Posts Tagged ‘SREC’

Erica Nangeroni

2014 Delaware Procurement Program Solicitation Results in Surprisingly Higher Pricing than 2013

On May 28, 2014, the results for the 2014 SRECDelaware Procurement Program were announced. This is the second year that the newly structured program has been in place; the Delaware Public Service Commission approved the new structure of the program in 2013, which implemented a competitive bid process for all tiers for the first 7 years of the contract and a set price of $50/SREC for the remaining 13 years of the contract. However, with the 2014 program, the set price for the remaining 13 years of the contract has decreased to $35/SREC. The 2012 Pilot Program that preceded the current Procurement Program differed in structure, with administratively set prices at $260/SREC for years 1-10 and $50/SREC for years 11-20 for projects under 250 kW and a competitive bidding process for anything larger. In 2013, the competitive Procurement Program resulted in lower SREC prices for successful bidders, as compared to the administratively set Pilot Program. In 2013, SRECDelaware also held a Spot Market Auction for owners of existing SREC’s generated since July 2009, which additionally produced low SREC prices.

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Erica Nangeroni

Ohio Becomes the First State to Freeze its Renewable Portfolio Standard

The passage of Senate Bill 310 (SB310) has frozen Ohio’s Renewable Portfolio Standard until 2017, making Ohio the first state to roll back renewable energy and efficiency measures.

The passage of Senate Bill 310 (SB310) has frozen Ohio’s Renewable Portfolio Standard until 2017, making Ohio the first state to roll back renewable energy and efficiency measures.

With the signing of Senate Bill 310 (SB 310), Ohio has become the first state to “freeze” its Renewable Portfolio Standard (RPS). Ohio Governor John Kasich signed the bill into law on June 13th, effectively halting the state’s mandates for efficiency and renewables until 2017. Come 2017, these mandates will pick up where they left off when the freeze occurred, as opposed to the annual increases in renewable energy and efficiency measures that would have occurred with the RPS.

SB310 will significantly harm Ohio’s solar industry by driving SREC prices down in both the Buckeye state as well as the surrounding states such as Kentucky, Pennsylvania, West Virginia, Indiana, and Michigan that sell their SRECs into Ohio. The bill faced tremendous opposition from health and environmental coalitions, as well as a group of 70 businesses and organizations, including Honda and Whirlpool, who urged Governor Kasich not to sign the bill.

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Jessica Robbins

Sol Systems Completes the Massachusetts Solar Market’s First SREC II Transaction

Sol Systems is the first to close a prepaid SREC contract in Massachusetts' nascent SREC II market.

Sol Systems is the first to close a prepaid SREC contract in Massachusetts’ nascent SREC II market.

Sol Systems is pleased to be the first to close a transaction in solar renewable energy credit (SREC) II, the newest iteration of the Massachusetts solar market. Under this agreement, Sol Systems will provide solar project financing via a prepaid SREC contract to EthoSolar, an Ontario-based solar power provider with over 600 systems installed in North America, for a 150 kilowatt (kW) solar energy project.

This landmark deal is the first prepaid SREC contract in the nascent Massachusetts SREC-II market, which will be promulgated on April 25. Sol Systems provided a Sol Upfront contract, issuing pre-payment to EthoSolar’s client for generation of SRECs in 2014 and 2015; this capital was key in pushing the project over the finish line in light of a tight deadline.

“Combining an upfront sale of a percentage of SRECS with other traditional and nontraditional solutions allowed us to negotiate an attractive financing solution from a local bank that has our client in the black from day one on this project. Sol Systems brought creativity and value that was outside the box,” said Ethan DeSota of EthoSolar.

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Sara Rafalson

Webinar Invitation – Everything You Need to Know about the Massachusetts SREC II Program

The Massachusetts solar renewable energy credit (SREC) program has been critical for driving the massive solar growth in the state. However, regulatory uncertainty has loomed since the Massachusetts Department of Energy Resources (DOER) announced last spring that the first iteration of the solar carve-out, now known as SREC I, had reached its cap. Since then, the industry has had their eyes on the development of SREC II, the Bay State’s next solar carve-out program. As SREC II nears promulgation, join Sol Systems, SEIA, and the Massachusetts DOER as we discuss:

  • SREC II’s regulatory framework and how it differs from SREC I, particularly in regards to the new SREC factor and Clearinghouse auction
  • The fate of Massachusetts SREC I subscribers, including those who have not yet been accepted into the program
  • Supply and demand dynamics in the MA SREC I & SREC II programs
  • Spot market prices and the availability of fixed price contracts, including advisable SREC strategies for both residential and commercial systems
  • How to finance commercial projects in Massachusetts, including advisable PPA rates and the availability of SREC strips

    Sol Systems will host a webinar on SREC II with the Massachusetts DOER and SEIA

    Join Sol Systems, Massachusetts DOER and SEIA for information on SREC II structure, pricing and market dynamics

Speakers include:
  • George Ashton, Vice President & CFO, Sol Systems LLC
  • Jason Cimpl, Renewables Trader, Sol Systems LLC
  • Michael Judge, Associate RPS Program Manager, Massachusetts Department of Energy Resources
  • Carrie Hitt, Senior Vice President of State Affairs, SEIA

The event will be taking place on April 23rd, 2014. Register today.

About Sol Systems
Sol Systems is a renewable energy finance firm that provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. Founded in 2008, Sol Systems focuses on meeting the industry’s most critical solar financing needs, including tax structured investments, capital placement, debt financing, and SREC portfolio management. To date, the company has facilitated financing for thousands of distributed generation solar projects and hundreds of millions in investment on behalf of Fortune 100 corporations, utilities, banks, family offices, and individuals. For more information, please visit
Daniel Watson

New Jersey’s PSE&G’s Second Solar Loan III Solicitation is Coming. Here’s What You Need to Know.

The Public Service Electric and Gas Company of New Jersey (PSE&G) will begin accepting applications in less than a month, on February 25, for its Solar Loan program. While no major changes have occurred since the first solicitation late last year, data is now available on pricing from the first round of applications and awards.

The first solicitation of New Jersey’s PSE&G Solar Loan III program began last year and closed the period on November 12th, 2013.  The program provides loans that make up significant portions of project construction costs (see an example here). The loans can be repaid through SRECs, with payment plans set at the closing of the loan. Cash can also be used to pay in case of low production. Once the loan has been paid in full, any SRECs produced thereafter belong to the owner of the system. The following capacities are available per each program segment:

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Natacha Kiler

January 2014 Project Finance Statistics

Our monthly project finance journal contains solar finance statistics, trends, industry news, and SREC market information. Contact our team at finance@solsystemscompany.com or 888-235-1538 x2 for your solar project financing needs.

Our monthly project finance journal contains solar finance statistics, trends, industry news, and SREC market information. Contact our team at finance@solsystemscompany.com or 888-235-1538 x2 for your solar project financing needs.

Below, we have included excerpts from Sol Systems’ January 2014 Project Finance Journal, which is a monthly email newsletter that our project finance team distributes to our network of clients and solar stakeholders. Our newsletter contains solar statistics from current real-life solar projects, trends and observations gained through monthly interviews with our solar project finance team, and it incorporates news from a variety of solar industry resources.

If you would like to receive our Solar Project Finance Journal via email every month, please email pr@solsystemscompany.com with a request to be added to our Project Finance Journal distribution list.

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Anna Noucas

Formal Rulemaking Process Begins for Massachusetts SREC-II Program

On January 3, 2014, the Massachusetts Department of Energy Resources (DOER) announced that they filed revisions to the Renewable Portfolio Standard (RPS) Class I regulation, thus beginning the formal rulemaking process for establishing a framework for the SREC-II program.  The official version of the draft regulation will be published in the Massachusetts Register on January 17, 2014, but in the meantime, the DOER has provided an unofficial version on their website.

Timeline for the Formal Rulemaking Process

The formal rulemaking process begins with a public comment period which includes holding a public hearing.  Written public comments will be accepted from January 3 through 5:00pm on January 29, 2014 and the public hearing will be held on January 24, 2014 from 1:00 to 3:00 pm in the Gardner Auditorium of the Massachusetts State House in Boston.  Following the public comment period, the DOER will submit this proposed final regulation to the Joint Committee on Telecommunications, Utilities and Energy and will incorporate any changes deemed prudent from the public comments.  Within the following 30 days, the Joint Committee will review and submit comments on the regulation back to the DOER.  To conclude, the DOER must consider the Joint Committee’s comments for a period of not less than 30 days, and thereafter, the final regulation will be promulgated as soon as possible.  Based on the estimated outline in the table below, the SREC-II program should become effective in April 2014.

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Anna Noucas

Everything You Need to Know about the Most Recent Updates to Massachusetts SREC II

Massachusetts Department of Energy Resources (DOER) Commissioner Mark Sylvia recently shared the DOER’s most recent developments regarding its SREC II program.

Massachusetts Department of Energy Resources (DOER) Commissioner Mark Sylvia recently shared the DOER’s most recent developments regarding its SREC II program.

Massachusetts Department of Energy Resources (DOER) Commissioner Mark Sylvia recently shared the DOER’s most recent developments regarding its SREC II program with a packed house at the recent Electricity Restructuring Roundtable on Solar in New England and California.  The official draft has not been published for the public, but is expected to be filed any day now.  Here’s what you need to know.

  1. SREC-II Policy Objectives: Unchanged

The overall policy objectives remained unchanged under this most recent draft. The DOER’s main goals are still to provide sufficient economic support, control ratepayer costs, and create competitive, robust, and progressive market conditions that will maintain and expand PV installations in Massachusetts to reach Governor Deval Patrick’s 1600 MW goal by 2020.  The most significant updates and changes to the original SREC-II draft regulations came instead in the announcement of the key design features, which will drive the structure of the SREC-II Program.

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Thomas Larson

Sol Systems Seeks Renewable Energy Intern

Position: Solar Analyst Intern (position beginning in January 2014) targeted towards undergraduates

Description: The Solar Analyst Intern will assist with registration processes, administrative duties, and research tasks, and will be expected to provide clearly defined deliverables. The position will require attention to detail, excellent record keeping, and efficient allocation of time and resources.

Through this position, the Solar Analyst Intern will gain familiarity with solar legislation, solar finance mechanisms, industry news, and industry vocabulary, as well as new product development in a fast paced, start-up environment. This position provides a fantastic launching pad for a career in renewable energy.  Read the rest of this entry »

Natacha Kiler

November 2013 Project Finance Statistics

Our monthly project finance journal contains solar finance statistics, trends, industry news, and SREC market information. Contact our team at finance@solsystemscompany.com or 888-235-1538 x2 for your solar project financing needs.

