s RPS legislation calls for an increasing number of SRECs to be bought and/or created by energy suppliers (“SREC demand”). In fact the SREC demand will increase in June 2011, but the supply of SRECs is edging closer and closer to SREC demand.

As of March 2011, there was an SREC undersupply of approximately 10,000 SRECs (equivalent to what 8 MW generates annually). This gap is smaller than it has ever been – but the gap is what helps keep New Jersey’s solar REC prices high. Moreover, new projects are coming online every day (11 MW were installed in February 2011), and there is a pipeline of small residential projects and more than 200 megawatts of large-scale projects that have already been announced. (Here at Sol Systems, it seems we talk to at least one developer each day who is planning a 1+ MW project in New Jersey.)

If just a portion of this pipeline comes to fruition, there may be an oversupply of SRECs which will flood the SREC market and cause SREC spot market prices to fall. On the other hand, history has shown that multi-megawatt solar projects are often delayed or never come to pass – so it’s hard to know exactly when supply will catch up with demand. If an oversupply occurs, SREC spot market prices will begin to fall, and system owners who do not have a fixed-price, multi-year contract like Sol Annuity with an SREC aggregator or an energy supplier could see decreases in their SREC income and their solar energy system ROI.

Alas, even the SREC experts can’t tell you if or when spot market SREC prices will fall in New Jersey. The truth is that SRECs are commodities and system owners need to evaluate their own tolerance for risk when determining their strategy for selling them.

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 www.solsystemscompany.com.

An SREC is a tradable credit that represents the clean energy benefits of electricity generated from a solar electric system. Each time the electric system generates 1000 kWh, a SREC is issued that can be sold or traded separately from the power. SRECs are financially valuable because many states have Renewable Portfolio Standards (an RPS) with specific solar carve-outs that require energy suppliers to incorporate a certain percentage of solar generated electricity into their portfolio. Most energy suppliers do not have enough solar capacity to satisfy the RPS requirements with their own power and subsequently must purchase SRECs to meet the state requirement. This allows owners of solar systems to trade their SRECs as commodities and receive payments for them.

SRECs have functioned as an important tool for making solar systems more affordable, and therefore SRECs are typically a significant part of the sales pitch that installers use when explaining the economic benefits of going solar. Furthermore, as state grant and rebate programs diminish, SRECs represent a bigger piece of the way to finance solar. For example, in Ohio and D.C., state funds for solar rebate programs are currently depleted, and homeowners must now rely solely on the federal tax investment credit, SREC payments, and energy bill savings to offset the cost of their system.

In many states, the RPS requirements (that make SRECs valuable) increase annually until 2025. This leads some people to assume that SREC values will also increase annually as energy suppliers will need to purchase more SRECs to meet the solar carve our requirement. However, this is not necessarily the case. The amount of solar capacity is increasing along with RPS requirements, which means that in most states, the SREC values are actually coming down. For this reason, installers need to be honest and careful when describing the future value of SRECs, so that customers do not have false expectations about the ROI of their solar energy system.

In addition to the RPS requirement, the two key factors in determining SREC values are the Solar Alternative Compliance Penalty (SACP) and SREC supply.

The SACP is a fee that a regulated entity must surrender in the event they do not procure a sufficient amount of solar electricity. This fee acts as a price cap because a rational energy supplier would not be willing to purchase SRECs for greater than this value. The SACP is defined on a state-by-state basis, and virtually every state has a declining SACP schedule. For example, in Ohio the SACP declines by $50.00 every two years. The SACP alone will not determine the value of an SREC, but a declining SACP schedule will push the maximum value of SRECs down over time.

The supply of SRECs in the market is another essential factor to consider when predicting future values. Naturally, if there is a surplus of SRECs, then SREC prices will come down. This dynamic has already happened in states such as Pennsylvania and D.C., and solar system owners that locked into a long-term fixed contract are receiving higher values than those trying to trade on the spot market.

Since there is a lot of uncertainty about the future of SREC values, installers should make it clear that SRECs are a commodity and that their pricing can be quite volatile. They should also help their customers make an informed choice about how to sell their SRECs that accommodates their tolerance for SREC market risk. Installers will find that customers who have a good understanding of the SREC market volatility may be willing to accept a lot of risk and enter shorter contracts because they are bullish on the future of SREC markets. However, others may be risk adverse, and would prefer to lock in a fixed price for their SRECs for 3, 5, or even 10 year periods.

As long as installers adopt a cautious approach when discussing SRECs with clients, customers will sort themselves along the lines of risk preference.