Our monthly project finance journal contains solar finance statistics, trends, industry news, and SREC market information. Contact our team at finance@solsystemscompany.com or 888-235-1538 x2 for your solar project financing needs.

Every month, Sol Systems distributes a newsletter, the Sol Systems Project Finance Journal, to our community of solar developers and investors. The journal features solar finance statistics, trends, industry news, and SREC market information. We gather this information from our relationships and experience aggregating SRECs and financing commercial and utility scale solar projects.

We have included excerpts from our November Project Finance Journal below. If you have any questions about this information, wish to receive our monthly newsletter via email, or have a solar project in need of financing, please contact our team at finance@solsystemscompany.com.  We would love to hear from you.

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Jessica Robbins

First Round of PSE&G’s Solar Loan III Program Begins Accepting Applications

Due to the competitive nature of the application process and the relatively low prices in the NJ SREC market, we expect the commercial segments especially to see very tight margins.

Due to the competitive nature of the application process and the relatively low prices in the NJ SREC market, we expect the commercial segments especially to see very tight margins.

After two successful prior rounds, PSE&G launched their third Solar Loan program and began accepting applications for PV projects on October 31st. The first round of competitive solicitations will close on Tuesday, November 12th. Projects in PSE&G service territory that are eligible for net metering can receive a percentage of project costs upfront as a loan to be paid back with SRECs or cash during the life of the project. The program will accept 97.5MW in both residential and commercial projects. Sol Systems previously wrote about the program here.

Solar Loan Program III will differ from previous procurements in several ways. Unlike previous Solar Loan programs, the floor price per SREC will be determined by a competitive bid-in process. The program will also feature a ten year loan term, down from 15 years in previous rounds. It will not include a call option on SRECs, providing additional security for investors. The available capacity will also be divided into market segments (various types and capacities of residential and commercial projects), meaning increased diversity of project types in the program. The program applicants will now be responsible for administrative costs of the program as well, in the form of per kW fees. Bidders should account for these fees in their floor price.

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Sara Rafalson

Sol Systems Closes 1.2 MW Transaction for Maryland Nonprofit, Leveraging Solar Financing & SREC Expertise

Financing for the construction of the 1.2 MW project was handled between Sol Systems and Building Energy.

Sol Systems recently financed a 1.2 MW solar project in Maryland.

Sol Systems has successfully financed a 1.2 MW solar project in partnership with its investor client, Washington Gas Energy Systems, a subsidiary of WGL Holdings (NYSE: WGL), which will own and operate the system. Located at Presbyterian Senior Living Services, a non-profit located in Glen Arm, Maryland, the system will provide electricity under a long-term Power Purchase agreement. Financing for the construction of the project was handled between Sol Systems and Building Energy. Washington Gas Energy Systems will own and operate the system.

To fast-track the financing for the commercial-scale project, Sol Systems engaged its network of institutional investors, structured the transaction, and secured a multi-year solar renewable energy credit (SREC) contract, critical to financing the deal.  Maryland SREC compliance buyers do not typically execute SREC contracts prior to a project’s operation date. However, Sol Systems was able to leverage its reputation as the oldest and largest SREC aggregator in the nation to secure a four-year fixed price contract.

“Early before entering into the U.S. market, we recognized the value of having a solid and reliable financing partner to help us navigate the complexities of U.S. solar market. An experienced partner like Sol Systems has provided us with the support we needed to finance our first deal in the United States,” said Andrea Braccialarghe, Managing Director America at Building Energy.

Since 2008, Sol Systems has facilitated financing for 69 MW of solar projects throughout the country, 8 MW of which are located in Maryland. In addition to commercial project financing and SREC aggregation, Sol Systems is tackling tax equity, one of the solar industry’s biggest financing limitations.

“Sol Systems is proud to have helped Building Energy succeed with their first U.S. solar project,” said George Ashton, CFO of Sol Systems. “This effort is an example of how our commercial financing solutions and SREC services can work in tandem to increase deal velocity, accelerate the tempo of project development, and bring solar to non-profits like Presbyterian Senior Living Services.”

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Natacha Kiler

October 2013 Project Finance Statistics

Our monthly project finance journal contains solar finance statistics, trends, industry news, and SREC market information. Contact our team at finance@solsystemscompany.com or 888-235-1538 x2 for your solar project financing needs.

Our monthly project finance journal contains solar finance statistics, trends, industry news, and SREC market information. Contact our team at finance@solsystemscompany.com or 888-235-1538 x2 for your solar project financing needs.

Every month, Sol Systems distributes a newsletter, the Sol Systems Project Finance Journal, to our community of solar developers and investors. The journal features solar finance statistics, trends, industry news, and SREC market information. We gather this information from our relationships and experience aggregating SRECs and financing commercial and utility scale solar projects.

We have included excerpts from our October Project Finance Journal below. If you have any questions about this information, wish to receive our monthly newsletter via email, or have a solar project in need of financing, please contact our team at finance@solsystemscompany.com.  We would love to hear from you.

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Alejandro Neira

Fall 2013 Incentives Roundup

Long Island and Rhode Island will open their enrollment periods in October 7th and 23rd, respectively

Long Island and Rhode Island will open their enrollment periods in October 7th and 23rd, respectively

The Long Island Power Authority announced that the Clean Solar Initiative  would start its second round of applications on October 7th. This program seeks to bring an additional 100 megawatts (MW) of solar energy to the island, and it is expected to have the same success as CSI-I. Projects to enter this round should be 100kW to 2MW in capacity. Similarly to Rhode Island’s program, the rate will be set through a bidding process. The final price per kWh will be fixed for 20 years. CSI will be accepting applications until January 31st, 2014.

On October 28th National Grid starts its third open enrollment period and will be accepting applications to enter into standard contracts for the supply of energy and RECs in Rhode Island. For this year, the ceiling price (the maximum bid-in price for projects) for 50-100 kW systems will be $0.2995/kWh, $0.2880/kWh for 101-250 kW systems, and $0.2840/kWh for 251-500 kW systems. This is the first round where all applicants will have to include competitive bids with their applications. National Grid will be accepting applications until November 8th.

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William Graves

California Solar Incentive Alert: Re-MAT Feed-in Tariff Program

On October 1, 2013 California IOUs will begin accepting Re-MAT applications for qualifying facilities.

On October 1, 2013 California IOUs will begin accepting Re-MAT applications for qualifying facilities.

Pursuant to Senate Bill 32 of 2009, the California Public Utilities Commission (CPUC) implemented the Renewable Market Adjusting Tariff (Re-MAT) program on July 24, 2013. The Re-MAT program is a Feed-in Tariff (FiT) through which customers can sell electricity produced by qualifying facilities* directly to the utility at a set rate for a term of 10, 15, or 20 years. The bill also raises state renewable energy targets from 500 MW to 750 MW, and increases the size cap on qualifying energy facilities from 1.5 MW AC to 3 MW AC. All investor owned utilities (IOUs) in California with more than 75,000 customers must participate in the program. Although all qualifying facilities are eligible to participate in the program, it is clear that solar will play a large role given the amount of attention the program has already gained with developers in the state.

The first round of solicitations for the Re-MAT program will begin on October 1, 2013, and will continue every two months thereafter until it is fully subscribed. The amount of time it takes for the program to become fully subscribed will depend on the ability for projects to be financed at the set energy price, which is one of the more unique aspects of the program. The base price is currently set at $89.23/MWh, pre-Time of Delivery (TOD) adjustments. This price is subject to adjustment after every solicitation depending on program participation. Read the rest of this entry »

Anna Noucas

DOER Releases Updated SREC-II Proposal: What Does It Mean for the MA Solar Market?

Massachusetts DOER released it most recent version of the proposed program design for the next phase of the solar carve-out program (SREC-II).

Massachusetts DOER released it most recent version of the proposed program design for the next phase of the solar carve-out program (SREC-II).

After two months of diligently reviewing comments submitted following the June 7th Solar Stakeholder meeting, the Massachusetts Department of Energy Resources (DOER) released its most recent version of the proposed program design for the next phase of the solar carve-out program (SREC-II) at a meeting held at the Massachusetts State House in Boston on Monday, August 12, 2013. The presentation with detailed information on the proposed program design has been made available on the DOER’s website.

What are the next steps?

The DOER will accept comments on their updated proposal through Monday, August 26th. They have asked stakeholders to consider and answer certain topics of interest and questions in their comments. At the conclusion of this comment period, the DOER will begin the process of translating the program design into a piece of legislation, which will effectively create the SREC-II Program. This could take anywhere from 2-3 months, with the hope of holding a third and final stakeholder input process by November 2013. The DOER’s goal is to then have the legislation for SREC-II promulgated by January 2014, to ensure a January 1, 2014 effective date for the SREC-II program.

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Thomas Larson

Sol Systems Seeks Full-time Portfolio Manager

Position:  Portfolio Manager

Sol Systems is seeking a full-time Portfolio Manager to lead its Solar Renewable Energy Credit (SREC) business. The right candidate lives in, or would relocate to, the Washington DC area to join our growing team of solar finance professionals. This is a mid-level position that will include a combination of business development, SREC trading, financial analysis, and market policy research. This is an opportunity to become an expert in the supply and demand dynamics of U.S. solar markets, to develop and execute portfolio strategies, and to grow the company’s REC trading business through portfolio acquisition and new business generation. The Portfolio Manager will work directly with the CFO, and will be expected to hire and manage other members of the SREC trading team.

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Eric Scheier

Sol Systems’ George Ashton Named as Finalist for CFO of the Year

George Ashton, CFO of Sol Systems, is a finalist for the Washington Business Journal's CFO of the  year award.

George Ashton, CFO of Sol Systems, is a finalist for the Washington Business Journal’s CFO of the year award.

The Washington Business Journal has named Sol Systems’ CFO George Ashton as a finalist for its CFO of the Year Award. The award honors the financial professionals in Greater Washington for outstanding performance in their roles as corporate financial stewards. The awards ceremony will take place at 11:30 on July 18 in Tysons Corner, Virginia.

George, co-founder of Sol Systems and vice president of Sol Systems, has been a critical contributor to the vision and conceptual development of the firm’s renewable energy credit and solar project finance businesses. His current responsibilities include on-going ideation and process implementation with the goal of ensuring that Sol Systems is a transformative financial intermediary in the renewable energy finance space. In addition, George manages the Sol Systems’ SREC portfolio for 3700 solar assets and leads the investor advisory group, which provides investors with opportunities to deploy capital in the renewable energy asset class, including tax equity and take-out investments for solar projects.

For more information or if you are interested in attending the ceremony, please contact pr@solsystemscompany.com.

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Anna Noucas

Massachusetts DOER Updates Solar Stakeholders on Emergency Regulation and Proposed Post-400 MW Policy

This morning was a big one for the Massachusetts solar market. After the surprising announcement that the Massachusetts Department of Energy Resources (DOER) had already received well over 400 MW of Statement of Qualification Applications (SQA) for the Solar Carve-Out Program, many developers, investors, and other interested parties faced the very real possibility that projects into which they had sunk significant capital and time would not be eligible for SRECs under the 400 MW cap. To follow up on their announcement and provide structure for the pending applications, the DOER specified that projects would need to submit SQAs by June 7th to be considered under the current 400 MW program and then subsequently published a list to outline the status of these applications. Consequently, over the last week in parallel with these announcements the amount of project applications swelled to over 800 MW.

Hundreds attend the Massachusetts DOER Solar Stakeholder meeting at the State House in Boston on June 7th.

Hundreds attend the Massachusetts DOER Solar Stakeholder meeting at the State House in Boston on June 7th.

All this transformed what was supposed to be a stakeholder meeting solely regarding plans for the post solar 400 MW program into a discussion on how the DOER would address the accelerated growth of development of the Massachusetts solar market. Discussion of this emergency regulation lasted for the first thirty minutes; the remaining hour and a half concentrated on plans for the post 400 MW solar carve-out program, although it can no longer technically be called “post-400 MW”, given that the total capacity that is either qualified or under review now totals over 900 MW. There were several interesting developments, and although it remains only a proposal at this point, it is clear the DOER remains committed to the growth of solar and trying to create linear growth towards Governor Patrick’s goal of 1600 MW of solar by 2020. More analysis on the likely form that the post-400 MW program will take will be provided by Sol Systems next week, during a webinar hosted with SEIA, featuring Michael Judge of the DOER.

Dwayne Breger, Director of Renewable and Alternative Energy Development at the DOER, laid out a few possible actions, one of which was simply doing nothing. Fortunately, he soon after announced that the DOER would file an emergency regulation to address the oversupply, which was greeted by applause from the entire room. The stated goal of the emergency legislation is to allow the 400 MW cap to expand to accommodate larger projects that are well invested in the development cycle, as well as small-scale solar projects given their short development timeline.

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Daniel Watson

Renewable Portfolio Standards Face Stiff Opposition Across the Country

Renewable Portfolio Standards across the nation are under re-examination by state lawmakers, aiming to diminish or eliminate these Blog-Image-2-Feb-10-2012programs. Despite benefits to local economies and environments, some politicians and lobbyists feel the programs are unimportant. To date, a number of proposals have reached State Senate and House floors throughout the country. Many lawmakers hold that RPS programs across the board create unduly costs for electricity consumers and taxpayers in order to support an industry that should be able to stand on its own. However, organizations funded by oil and gas interests like the American Legislative Exchange Council (ALEC), the Heartland Institute, and others have also played a strong role in fostering anti-renewables legislation across the country. Our company has been tracking the movement in many states and provides an overview of legislative progress thus far.

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Anna Noucas

Delaware Procurement Program Results in Low SREC Prices for Successful Bidders

On May 1, 2013, the Delaware Procurement Program announced the final results for their 2013 program. The results show a significant decrease in the contracted price per SREC as compared to the 2012 Pilot Program’s pricing.

This year, the Delaware Public Service Commission approved a new structure for the program which resulted in a competitive bid process for all tiers. This differs from the structure of the 2012 Pilot Program, which included an administratively set price for projects under 250 kW and a competitive bid process for projects above that size. The set price was an attractive, guaranteed price of $260/SREC or $240/SREC for the first 10 years of the contract.

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Anna Noucas

Massachusetts DOER Announces Solar Policy Stakeholder Meetings

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.

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Sara Rafalson

December Solar Project Finance Statistics

Every month, Sol Systems distributes a newsletter, the SolMarket Project Finance Journal, to our community of solar developers and investors. The journal features solar finance statistics, trends, industry news, and information about SREC markets that we garner from our relationships and experience aggregating SRECs and financing commercial and utility scale solar projects via SolMarket.

We have included excerpts from our December SolMarket Project Finance Journal below. If you have any questions about this information, wish to receive our monthly newsletter via email, or have a solar project for which you are seeking financing, please contact the SolMarket team at info@solmarket.com. We would love to hear from you.

Project Finance Statistics

Characteristics of “Hot Projects” on SolMarket

Capacity: 149 kW – 3 MW

Average capacity: 1,275 kW

Competitive EPC Costs: We have seen a continued fall in EPC costs.  Where costs used to be at $2.75-$3.00, we are now seeing costs of $2.25 to $2.50 – or even as low as $2.10. These decreases will be increasingly necessary as local incentive programs and SREC prices continue to fall.
PPA rates:

  • DE:  9.9 cents/ kWh (20 year term; 2% escalator)
  • MA: 8.6 cents/ kWh (20 year term; 1.5% escalator)

Feed-in Tariff rates:

  • FL: 29 cents/ kWh (20 year term; no escalator)
  • NY: 22 cents/ kWh (20 year term; no escalator)
  • RI: 32.2 cents/ kWh (15 year term;  no escalator)

Characteristics of Recently Funded Projects

Capacity: 1,000 kW – 12,000 kW
Average capacity:  1,159 kW
Average cost (all-in): $3.27/ Watt
Locations:  AZ, CA, CO, DE, GA, MA, MD, NJ, NC, OH, PA, TN, TX

Trends and Observations

New SolMarket Investor with Interest in Projects in 50 kW – 500 kW Range

Sol Systems is working with an investor who is evaluating projects in the 50 kW – 500 kW size range, particularly projects in DC, MA, and MD.  This investor has tax appetite, experience investing in solar, and is comfortable with the underwriting and acquisition process.  As always, a given project will be more attractive to this investor if it can be grouped with similar projects into a 1 MW+ portfolio.  For example, a given project would ideally be grouped with projects that have the same incentive regime, energy offtaker, set of legal documents, or host.

The Limiting Factor in Solar Development: Tax Appetite

Through our daily communications with solar developers and investors, we are constantly reminded that tax appetite is the limiting factor for solar project development.  This challenge has become more pronounced with time given the expiration of the Section 1603 Grant in lieu of investment tax credit in December 2011.  While there are corporations with significant federal tax liability, there are two main limitations on getting these entities to invest in solar: lack of familiarity with solar as an asset class and a lack of familiarity with tax investment structures.  Additionally, there is a risk that a corporation’s federal tax appetite itself will contract if we hit the fiscal cliff and face another economic recession in 2013.  Our SolMarket team is bringing on new (non-banking) corporate investors who have not invested in large scale solar in the past, and we are educating these investors on risks, helping them address them, and working in concert with them to build portfolios of high quality projects.

SolMarket Investors Seeking Projects in Connecticut & Vermont

Projects in the Vermont SPEED program are starting to get attention from our investor clientele.  In particular, projects that have received their Certificate of Public Good (CPG) are generating interest.  The CPG indicates that a project is fully permitted, has a conditional interconnection agreement, and has received a notice to proceed.

There are also three categories of Connecticut projects that may be attractive to our investor network:

  • Connecticut projects that are under 100 kW that have an offtake agreement with a municipal or investment grade host
  • Connecticut projects above 100 kW that were awarded ZRECS in 2012
  • A 100 kW+ site in Connecticut that you plan to submit into the competitive CT ZREC process in April 2013

Please reach out to the SolMarket team if you have Vermont or Connecticut projects that meet these criteria. If you have an LOI or lease/PPA with a credit worthy host, we would be happy to help you set an ZREC bid price and help you identify prospective investors.

North Carolina and Tennessee Valley Authority Solar Markets Proving Tight

We continue to see several stranded projects in North Carolina, where the number of good projects outweighs the number of investors with NC state tax appetite.  Until we are able to bring on an investor with significant state tax appetite, North Carolina will be a challenging market for large scale solar.

We have also seen some portfolios of 2+ MW projects within the Tennessee Valley Authority region; however, the local incentives are not very rich, and the individual project limit of 50 kW makes it difficult to create portfolios with desirable returns.  With falling incentive levels in 2013 and a total program limit of 10 MW, the market will likely become even more difficult in the coming months.

SREC Roundup

SREC pricing did not change for any Sol Annuity and Sol Upfront solutions for the month of December.  If you are interested in our Sol Brokerage clear prices and price movements on the spot market, please view our Q3 SREC clear prices, which were updated at the end of November.

The SolMarket community also has the opportunity to view historic SREC marks and model future marks using their own market assumptions.  To utilize our SREC supply and demand model, please visit www.solmarket.com/srec_prices.

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.

Anna Noucas

NJ Senate Environment and Energy Committee Passes S1925

During the May 17th Senate Environment and Energy hearing, the New Jersey committee passed legislation to alter the state’s current Renewable Portfolio Standard. In addition, S1925 underwent several key revisions that will hopefully promote an even stronger and far-reaching fix to the declining SREC market.

The Committee decided to further lower the Alternative Compliance Payment (ACP) by 8% each year in order to decrease the overall cost of noncompliance.  The proposed ACP is approximately 50% less than the existing ACP under current legislation. The rationale behind these modifications is to bolster the SREC market by 1) increasing yearly demand for solar energy and 2) making it dramatically less expensive (the ACP is still more than double current SREC prices) for suppliers to meet their solar energy obligations.  Finally, S1925 provides a 15-year roadmap of ACP that is established statutorily, not by the BPU.  This offers investors, developers, and suppliers a secure, long-term picture of the price for non-compliance and similarly, the “worst-case scenario” cost of the program.

Failing to meet compliance obligations can impose significant costs on utilities, as they must pay the ACP per megawatt hour of solar energy they are unable to supply.  The ACP is also generally much higher than SREC prices, thus encouraging suppliers to purchase SRECs instead of paying the penalty.  Since the substituted legislation contains a slightly more aggressive solar requirement, lowering the ACP will lower the risk and cost of non-compliance- a cost that invariably passes onto consumer.  If there were a situation of undersupply in New Jersey, the lower ACP would also cushion the subsequent impact on the utility and ratepayer.  Additionally, a more aggressive demand schedule will, in effect, decrease the currently prodigious oversupply and allow SREC prices to return to levels that will sustain investment and deployment.