The bill accomplishes these goals in two ways.

1.      It increases the solar renewable portfolio standard (RPS) requirements for the District so that these requirements look more like the policies of surrounding states: Maryland, Delaware, and New Jersey.  This sets up the long-term foundation for the solar community, and positions the District as one of the leading cities to attract and retain investment in solar.

2.      It ensures that only solar systems actually located on the District’s distribution grid qualify towards DC’s RPS, or solar energy goals. This has the added effect of stimulating local economic development while ensuring DC reaps the many benefits of distributed solar energy.

What is a Renewable Portfolio Standard (RPS)?

A renewable portfolio standard is a state-legislated policy (in this case, the District’s policy) that requires energy suppliers to provide a portion of their electricity from renewable energy in a state.  This means that for every unit of electricity provided to the district, a certain percentage must come from wind, solar, biomass, etc.

The District’s RPS has a specific requirement for solar, which means that for every unit of electricity sold, a portion (.04% in 2011) must come specifically from solar.  Energy suppliers can meet this requirement by:

(1)   Supplying solar electricity from solar systems they build, or

(2)   Paying a solar energy system owner (like a homeowner) to supply it for them.  This is accomplished by purchasing the solar renewable energy credits (SRECs), something akin to carbon credits, associated with the solar system. SRECs are key to making solar affordable and they are fundamental for making solar systems economical for homeowners and businesses.

RPS legislation like the District’s is now very common. Altogether, 36 states have a RPS or similar legislation and 16 states have a RPS with a solar carve-out similar to that in DC.

The Distributed Generation Amendment Act of 2011 makes some critical changes to the RPS that will ensure its effectiveness in the future.

Why is solar beneficial to the District of Columbia?

The District of Columbia currently imports almost 100% of all of its energy supply. Solar generation, and more specifically, distributed solar generation provides significant social, environmental, and economic benefits.  Some benefits of local solar generation include:

• Increasing the stability and reliability of the distribution grid
• Reducing pollutants such as NOx and SOx
• Diversifying the District’s fuel sources
• Decreasing the price vulnerability District rate-payers incur by relying solely upon fossil fuel sources, which have significant variable costs
• Reducing the heat-islanding affects found in DC
• Reducing the demand for energy during the middle of the day, and specifically during the summer.  This aligns with peak demand, and disproportionately offsets highly polluting “peaker” units
• Creating jobs in the District of Columbia

The Distributed Generation Amendment Act of 2011 bill forges the foundation necessary for sustainable industry growth for years to come, while creating many more local green collar jobs (over 600 have been created so far) and a significant revenue stream for the city through increased tax revenues.

What are the benefits of the legislation for a homeowner?

A residential system owner can save a substantial amount of money on their utility bills by installing a solar energy system, typically between 30-50% (or $400-800 annually), depending on the size of their system. Homeowners can also sell the green attributes associated with their energy production in the form of solar renewable energy credits (SRECs). The average homeowner can earn between $900-1800 annually by selling SRECs. Energy suppliers buy these SRECs to meet their RPS goals.  This is why an effective renewable portfolio standard (RPS) is so critical for solar financing.

The Distributed Generation Act of 2011 provides homeowners and businesses with a significant economic incentive to go solar.  The legislation creates a long-term and sustainable market for solar renewable energy credits (SRECs) which solar system owners can sell to energy suppliers.  The legislation also ensures that the market for SRECs will remain stable and strong into the future, which will spur solar development and investment in the District.

For the District’s environmental community, this bill moves us towards a more sustainable future, while also creating jobs and helping local industry.  It is well crafted, with significant support from the solar industry, and it is a piece of legislation worthy of community support.

If you want to help the District lay the foundation for a sustainable solar community and spur solar development in the city, we urge you to contact your DC council member .

The result is a strange dichotomy of a manufacturing industry undergoing rapid growth and simultaneously undergoing a stressful reallocation of resources and a fairly pessimistic outlook on Wall Street. The WilderHill Clean Energy Index, which includes solar and other alternative-energy stocks, fell 5.3 percent last year, compared with a 12.8 percent rise in the Standard & Poor’s 500 index. Companies like SunPower, Yingli, JA Solar, Trina, Canadian Solar, MEMC, Suntech and others all produced significant negative returns, some upward of negative 20 percent.