Energy Year Current RPS (GWh) RPS as introduced Substitute RPS Current ACP ($) ACP as Introduced ($) Substitute ACP ($)
2009 .1600% .1600% .1600% 711 711 711
2012 .2210% .2210% .2210% 693 693 693
2011 306 306 GWh 306 GWh 675 675 675
2012 442 442 GWh 442 GWh 658 658 658
2013 596 596 GWh 596 GWh 641 641 641
2014 772 1.832% 2.184% 625 350 325
2015 965 2.145% 2.543% 609 343 317
2016 1,150 2.446% 2.549% 594 336 309
2017 1,357 2.519% 2.788% 475 329 301
2018 1,591 2.851% 3.023% 463 322 294
2019 1,858 3.111% 3.225% 451 315 286
2020 2,164 3.233% 3.486% 440 308 279
2021 2,581 3.320% 3.722% 429 301 272
2022 2,928 3.383% 3.865% 418 294 265
2023 3,433 3.434% 4.002% 407 287 259
2024 3,989 3.483% 4.078% 397 280 252
2025 4,610 3.532% 4.147% 387 273 246
2026 5,316 3.579% 4.180% 377 266 240
2027 3.625% 4.204% 259 234
2028 3.730% 4.227% 252 228

The amended legislation also includes substantially higher solar energy obligations for each Energy Year. Starting in EY14, the substitute bill will further increase the RPS by approximately half of a percent per year.  This was intended to confront stakeholders’ concerns that the introduced legislation did not establish a demand schedule aggressive enough to dent the oversupplied market.  Reactions to the second reading will unveil as to whether or not the adjustments will actually reinvigorate the market.

Another important modification made before passing S1925 involved a plan to address consistent oversupply in the future.  The proposed legislation included a plan to automatically increase the solar RPS by 20% should there be three consecutive years of excessive supply.  The contingency plan takes into consideration the necessity for flexibility and dynamism in a market that is clearly volatile.  However, the substitute bill that passed out of committee failed to include this language, and replaced it with an investigation of methods to mitigate future market instability.  This means, barring any significantly radical conclusions and recommendations from the investigation, that future adjustments to the RPS resulting from oversupply or any other shock will most likely have to endure the legislative process- a long and uncertain process in a situation that requires expediency and clarity.

S1925 was passed out of Committee for its second reading on the Senate floor as a “substitute bill.”  This means it will go through one more round of amendments, then ideally return for a third reading on the Senate floor. If the bill succeeds, it will then proceed to the Assembly for approval.

The revisions to the legislation are more conducive to improving current SREC prices, but subsequent modifications should be expected upon second reading.  Some in the industry still fear that even with the legislative fix, the market will remain oversupplied in the near-term given current annual installment rates.

Sol Systems will continue to track the process of S1925 through the legislative process.

A full-text version of the amended bill can be found here.

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 requirementsefficiently by providing them with access to diverse portfolios of SRECs. For more information, please visit http://www.solsystemscompany.com.

Sol Systems at SPI

Next week, the Sol Systems team will be traveling to Dallas, Texas to attend the Solar Power International conference.  SPI is the largest solar power and trade show in North America, and with over 24,000 professionals attending, the conference represents an exciting networking opportunity for the solar industry. With the first convention occurring in 2006, SPI has quickly become one of the most important and comprehensive events of its kind.

On Tuesday morning, Sol Systems’ CEO, Yuri Horwitz, will be moderating a panel called “Outlook on SREC markets.”  The panel will discuss the successes and failures of the SREC market and offer insight into future trends and prices.  As an expert on all things SREC, Yuri will be sure to lead a thought provoking discussion.

The Sol Systems’ management team will also be available all week at SPI to discuss SRECs, our new solar finance platform, SolMarket, and our group solar panel purchase program, SolPurchase.

The panel, Outlook on SRECs, will meet at 10:30 am on Tuesday, Oct 18 in room C140 of the Dallas Convention Center.

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 http://www.solsystemscompany.com.

Solar Analyst Position

As Sol Systems continues to grow, we are looking for bright, motivated individuals to become part of our team and contribute directly to the success and sustainability of our business.  Currently we have the following opening:

Position: Solar Analyst Intern

Company: Sol Systems is a solar energy finance firm primarily involved in the purchase, aggregation, and sale of solar renewable energy credits (SRECs) in the Northeast, Southeast and Midwest.  Sol Systems was founded with the intention of facilitating the development of the solar energy market and is now the largest SREC aggregator in the country.  The company is based in Washington DC.  A Part-Time Solar Analyst would have the opportunity to become intimately engaged in the day-to-day operations of the company as well as long-term strategy decisions.

Requirements: The ideal candidate will be a current student that is: resourceful, detail-oriented, and passionate about the development of renewable energy.  A successful candidate will possess the following skills and attributes:

  1. Enthusiasm and a great attitude
  2. Intermediate to advanced understanding of Microsoft Excel
  3. Excellent research and persuasive writing skills
  4. The ability to understand a complex and evolving market
  5. A demonstrated interest in energy, renewable energy, energy finance, project finance, entrepreneurship, renewable energy legislation and regulations

Description: A successful Solar Analyst Intern will be critical to the success of a dynamic company in a nascent industry.

The Analyst will be expected to provide clearly defined deliverables, related primarily to administrative tasks. The position will require attention to detail, excellent record keeping, and efficient allocation of time and resources. Through this position, the Solar Analyst Intern will gain familiarity with solar legislation, solar finance mechanisms, industry news, and industry language, as well as new product development in a fast paced, start-up environment. The position will provide a fantastic launching pad for a career in renewable energy.

Our Approach: We are a group of passionate and capable individuals dedicated to making a lasting and positive change to our energy infrastructure and resources.  We are involved in a challenging environment and a competitive market with a high level of intensity.

Location: The Solar Analyst Intern will be expected to work out of our centrally located office in downtown Washington, DC.

Commitment & Compensation: The internship will last for a term of 4 months (with the understanding that students will take time off for the holidays). Applicants will be expected to work 20 hours each week.  Solar Analysts will receive compensation, which will be specifically determined on a case by case basis and dependent on time commitment and experience.  Successful candidates will be eligible for a full time position.

To Apply: Please submit a resume and cover letter (no more than one page each) to jobs@solsystemscompany.com.  Qualified candidates will be subsequently asked for a writing sample and three professional or academic references.

Deadline: Applications for this position will be accepted immediately. We will review applicants on a rolling basis.

When is 1 MWh of solar electricity equal to 1 SREC?

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.

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.

Sol Systems Presents Nationally on SRECs Markets & Best Practices

Yuri Horwitz, Sol Systems’ CEO, has spoke extensively about the United States’ SREC markets at a number of recent conferences, including a presentation at PV America, held in Philadelphia Pennsylvania on April 3-5th, Novogradac’s Financing Solar Energy Conference in San Francisco, held on April 28th, and a number of presentations locally in the District and Maryland. Mr. Horwitz typically presents on the technical and core drivers in the solar industry’s relatively nascent solar renewable energy credit (SREC) markets, as well as best practices for policymakers. More recently, Sol Systems has been focused on communicating some of the inherent risks in the SREC market, and also best practices to deal with some of these risks.

“It’s terrific to be communicating with the industry in scale like this. The SREC markets are our creation, and we have the responsibility to be stewards for these markets, and help guide policy-makers craft legislation and regulations that work for all,” said Mr. Horwitz. “As the SREC markets continue to grow by 50% annually, these markets will grow in complexity, and so our efforts must grow in focus. We at Sol Systems take this responsibility very seriously.”
Sol Systems has been meeting with policy makers in DC as well as Pennsylvania over the last year to help stabilize what are increasingly volatile SREC markets. Sol Systems has also been meeting with state policymakers hoping to craft SREC legislation in order to help guide policy that is dynamic in a changing market, but also stable as the industry continues to scale.

“We were leaders in establishing these markets, and so we must be leaders in helping to ensure they succeed. We’re absolutely dedicated to these efforts, and a significant part of our job is educating others about how these markets work, and if we want to see them succeed, how we must work together to ensure this success.”

Sol Systems Welcomes Andrew Gilligan To Its Team

Sol Systems is proud to welcome a new member to its team. Andrew Gilligan will be joining the company full-time beginning in late June as an Analyst and will be responsible for customer relations, state registrations, and providing research support on a wide variety of solar topics. Many of Sol Systems’ SREC customers and partners may have already had the pleasure of speaking to Andrew, as he has been an intern with the company for the past 4 months.

“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.

NJ Solar Driven by SRECs (Even More than Before)

New Jersey has been the leading SREC market in the U.S for some time, but the phase-out of the REIP program and the introduction of the SREC Registration Program (SRP) mean that New Jersey’s solar market is now truly driven by SRECs — and market growth appears to be quite robust.

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.

The 2 SREC Markets

When talking with potential customers at Sol Systems, it is often interesting to hear the diverging views on the benefits and drawbacks of selling Solar Renewable Energy Credits (SRECs) through spot market agreements or multi-year contracts. With spot market brokerage-type agreements, SRECs are sold every month or quarter for the highest current price. Long-term contracts (often called forward contracts) are when a solar system owner locks into a fixed price per SREC for a multi-year term.

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.

Sol Systems to speak at PV America Conference on 4/5/11

Sol Systems, a solar finance company and the largest and oldest SREC aggregator in the U.S. will present at the PV America Conference in Philadelphia, PA on Tuesday, April 5th, 2011 at 10:30 AM.

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.

3 Things You Don’t Know About New Jersey Solar RECs

Lots of people know that New Jersey is the 2nd largest solar market in the U.S. and that the market’s strength is largely credited to a robust solar renewable energy credit (“SREC“) market (SRECs traded on the spot market at approximately $650/SREC in early 2011), but there are three things that most people don’t know about the New Jersey SREC market…

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.

Sol Bridge Allows Business Owners to Go Solar with Low Out-of-Pocket Costs

Sol Systems, the oldest and largest solar renewable energy credit (SREC) aggregator in the U.S., recently announced a new financing solution for commercial-size solar energy systems called Sol Bridge. The bridge financing solves a problem that many prospective solar owners face: commercial-sized solar energy systems have high capital costs (typically more than $100,000), and system owners must pay for the system costs several months before they receive their federal and state solar incentives or solar renewable energy credit (SREC) payments. Because most businesses have limited cash and must reserve their capital for business-related expenses and investments, owning a solar energy system is a distant possibility.

Sol Bridge addresses this problem by providing a 90 day cash advance to system owners for the 30% federal tax grant and any applicable state incentives. This option allows business owners to go solar without tying up capital, while still retaining ownership of their system and all the benefits including SREC payments and electricity bill savings.

The cash advance is provided upon system completion and can be assigned to the solar installer, so that the installer reduces the customer’s payment amounts accordingly. Sol Bridge and the corresponding loan fees are due after 90 days, however, the loan fees can be wrapped into the total installation costs and therefore included in the amount that will be refunded upon receipt of the federal grant and state rebates.

In addition, Sol Bridge can be paired with the Sol Upfront SREC payment option which allows system owners to pre-sell the future SRECs to Sol Systems in exchange for a one-time lump-sum payment. When the Sol Bridge and Sol Upfront options are combined, the system owner is responsible for merely 10-30% of the remaining system costs; moreover, the business owner reaps the full benefits of their electricity savings because there is no ongoing solar lease fee or PPA payments.

Please visit the Sol Systems website for more information about Sol Bridge.

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.

The Distributed Generation Amendment Act of 2011: Critical for DC’s Solar Community

District of Columbia Council Member, Mary Cheh, recently introduced one of the more important pieces of legislation the District’s solar community has seen in some time: the Distributed Generation Amendment Act of 2011.  This bill sets a framework and goals for the District that will ensure the development of a robust solar community by creating jobs, providing a price hedge against rising energy costs, strengthening the local transmission grid, and producing significant localized environmental benefits.

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 .

An Outlook On Solar in 2011

Competition is stiff in the solar manufacturing industry, with companies like Evergreen announcing their departure from the United States to China in order to reduce costs. Enormous global module supply has come online in the last two years to help fuel the rapid build-out in Europe, China and elsewhere, resulting in dramatic declines in solar module pricing. Some, like Gleacher and Company, are modeling module prices at around $1.30/watt right now. Others are actually predicting wholesale module costs at $1.10 in the next few weeks.

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.

Federal 1603 Investment Tax Grant Extended

The United States House of Representatives extended the investment tax credits grant program (ITC Grant Program) today, a huge victory for the solar industry. The ITC Grant Program provides grants in the amount of thirty percent of a project’s costs, and is one of the single most important pieces of legislation for commercial solar development currently. The ITC Grant is often combined with Sol Systems’ Sol Up-Front (which provides up-front financing based on SREC production) to help pay down much of the costs of a system within 90 days of installation.

The program was created by the American Recovery and Reinvestment Act (Section 1603) to provide commercial solar installations with a cash grant in lieu of the 30 percent solar investment tax credit (ITC). The ITC actually went into law in 2008, but the economic conditions created by the global recession, and the lack of tax appetite on the part of many institutional investors, meant that few institutional investors could utilize the ITC. The 1603 Program allows the Treasury to effectively purchase the tax credit from solar developers through the 30% grant.

So far, the ITC Grant has helped more than 1,100 solar projects in 42 states and has supported $18 billion in investment. The program has been critical in allowing the solar industry to grow by over 100 percent in 2010, create enough new solar capacity to power 200,000 homes and provide work to more than 93,000 Americans.

Why are spot market and long-term SRECs priced differently?

Many prospective solar energy owners are quick to notice that spot market rates for Solar Renewable Energy Credits (Solar RECs or “SRECs”) are typically higher than long-term SREC rates on the contract start date. For example, a person that owns a solar energy system in Delaware could sell a single SREC on the spot market for approximately $275 in December 2010, but if that same person wanted to lock-in at a 5 year SREC rate, she would only be able to get approximately $250 for each SREC produced between today and 2015.

This price difference sometimes leads solar owners to sell their SRECs on the spot market, particularly if they expect SREC prices to go up over time.

So, why would a solar owner choose to enter a long term SREC agreement?

The main reason a system owner would choose a long term contract is because they realize that spot market rates may not always stay high. These owners prefer to guarantee their SREC returns by locking into a fixed rate multi-year contract, which will give them long term security and a predictable source of income. If these system owners are correct, they will end up getting more income over time than they would have by selling their SRECs on the spot market.

But why are long term rates lower than current spot market prices?

There are a few reasons why multi-year contract rates are initially lower than spot market rates, and they relate to SREC buyers appetite to buy SRECs. Let’s start by considering the profile of an SREC buyer.

The ultimate SREC buyer is an energy supplier or utility that is subject to a state Renewable Portfolio Standard with a solar carve-out. These energy suppliers and utilities have the choice of:
(1) Building solar power plants and generating solar energy themselves
(2) Buying the environmental attributes of solar (SRECs) from independent solar energy system owners, or
(3) Paying an Alternative Compliance Payment (ACP) or a penalty fee for not meeting their legislative mandates

If these energy suppliers and utilities do not own operational solar power plants, they typically prefer to buy SRECs. If they want to buy SRECs they can do so by buying them on the spot market or they can enter multi-year agreements at a pre-determined price.

Most energy suppliers will hedge their bets by buying some SRECs on the spot market and some SRECs through multi-year agreements. However, in virtually all cases, these energy suppliers will contract for lower prices per SREC for multi-year agreements than they will pay on today’s spot market. There are a few reasons for this:
(1) They expect that they will not need to buy SRECs in the future. Why? They plan to build solar power plants and generate their own solar energy, so they won’t have to buy them from independent system owners.
(2) They expect that they can buy SRECs at lower costs in the future. Why? They anticipate that there will be more solar projects and that the increased SREC supply (http://www.solsystemscompany.com/faqs-recs-and-srecs) will lead to lower SREC prices.
(3) They want to wait and see what happens to requirements and prices in future years. Why? They expect that legislative changes may reduce or eliminate the requirement for them to buy SRECs.

In other words, energy suppliers themselves believe SREC prices will go down. Because of these expectations, energy suppliers are usually only willing to engage in multi-year agreements at reduced SREC prices. And these uncertainties are the very same risk factors that create SREC spot market volatility.

In summary, when choosing between the SREC spot market and a long term contract, a solar energy system owner should examine their appetite for risk and reward.
System owners who choose to sell their SRECs on the spot market get the reward of higher spot market prices today, but they are likely to face reduced or eliminated SREC values in future years. System owners who choose to sell their SRECs through long term contracts typically receive lower SREC rates today, but they get more certainty on their solar investment returns.

About Sol Systems:
As the largest and oldest SREC aggregator in the U.S., Sol Systems aggregates SRECs from independent solar energy system owners and sells them directly to energy suppliers and utilities through spot-market arrangements and multi-year contracts. Sol Systems operates in 13 states. For more information, please visit www.solsystemscompany.com.

Sol Systems Unveils Utility-Backed Solar SREC Financing Option in MA

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.

Sol Systems Partners with Standard Solar

Standard Solar, Inc., a leader in the full-service development, installation and financing of solar electric systems for commercial, government and residential customers, today announced a partnership with Sol Systems, the nation’s largest solar renewable energy credit (SREC) aggregator. The partnership will help make alternative energy solutions more affordable for Standard Solar customers.

“This partnership will go a long way for our current and future customers,” said Standard Solar President Scott Wiater. “Not only will it help businesses and homeowners significantly cut costs of their solar energy systems, but it will help those considering solar energy to realize that alternative energy is an affordable solution.”

Solar renewable energy credits are a critical component to making solar energy an affordable option for homeowners and businesses, and can compose up to 30 percent of a solar energy system’s payback. Through Standard Solar’s partnership with Sol Systems, customers will have access to competitive SREC pricing and the resources to secure the maximum benefit from their SRECs.

Through one SREC program, Sol Upfront, customers can receive immediate financing for their systems. Sol Systems will purchase all estimated SREC production for a 10-year period, providing customers with a one-time, lump-sum payment that can be used to pay off installation costs. The Sol Annuity SREC option allows customers to lock in the current SREC rate and receive payments for each full SREC produced. This gives customers reliable, quarterly payments as solar energy is generated.

“We are excited to work with Standard Solar, an installer with one of the best reputations in the Mid-Atlantic region,” said Sol Systems CEO Yuri Horwitz. “The partnership will extend our solar financing services to hundreds of homeowners and businesses and give them easy, economical ways to invest in solar.”

Standard Solar is also participating in Sol Lease, which allows Washington DC homeowners, schools, churches, businesses and non-profits to secure solar energy with no up-front costs. By paying a fixed, monthly payment, these groups can enjoy the savings and benefits of solar energy produced from a solar energy system for a 10-year contract term.

About Standard Solar

Standard Solar, Inc. is a leader in the full-service development, construction, integration, financing and installation of solar electric systems. Dedicated to making solar solutions more accessible to consumers, businesses, institutions and governments, the company is leading the way to energy independence. Committed to offering responsible and energy cost-saving solar solutions that conform to the highest standards, Standard Solar is one of the most trusted and respected solar companies. Since 2004, Standard Solar has been the partner of choice to make solar energy financially accessible, helping customers through financing options, including Power Purchase Agreements (PPAs) and navigating expanded federal and state and local tax credits. The company’s Standard Energy Solutions (SES) division provides energy auditing and retrofitting services for energy improvement projects. Ranked the 73rd Fastest Growing Private Company in America in 2010 by Inc. magazine, and the highest-ranking renewable energy company on the list, Standard Solar is headquartered in Rockville, MD. For more information, please visit www.standardsolar.com.

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.

Mid Size Commercial Solar Projects Require Guaranteed Long Term SREC Contracts

The mid-Atlantic region has witnessed a rapid growth in solar installations over the past few years. While the large multi-megawatt commercial projects make front-page news, it is interesting to note that there is also vibrant growth in mid-size commercial projects, ranging from 50kW-500 kW. Today, the total capacity of solar installed in the PJM region (solar projects in the mid-Atlantic region) is 262 MW, of which 83 MW comes from systems in the 50 kW-500 kW range. Moreover, the mid-size commercial project segment has shown steady growth, adding approximately 26 MW each year since 2009.

Large solar projects face significant financing hurdles because millions of dollars of capital are required, but these projects also fetch the attention of large banks, energy suppliers and tax equity investors. Mid-size commercial projects face the daunting challenge of financing their projects with less visibility, but they can be successful if they make use of all the available incentives and financing tools.

Many mid-size commercial developers and installers can help the customer through the process for applying to federal and state grants; however, monetizing the Solar Renewable Energy Credits (SRECs) is often more difficult. SREC markets are complex for two main reasons. First, SREC markets differ across various states depending on the State’s Renewable Energy Portfolio Standard (RPS) and Solar Alternative Compliance Payment (SACP), the fee paid by energy suppliers for non-compliance of RPS requirements. Second, SREC markets have been known to be fairly volatile due to legislation changes and variations in supply and demand. These challenges can be mitigated by finding a stable partner with long-term SREC contracts who can help system owners navigate the legislation, and provide security of cash flow payments which allow system owners to accurately determine their payback period.