This fall in module prices, and the corresponding difficulties for module manufacturers, will likely continue through 2011 as the world’s top solar market, Germany, further cuts its solar subsidies and a growing supply of photovoltaic modules outstrips demand, putting pressure on prices and producers’ profits. As others have noted, a weak euro will compound the problem for Chinese and U.S. manufacturers. Last year, Germany, Spain, France, Italy and Czech Republic all cut back their solar subsidies. Further cuts are expected in Germany and France in the first half of 2011 and in Italy in the second half. Those three markets account for around 70 percent of the global market, according to Bank of America Merrill Lynch. Next year may be the first year in which more solar is built in the United States than in Germany.

For the solar installer and developer community this is presumably welcome news (ignoring the risks, of course, that similar reductions in incentives may take place here). As solar module costs decline, so are total system costs since modules compose a significant portion of the overall costs of a solar system.

However, cost reductions do not uniformly impact the solar community. Because of economies of scale, module costs account for a much larger portion of commercial-sized solar system’s costs than residential. The impact is still more powerful with regard to utility sized projects. As a result, falling module costs disproportionately benefit larger systems, as illustrated the figure below (care of SEIA).

Not only are commercial and utility costs already significantly lower than residential costs, they are also falling more rapidly. Indeed, utility projects are falling in price at three times the rate that residential projects are. This is an interesting window into the solar industry in the United States, which is that solar systems will undoubtedly get BIGGER.

To compound this trend, as states drastically reduce or altogether cut their rebate and grant programs for residential and small commercial systems, the economics that once favored smaller projects are starting to disappear. States like New Jersey, California, Maryland, Pennsylvania, Ohio and many others have all gutted their tax-funded rebate or grant programs. American Recovery and Reinvestment monies that flowed through the states in much of 2009 and 2010 are nearing their ends. Although module costs are falling significantly, they are not falling (nor could they) by two to three dollars a watt , which was often the size of grant and rebate monies. The result is a further shift upward in size. In Massachusetts, for example, given the emphasis on a solar renewable energy credit (SREC) market, many developers are starting to focus exclusively on commercial and utility scale projects.

For residential focused installers and developers, this may be an opportunity or a challenge. Presumably, those firms that can secure large economies of scale in purchasing power will better weather these changes than those that cannot. Additionally, because size matters, the industry may see consolidation. Hopefully, it will also see aggregation or collaborative models, where residential and small commercial installers work together to secure better financing opportunities and engineer more sophisticated acquisition models. This, of course, is a primary focus of financing firms like Sol Systems. Additionally, power purchase agreements and lease agreements may gain prominence if effective costs rise for residential customers in the absence of rebates.

For commercial and utility developers, a move upward in size means a necessary move towards more complex financing instruments. It becomes a bit more difficult to make a pure equity play on a multimegawatt project – a blended debt/tax equity/first loss equity product is typically required to reduce risks and bring down the costs of capital. To see this approach succeed, the capital markets will have to open further to solar projects. A lack of access to debt markets and tax equity was a big part of what has slowed the growth in wind and large-scale solar in the last few years. So this may be a challenge. On the other hand, Chinese banks continue to push into the US market to debt finance multi-megawatt portfolios, so it may not only be Chinese modules the US industry is using, it may also be Chinese money.

In sum, as the industry grows, there will be a continued movement towards larger projects. To succeed, players will have to become more sophisticated. This will favor players in the residential space who are able to collaboratively or individually leverage economies of scale and acquisition models and players in the commercial and utility space who are able to better secure complex financing instruments.

Enacted in 1998, Connecticut’s RPS mandates that 23% of the retail electricity load come from renewable electricity by January 1, 2020. Renewable technologies in the RPS are differentiated into Classes 1, 2, and 3, with solar and wind electricity both being designated as Class 1 technologies. Electricity suppliers can comply with Class 1 annual requirements by procuring Renewable Energy Credits (“RECs”) from facilities located within the ISO New England area (i.e. Connecticut, Maine, Massachusetts, Rhode Island, Vermont, and New Hampshire). In addition, RECs from systems located in states outside of the ISO New England area, such as Pennsylvania and Delaware, are eligible for compliance purposes. If electricity suppliers fail to generate or purchase sufficient RECs to meet their renewable energy requirements, they must submit an Alternative Compliance Penalty (ACP). The current ACP in CT is $55.00 per REC or megawatt hour.

In the spring of 2010, Assembly Bill 493 was passed by the Connecticut House and Senate, but vetoed by former Governor Rell. This bill, “An Act Reducing Electricity Costs and Promoting Renewable Energy”, would have defined a specific requirement for solar energy technologies, and would have created a more stringent non-compliance penalty. If passed, the legislation would have increased the value of SRECs. Connecticut’s current Governor, Dan Malloy, has, in the past, voiced support for the passage of this legislation and stated that he would have signed the bill. However, to date, no solar legislation or discussion drafts are available for analysis.