Investing in a mid-size commercial solar project is a sizeable investment for a small business owner or homeowner, thereby making it imperative to ask some difficult questions to the SREC aggregator or financier. The most important question to ask the SREC aggregator is: “Are your customer contracts backed up with energy supplier contracts?” If an SREC aggregator has long term contracts with energy suppliers, then the SREC firm has foresight into future SREC prices and can offer a fair, guaranteed rate. On the contrary, if an SREC aggregator is speculating on price and hoping to sell the SRECs in the spot market at a future date without any security of a long term agreement, their customer is exposed to a lot more SREC market risk. System owners should also be aware of the other factors that shape the SREC markets, like regulatory changes, rapid adoption of solar, and market shifts due to large-scale solar projects.

Being the oldest and largest SREC aggregator in the country, Sol Systems has matched a majority of its long-term SREC contracts with its energy supplier contracts, thereby providing the market stability and flexibility that mid-size commercial customers seek. Today, Sol Systems works with over 200 developers and installers in financing mid-size commercial solar projects. More information can be found at www.solsystemscompany.com.

Sol Systems is Hiring: Solar Analyst

Sol Systems is hiring (2) part-time Solar Analysts / Interns.

The ideal candidate will be a current student or a recent graduate that is: resourceful, detail oriented, and passionate about the development of renewable energy. A successful Solar Analyst will possess the following skills and attributes:
1. Intermediate to advanced understanding of Microsoft Excel
2. Excellent research and persuasive writing skills
3. The ability to understand a complex and evolving market
4. A demonstrable interest in: energy, renewable energy, energy finance, project finance, entrepreneurship, and/or renewable energy legislation and regulations
5. Enthusiasm and a great attitude

The Solar Analyst will be critical to the success of a dynamic company in a nascent industry. The Solar Analyst will assist with registration processes, administrative duties, and discrete research projects. The Analyst will be expected to respond to customer queries, research industry news, write timely blogs, and provide clearly defined deliverables. The position will require attention to detail, excellent record keeping, and efficient allocation of time and resources.

Through this position, the Solar Analyst will gain familiarity with solar renewable energy credit (SREC) legislation, solar finance mechanisms, solar industry news, solar industry language, as well as new product development in a fast paced, start-up environment. The position will provide a fantastic launching pad for a career in renewable energy.

Commitment & Compensation: The internship will last for a term of at least 3 months (with the understanding that students will take time off for the holidays). Applicants will be expected to work 10 or more hours each week. Solar Analysts will be paid a stipend of $2,000, or an amount commensurate with the length of the commitment and prior experience. Successful candidates will be eligible for a full time position.

To Apply: Please submit a resume and cover letter (no more than one page each) to intern@solsystemscompany.com. Qualified candidates will be subsequently asked for a writing sample and three professional or academic references.

Applications for this position will be accepted immediately and reviewed on a rolling basis. Preference will be given to applicants that can work out of our downtown DC office two days a week.

About the Company: Sol Systems is a solar energy finance firm primarily involved in the purchase, aggregation, and sale of solar renewable energy credits (SRECs) in the Northeast, Southeast and Midwest. Sol Systems was founded with the intention of facilitating the development of the solar energy market. The company is based in downtown Washington DC.

SREC Monitoring, Reporting, and Verification, Explained

When speaking with homeowners who have recently invested in solar energy, and who are considering how to manage the sale of their Solar Renewable Energy Credits (SRECs), a common question is, “how will my solar electricity be monitored and how do I earn SRECs?”

This simple question cuts right to some of the most complex and nuanced underpinnings of how SREC markets work and begs answers to questions like:

• How is solar electricity production monitored?
• How is this production reported to a solar Attributes Tracking Program?
• How is the reported generation verified as accurate?

These questions illustrate the complexity of SREC markets — particularly because the answers to these questions vary by state. It’s understandable that homeowners can be intimidated by the solar industry and SREC markets; however, navigating these complexities is possible.

Each state determines its own regulations for monitoring solar electricity generation for SREC production. These regulations may require an inverter, a solar meter, or a remote monitoring system. Depending on the system state, and the size of the system, vastly different reporting technologies are required.

Reporting provisions refer to how the solar monitoring data is transmitted to an Attributes Tracking System (such as PJM’s Generation Attributes Tracking System “GATS”) for verification and ultimately SREC production. Solar reporting provisions are also determined on a state by state basis. For example, in Massachusetts all monitoring data must be reported to the Massachusetts Production Tracking Systems (administered by the MA Clean Energy Center). For systems above 10 KW , the monitoring data must also be reported electronically though a remote monitoring system, such as Locus Energy. However, each state differs on these provisions as well.

Verification of reported monitoring data is the final step of the compliance cycle for SREC production, and is conducted by the Attributes Tracking System. The only exception to this rule is Massachusetts, in which the Production Tracking System verifies the reporting data and then transmits it to NEPOOL GIS on the system owner’s behalf. For all solar energy systems registered with PJM GATS, GATS verifies reporting data by comparing the data with its own internal models. If and when GATS determines the reported generation falls within boundaries of the projected modeled generation, GATS then awards the system owner’s account SREC value. In the event that the reported data is not within the bounds of the projected modeled generation, GATS follows up to verify the accuracy of the reported data. In the future, some states will be implementing independent verification steps to ensure that the reported data is accurate, and markets are operating efficiently.

Certainly, it can be challenging to understand and abide by the requirements of SREC monitoring, reporting, and verification; however, the benefit of working with an aggregator like Sol Systems is that we navigate these complexities on behalf of our customers. We understand these provisions, abide by them, and work with regulators on a daily basis. This means our customers can rest assured that they receive all the credit, and solar credits, for their solar electricity production.

The Massachusetts Solar Carve Out Program and SREC Market

If you are a homeowner or business owner with a solar electric system located in the state of Massachusetts, you now have the opportunity to significantly improve the economics of your solar project and receive income for the solar renewable energy credits (SRECs) associated with the electricity you will be generating from your solar energy system. Because the Massachusetts SREC market is so new, Sol Systems thought it may be useful to summarize the Solar Carve Out Program and highlight some of the available options for selling your SRECs.

What is the Massachusetts Solar Carve Out Program?
In January of this year, Massachusetts implemented a Solar Carve Out Program as part of the Green Communities Act of 2008. As a result, Massachusetts utilities must now provide a portion of their total energy load from solar power generated from photovoltaic (PV) systems located within the state. This year the Minimum Standard, which is the total solar capacity that all utilities must procure, is 30 MW and is spread proportionally across all local utilities. If a utility is unable to meet the requirement by producing solar electricity on its own, it must purchase SRECs from independent PV system owners (like homeowners or businesses) or face a penalty called an Alternative Compliance Payment (ACP). For load contracted after 2010, the ACP is set at $600/MWh (higher than most states with a solar carve out program) and for load contracted prior to 2010, the ACP is set at a much lower value of roughly $60.

How does the Solar Carve Out Program Benefit Solar Project Owners?
The benefit of the solar carve out program is that solar project owners in Massachusetts can now secure a higher value for the green attributes associated with their solar electricity. Previously, the green attributes of a solar energy system were valued under a different program and were selling for only $10-40/credit. The new ACPs offer the potential for SRECs to sell at a much higher price.

How much are SRECs in MA worth?
The value of each SREC in MA depends on a variety of factors including the ACP, SREC supply, and SREC demand. Since there are two ACPs in effect until load contracted prior to 2010 phases out, there is a bit of uncertainty over where SREC prices will settle during the initial years. However, as the market is likely to be undersupplied this first year, many solar stakeholders are hoping that spot market SREC prices will settle closer to the $600 ACP.

If a PV system owner opts to enter a long term contract for a fixed SREC price, the value of each SREC is likely to be lower than spot market prices. However, in exchange for the lower price, the owner get added security knowing that they have a predictable source of income, regardless of where spot market prices end up in the long run.

What is the Solar Credit Clearinghouse Program?
The ACP mentioned above is designed to set the ceiling for SREC prices, the Solar Credit Clearinghouse, however, is designed to set the SREC floor price. If a PV system owner is unable to find a short term or long term contract for their SRECs, they may place the solar credits into the Clearinghouse, which is a fixed price auction that takes place every July. The Clearinghouse price for SRECs is set at $300, minus a 5% ($15) transaction fee.

Which projects are eligible for the program?

A PV project is eligible if the PV system meets the following specifications[i]:
• Located in the Commonwealth of Massachusetts
• Is 6 MW or less
• Began operation on January 1, 2008 or later
• Is interconnected to a utility grid
• Received less than 67% of total funding from the American Recovery and Reinvestment Act

What options does Sol Systems offer for SRECS?
Sol Systems currently provides three options to help Massachusetts customers take advantage of the solar carve out program.

Option 1 - Sol Annuity. Sol Annuity provides a fixed, quarterly payment for each full SREC produced. This option removes SREC price volatility, and provides customers with a steady income stream over a five year contract term. As spot market prices change (and decrease) over time, Sol Annuity gives you consistent, guaranteed income. You can match this cash flow against a solar financing payment, such as a loan or solar power purchase agreement (PPA).

Option 2 - Sol Brokerage. Sol Brokerage lets you take advantage of high solar renewable energy certificates (SREC) spot market prices without any effort or market knowledge required. We monitor all solar renewable energy certificate trading platforms and legislative changes, and we establish an aggressive floor price that reflects current market conditions. As the market changes, you’ll receive payment for solar RECs at prices that are between our achievable floor price and the ACP.

Option 3 - Sol Flex. Sol Flex is a hybrid option between Sol Annuity and Sol Brokerage. This option provides a guaranteed base price for your SRECs for 5 years, but also allows you to benefit from upside and profit sharing, if the spot market performs above the base price.

Regardless of which option you choose, Sol Systems will take care of registering your system with the appropriate regulatory agencies. All you have to do is sign up with Sol Systems and we’ll take care of the rest. Customers that are interested in working with Sol Systems should contact us for more information. We can lead you through the simple registration process and get you set up to receive SREC income.

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 1,100 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 and has partnerships in place with over 100 solar installers and developers. For more information, please visit www.solsystemscompany.com.

Contact
Phone: 888-235-1538 x1
Email: info@solsystemscompany.com
Website: www.solsystemscompany.com

As the Federal RES Evolves, What Does it Mean for Solar?

This last September, the U.S. Senate introduced the Renewable Electricity Promotion Act of 2010, Senate Bill 3813, a stand-alone Renewable Electricity Standard (RES) that will require sellers of electricity to retail customers to obtain certain percentages of their electric supply from renewable energy resources. If S. 3813 looks familiar, it should. The legislation is what remains of comprehensive climate change legislation that was introduced in the American Clean Energy Leadership Act of 2009 S.1462. This is therefore perhaps the last chance for any comprehensive federal approach to climate change or renewable energy prior to the next election.

So what does it mean for solar energy? In sum, it doesn’t hurt solar, but its immediate effects may not help much either. The proposed alternative compliance payment (ACP), which is the penalty energy suppliers must pay if they do not comply with their requirements is set low, especially when compared to current state RES programs such as New Jersey or D.C that have developed a foundation for a strong solar market. In addition, the portfolio of qualifying technologies may be too inclusive (by including numerous technologies the impact on any one technology is limited.

However, the legislation provides the framework, a seed of sorts, for the continued implementation and development of RES legislation nationwide. As RES markets develop nationwide, the solar industry can begin the task of adjusting to a more sustainable regulatory mechanism that is likely to help accelerate the implementation of solar technology (and others) well into the next decade. Our analysis is below.

BACKGROUND

What Does a Federal RES Do?

The federal Renewable Electricity Standard requires that a certain percentage of the electricity purchased in the country come from renewable energy resources. The purpose of an RES is to set up a competitive market in which utilities either (1) directly produce a specific amount of renewable energy based on their total load or (2) effectively purchase this renewable energy from others producing it or (3) pay a penalty. Most utilities will choose some combination of all three. In some state markets, an RES is called a renewable portfolio standard (RPS) or alternative energy portfolio standard (AEPS).

If utilities opt to go with the second strategy listed above, they usually do not purchase the energy from renewable energy resources, they simply purchase title to the “credit” associated with the renewable energy, termed a renewable energy credit (REC). Since energy can be measured in megawatt-hours (MWh), one REC represents the green attributes associated with one MWh of production from a renewable energy resource. Each time a homeowner or business produces one MWh from its solar system, it can sell the REC associated with this MWh in a competitive market. Technologies compete to produce RECs and sell them, and as these technologies scale, the supply of RECs increases, and the costs of these RECs decreases. The market is designed to drive down the costs of compliance and catalyze alternative energy technologies to scale.

CURRENT RES OVERVIEW

Volumes

The RES targets are less than the twenty to twenty-five percent recommended by most industry groups and President Obama himself this last year. The current RES requirements are below:

2012-13: 3%
2014-16: 6%
2017-18: 9%
2019-20: 12%
2021-39: 15%

The Alternative Compliance Payment

The Alternative Compliance Payment, which is the fee that electric utilities must pay in lieu of actually purchasing or producing the renewable energy credits required by the RES, is $21, adjusted for inflation. This means that for every MWH of electricity that the utility fails to supply from renewable energy, it must pay a fine of $21. The ACP effectively sets the ceiling on the value of renewable energy credits, with the caveat that there are multipliers (described below) that make some RECs more valuable than others.

Qualifying Technologies

Under the current RES, those resources include solar, wind, geothermal, biomass, landfill gas, qualified hydropower, marine and hydrokinetic renewable energy, incremental geothermal, coal-mined methane, qualified waste-to-energy, and potentially other technologies.

Multipliers

In order to incentivize certain technologies, states (and in this case the federal government) often provide multipliers for RECs from specific technologies or locations. Under the federal RES, utilities will receive double credit for RECs produced by renewable energy systems located on Indian land (to incentivize the development of renewable energy on Indian land) and triple credit for small renewable distributed generation less than 1 MW. Although not stated, it is likely that the maximum ceiling on energy efficiency credits will conversely reduce the value of RECs produced from energy efficiency upgrades.

No Preemption

The national RES will not preempt current state RES or RPS standards. Instead, the RES is meant to set a floor for states without current RES or RPS legislation to set up trading regimes and complement preexisting state legislation. The RES is a bit like the federal Clean Air Act or Clean Water Act in this respect, both of which provide states with a blueprint which they can either accept in whole, or mimic with state-specific standards that are as strict or less strict. This is incredibly important for those states that have more favorable solar requirements than the federal RES.

National Market

It is unclear at this point whether a national market will develop because of the legislation. Currently, the legislation provides for the delegation of responsibilities to either a national trading mechanism or a more regional mechanism. States will have to figure out whether they want their REC markets to be regional, like the Regional Greenhouse Gas Initiative (RGGI), or isolated, like Delaware, New Jersey, Massachusetts and others.

SREC Values

The value of solar renewable energy credits (SRECs) is typically a function of supply and demand . It is therefore unclear what the values of SRECs will be since this supply and demand will differ from state to state. Taken by itself, the legislation will not push SREC prices very high since the ACP is $21, with a potential multiplier of three ($63). However, current RPS states will likely retain their markets, and states without an RPS may develop more aggressive RPS legislation in light of the national RES.

ANALYSIS

Potential Negatives

1. The effective solar alternative compliance payment (SACP) is $63 per MWH for distributed solar energy systems (those below 1 MW in nameplate capacity). This is low enough that it is not likely to create a significant market for solar renewable energy credits (since the ACP provides a ceiling on the value of SRECs). This legislation is therefore unlikely to single-handedly develop robust markets for solar. However, as discussed below, the RES may provide the necessary legislative framework for the creation of such a market.

2. The list of qualifying “renewable energy resources” includes technologies that will be much less expensive to implement initially, and will likely flood REC markets. Solar energy, for example, is not likely to be able to compete with biomass or methane from mining.

3. Utilities can purchase energy efficiency credits. These credits are also likely to be much less valuable than SRECs, and may also flood the market – although they are limited to 26.67 percent of their overall required needs.

Potential Positives

Setting up a national RES begins to set minimum requirements, build the framework for the introduction of renewable energy legislation that many states currently do not have in an organized fashion, and develop a sustainable means by which to incentivize renewable energy. RES legislation is especially important for new technologies that may have higher up-front costs (like solar) because requirements can be structured around these costs. Although the standards may not be perfectly structured to assist solar energy at this time, most RES legislation is tweaked over time to better suite solar energy.

OUR CONCLUSION

The proposed federal RES is a good beginning, and provides a decent foundation for future legislation. Although it may not be perfect for solar initially, it forces legislators to address the important issue of alternative energy development, and provides them with a blueprint with which to do so. Our guess is that the requirements, and the ACP, will likely increase on a state-by-state basis. In the meantime, renewable energy is able to put itself on the map, and we’ve taken the first step of many in diversifying our energy infrastructure and moving towards a more sustainable future.

The Difference Between SREC and Carbon Markets

People outside the solar energy industry often refer to Renewable Energy Credit compliance markets as “carbon markets”, and solar renewable energy credits (SRECs) as “carbon credits”. This is a common misconception, so we wanted to flesh out the underlying similarities between SREC and carbon markets and then clarify the differences.

Carbon markets and SREC markets both utilize tradable permits, and market incentives, to achieve policy objectives. However, whereas carbon markets are established to reduce a pollutant and correct a market failure, SREC markets are established to incentivize the production of solar energy and create value for individuals investing in solar.

The underlying similarity between SREC and carbon markets is that both markets are based on the use of tradable permits. In markets with tradable permits, a new commodity is created through the passage of a law. The law requires regulated entities to obtain compliance permits, and in so doing creates a price signal which affects behavior and markets. In the case of mandatory carbon markets, like the Regional Greenhouse Gas Initiative in the Northeastern US, a regulating agency is given the authority by a law to regulate emissions of greenhouse gasses.

Hypothetically, the regulating agency tells a utility it can only emit 10 tons of pollution in 2011, and then gives the utility 10 carbon credits (each credit equal to 1 ton). The utility can either (1) emit 10 tons of pollution and surrender back the 10 credits to the regulatory agency, (2) emit less than 10 tons pollution and sell the excess credits to another utility or market actor, or (3) emit more than 10 tons of pollution and purchase credits from another utility or market actor. The decision the hypothetical utility ultimately takes is based on its own marginal costs of abatement (i.e. the cost of not emitting greenhouse gas) versus the market value of the carbon credit.

SREC markets share this market structure with carbon markets, and this is why I think people new to the SREC market often inadvertently confuse SREC markets with carbon markets.

However, SREC markets are entirely different than carbon markets in both intention and function. Whereas carbon markets utilize market forces to identify the most economical manner to reduce greenhouse gas emissions, SREC markets incentivize the creation of a new market and a new source of renewable energy. SRECs can be created by individual homeowners that have invested in solar energy, and these SRECs (paired with tax credits, rebates, and energy savings) can make the solar energy system affordable. Companies like Sol Systems can work with solar energy system owners to monetize the SRECs, and achieve the best value for the sale of their SRECs through long-term contracts. By aggregating customer’s SRECs into a large portfolio, Sol Systems can sell SRECs directly to energy suppliers and utilities through long-term agreements that bring security and value to both the utility, and the customer that has invested in solar.

Pennsylvania Solar REC Market May Be Tight in 2011

If commercial-sized solar projects that have been announced in Pennsylvania are built within the next 12 months, Pennsylvania could experience a significant oversupply of solar renewable energy credits in 2011. In other words, there may be more than enough solar renewable energy credits (SRECs) available for Pennsylvania energy suppliers to meet their solar energy mandates as dictated by the Alternative Energy Portfolio Standard (AEPS).

By June of 2011, Pennsylvania energy suppliers are supposed to generate or purchase an estimated 33,000 SRECs pursuant to the requirements of the AEPS. This is equal to 33,000 megawatt hours of solar-generated electricity, and equates to around 27.5 MW of nameplate installed capacity.

What may be surprising is that there is already enough solar capacity registered in Pennsylvania to produce approximately 46,440 SRECs.

In addition, there have been project announcements for more than 60 MW of new commercial-scale solar projects for corporations like GlaxoSmithKline, Nestle Waters, and Air Products & Chemicals as well as systems for government organizations such as Bethlehem Area School Districts, Colonial Elementary School, and the Tioga Marine Terminal.

These large projects alone could add 72,000 SRECs to the Pennsylvania market, but SRECs from new smaller residential projects will grow as well.

What’s difficult to predict, however, is the number of large scale solar projects that will actually be built. Many states see an attrition rate of 50% or more within their grant programs. It’s likely that the termination of the Treasury ITC grant program will push construction forward in the short term, creating a bump of SREC supply in the early part of 2011, but that may undermine solar development through the rest of the year.

If both residential and projects expand to their full potential, Pennsylvania could see an oversupply of more than 100,000 SRECs in 2011-12.