As the solar topic continues to gather steam inside and outside of Connecticut, Sol Systems would like to note a list of provisions that will be central to any new future solar legislation in Connecticut.

1. The Alternative Compliance Penalty (ACP): The ACP largely determines the ceiling value for an SREC. A higher ACP can lead to higher SREC prices, resulting in a better payoff for those investing in solar energy. For example, neighboring Massachusetts is a state that has helped enact an SREC market by creating a $600.00 ACP; as a result, SRECs in Massachusetts are currently fetching prices between $275-$500.

2. System Eligibility: Currently, Connecticut is an “open market” meaning that it’s RPS allows Renewable Energy Credits (“RECs”) from a large region outside of Connecticut to be eligible for compliance. If new legislation retains this “openness” the SREC and REC values will likely be decreased, as was the case with SRECs in the District of Columbia. To ensure the integrity of a future market, advocates for solar in Connecticut should ensure eligibility requirements that would not lead to an oversupply of SRECs on the market.

3. The Solar Carve-Out Schedule: A solar carve-out schedule defines how much solar electricity must be produced each year, and therefore determines the demand for SRECs. To ensure the market is robust, advocates of solar should advance aggressive solar requirements, akin to states such as New Jersey and Maryland.

Sol Systems’ anticipates future SREC legislation in Connecticut, and will be working with other solar advocates towards advancing a robust solar future in the state.

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 www.solsystemscompany.com.

Gov. Martin O’Malley has appointed a prominent academic researcher and a solar industry finance expert to fill two vacancies on the Board of Directors of the Maryland Clean Energy Center.

“We are privileged to have two such high-caliber and forceful clean energy advocates join us as we move into our second year of operation”

Eric Wachsman, PhD, Director of the University of Maryland’s Energy Research Center, will serve through June 2015. George Ashton, co-Founder and Chief Financial Officer of Sol Systems, LLC, a national leader in aggregating solar renewable energy credits, is fulfilling a term that runs through September 2012.

Wachsman and Ashton join existing members of the Center’s Board of Directors who oversee its mission of helping consumers, supporting businesses and advising lawmakers in Maryland as the state scales up its clean energy industries and energy efficiency initiatives. Other Board members include Jeremy Butz, Carol Collins, Ken Connolly, Jeff Eckel – who serves as the current Board Chairman – and Malcolm Woolf, Director of the Maryland Energy Administration.

“I am so proud to announce the appointment of two very talented individuals to the Board of the Maryland Clean Energy Center,” said Governor O’Malley. “As Maryland continues to emerge as a national leader in clean energy, their leadership will help us move toward a better and more sustainable future for our children. I’d like to thank them for their willingness to step up and serve the people of our State as we work to find innovative ways to reach our clean energy goals in the toughest of times.”

“We are privileged to have two such high-caliber and forceful clean energy advocates join us as we move into our second year of operation,” said I. Katherine Magruder, Executive Director of the Maryland Clean Energy Center. “They will help facilitate the adoption and generation of clean energy along with the new jobs, consumer savings and reduction of greenhouse gas emissions that come with it.”

In addition to his leadership of UM Energy Research Center, Wachsman holds the William L. Crentz Centennial Chair in Energy Research at the University of Maryland, College Park. Previously, Wachsman was Director of the Florida Institute for Sustainable Energy and a professor of materials science and engineer at the University of Florida in Gainesville. He has authored dozens of research papers since beginning his career as an engineer for chip-maker Intel. He earned his PhD and Masters of Science from Stanford University. Wachsman is filling out the remainder of the Board term served by Dan Goodman.

Ashton has been instrumental in growing Sol Systems into one of the country’s leading aggregators of solar renewable energy credits, or SRECs. Solar system owners earn 1 SREC for every 1,000 kilowatt hours of electricity their systems generate each year. Before Sol Systems, Ashton was a Senior Account Executive at Fannie Mae, a government-sponsored enterprise chartered by Congress chartered to provide liquidity and stability to the U.S. housing and mortgage markets. Ashton earned his MBA from the Robert H. Smith School of Business at the University Maryland in College Park.

About Sol Systems:
Sol Systems is a solar energy finance firm. 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 by providing access to diverse SREC portfolios. For more information, please visit www.solsystemscompany.com.