What does this mean for SREC prices in Pennsylvania?
Basic economics tell us that a rise in supply with no change in demand puts downward pressure on prices. However, it’s hard to say with certainty what will happen to SREC prices because Pennsylvania’s unique legislation dictates that the Alternative Compliance Payment (ACP) for energy suppliers who do not meet the AEPS must pay a penalty equal to 200% of the prior year SREC prices. Because the ACP is not fixed at a certain rate (like New Jersey), SREC prices in Pennsylvania have more variability.

Actual SREC prices depend on when energy suppliers contract for SRECs and what prices they negotiate with solar energy system owners. Energy suppliers and solar owners can mitigate the risks of volatile SREC prices by locking into fixed rate SREC contracts such as the ones offered by Sol Systems. Or, they can gamble on SREC prices by using the spot market. In either case, it’s important for SREC buyers and sellers to understand their options and market dynamics before they make a decision.

Arlington, Virginia Commercial Scale Solar Development RFP

Notice to developers in the Washington DC metropolitan area: we want to share with you an RFP for commercial scale solar developments.

Arlington County has issued a Request for Proposals to pre-qualify multiple firms for installation of solar thermal and solar photovoltaic systems on County government buildings over the next 3 years. Pre-qualified firms will receive the Invitation(s) to Bid for solar installations. We anticipate these will range from 5 kW to 50+ kW in size.

As always, Sol Systems wants to remind our partners that we have SREC financing solutions to help you reduce the cost of your solar installations and win bids like these.

Maryland Clean Energy Summit 2010

Maryland’s Clean Energy Summit – October 4th, 2010 – Hilton Inner Harbor

George Ashton, Vice President and CFO of Sol Systems, the largest SREC aggregator and a leader in solar finance, will be speaking at this year’s Clean Energy Summit in Baltimore, MD. The summit will bring federal and state policy leaders together in a public forum to discuss the future of renewable energy in Maryland and the effects local policies will have on the proliferation of residential and commercial renewable energy systems.

Mr. Ashton will speak as a member of a panel discussing the future of renewable generation. One of the most critical components to solar energy projects are the monetization and sale of solar renewable energy credits (SRECs). In fact, the income secured by solar system owners from the sale of SRECs is usually greater than the actual electricity savings. Mr. Ashton will discuss the future of regional SREC markets and their ability to support growth within the state of Maryland and in the region as a whole.

Other panels include: “Discovery Drives Change”, “Forecasting the Climate for Finance”, “Transportation”, “Renewable Generation”, “Alternative Fuels & Biomass”, and “Energy Management & Built Environment”.

Invited Guests include: Congressmen John Sarbanes, Governor Martin O’Malley, and Cathy Zoi, US Department of Energy Asst. Secretary for Energy Efficiency & Renewable Energy

For more information on the conference, please go to: http://www.mdcleanenergysummit.org/

The NJ SREC Bubble & Importance of Long Term Contracts

by Natacha Kiler

What do the dot-com bust, the home mortgage crisis, and the NJ solar market have in common?

Lots of people started believing that their investment was certain to make them rich. Perhaps we should learn from history: when the masses start believing they are certain to get rich easily, they are likely to be wrong.

While it is true that New Jersey solar renewable energy credits (SRECs) are fetching high prices on the spot market today, they will not always get such high prices. Let’s recall the major goal of solar legislation and performance-based solar renewable energy credit (SREC) markets is to help the nascent solar industry grow and reach economies of scale in both manufacturing and installation so that solar energy becomes cost competitive with polluting fossil fuels. Legislation can do this by:

1) Making solar an attractive investment to early-adopters
2) Creating a financial penalty for energy suppliers and utilities who do not employ clean technologies

Inherent in this logic is that one day the solar industry won’t need legislation-based financial incentives to succeed.

California provides a great example of how a production based incentive is supposed to increase solar capacity while driving solar incentive costs down. The program was set up in steps so that every time a certain capacity of solar applications were queued, the incentive would drop to the next level. The idea is that the solar incentive would drive scale and help cause the costs of panels to drop, while installers learn to be more efficient at installations and drive their costs down. The starting production based incentive for Step 1 for residential systems was $390/MWh; today two of the three investor-owned utility programs have incentive levels at Step 7 ($90/MWh). As of September 1, 2010, there are 690 MWs of installed solar capacity in California, and the state is perceived to have the most successful solar market in the country.

Certainly, the legislation and market dynamics that support the New Jersey market are different than those of California, but the intent of the legislation and the driving forces will ultimately lead to the same results: more solar capacity and a decrease in the level of solar incentives.

So why do so many people in New Jersey believe that solar is a surefire investment?

There are two main reasons.

REASON 1: The Alternative Compliance Payment (ACP) for not creating or purchasing SRECs is high (currently $675/SREC with scheduled decreases annually) and the current supply of solar capacity does not generate enough SRECs to meet the legislation-driven demand.

REASON 2: Installers who want to sell more solar have an inherent incentive to lead prospective solar energy system owners to believe that SREC values will remain high because it shows a higher ROI.

Buyer beware.

The first half of reason 1 is true today, but solar capacity will not always be undersupplied. Each and every energy supplier who is subject to the ACP is trying to figure out how to avoid paying the expensive penalties. Energy suppliers can avoid these fees by developing their own solar plants or purchasing solar-generated energy from large solar farms through Power Purchase Agreements (PPAs).

The development of small and large solar plants will continue as long as the investment returns are good, but the more solar plants there are, the lower the returns will be. Ultimately, solar will succeed, energy suppliers won’t have to pay alternative compliance penalties and the value of SRECs will diminish.

There is no question of whether this will happen, the only question is when this will happen.

What about the installers that lead their customers to believe that SREC prices will be high? Unfortunately, we expect that some customers will get burned when they expect their surefire investment to perform and they’re left with minimal SREC payments.

Luckily, some citizens of New Jersey are starting to talk about the risks of assuming spot market rates will stay high. We expect that, over time, more and more people will recognize the importance of long term SREC contracts. There are also forthright installers who educate their customers about the risks of the spot market and offer them the option to lock their rates with long-term contracts that ensure the SREC value over time.

Long-term SREC Contracts to Secure Financing for Solar Power Projects

An article recently posted in the Novogradac and Company Journal of Tax Credits discusses the implications of securing financing for solar energy developments utilizing long-term SREC contracts (as opposed to state rebate and grant money). We recommend reading the full article, but we wanted to provide a quick analysis of its central points, and follow up on the central strength of long-term SREC financing that this article misses.

The article observes that regional and state solar grant and rebate programs are being cut back as cash strapped governments find ways to reduce costs. In replacement of the grant and rebate programs, states (like Massachusetts) are instituting performance-based incentive structures, also known as Solar Renewable Energy Credit (SREC) markets. The subsidy for solar development is tied to performance, the value of the subsidy is determined by market and regulatory forces, and the costs of funding the subsidy are distributed to regulated energy suppliers and their customers.

The article concludes that securing long-term contracts for the sale of SRECs provides a solar energy developer with better leverage to secure financing for his or her project because the SREC contract provides a stable revenue stream for the financier. We agree in full. The article also notes, “prices offered in contracts could likely be either the floor price or something perceived as substantially below market”. While this point may appeal to those bullish on the future of SREC markets; we think this article misses a fundamental purpose of SREC markets.

The intended goal of SREC markets and Renewable Portfolio Standards is it to stimulate economies of scale for solar development, driving down manufacturing and installation costs thereby pushing solar energy markets towards grid parity (i.e. making solar electricity competitive with fossil fuel generated electricity). As solar development costs continue to decrease and the number of solar energy projects increases, the supply of SRECs on the market can quickly outpace the demand created by SREC Alternative Compliance Payments which would cause the floor price of SRECs to fall. For example, in Massachusetts the floor price is currently determined by the Clearinghouse Auction price of $285.00. In the event an energy supplier could broker with project owners to secure SRECs at a value below $285.00, the Clearinghouse Auction would freeze up and the market would find a new bottom.

We think one of the reasons investors often favor long-term SREC contracts instead of spot market transactions is precisely because there is certainty about the SREC floor price. Aggregators like Sol Systems, who manage a portfolio of SRECs through long-term contracts with energy suppliers, provide both a stable cash flow for the project developer as well as security against the intended consequence of a successful SREC market and Renewable Portfolio Standard. And, herein lies the paradox: a successful and vibrant SREC market creates exponential solar development, which drives down SREC values and leads to a mature solar market that does not require an SREC market.

Sol Systems Announces a 3 Year, Fixed-Price SREC Offer for Ohio and Pennsylvania Customers

Sol Systems, the largest solar renewable energy credit (SREC) aggregator in the nation, is pleased to announce Sol SREC 3, a new product for Ohio and Pennsylvania solar photovoltaic (PV) system owners. The Sol SREC 3 offer provides a price of $303 per SREC guaranteed for 3 years for any PV system located in either state. “Sol Systems is continuously identifying new ways we can help residential and commercial customers recoup the costs of their solar PV projects,” said Yuri Horwitz, Sol Systems’ CEO. “We are excited about this new product which offers a guaranteed SREC price that is as high, and in some cases higher, than current SREC spot market prices. Customers that lock in our Sol SREC 3 offer will not have to worry about fluctuating or volatile SREC spot market prices.”

Sol Systems’ SREC 3 offer will only be available for a limited time. Interested parties should contact Sol Systems within the next 30 days to sign up. In addition to this offer, Sol Systems will continue to offer its standard 5 year fixed price option as well.

Key components of SREC 3 Offer

• SREC price of $303 is guaranteed for 3 years.
• Systems as small as 1 kW are eligible. Systems larger than 500 kW should contact Sol Systems directly.
• Systems must either be installed currently or installed by November 1, 2010.
• Offer is not valid for customers that have already signed long-term contracts with aggregators.

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 1,000 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 and has partnerships in place with over 100 solar installers and developers. For more information, please visit www.solsystemscompany.com.

Contact

Sudha Gollapudi
Director of Strategic Partnerships
Sol Systems, LLC
888-235-1538 x2
srec3@solsystemscompany.com

SRECs and Sustainability

Schools and universities across the U.S. are taking sustainability very seriously. A number of schools have established policies so that all new construction buildings are designed to have a reduced impact on the environment by meeting LEED certification standards. Many universities have also set targeted goals. Almost 700 universities have signed on to the President’s Climate Commitment thus far, voluntarily pledging to go carbon neutral. One way to go green is to install a solar photovoltaic (PV) system. Solar PV systems offer a host of benefits including electricity for the life of the system (typically 40+ years), a hedge against rising electricity prices, reduced grid dependence, and a transition to a cleaner, more sustainable economy. However, because the solar renewable energy credits (SRECs) generated from the project represent the environmental attributes of the generated solar electricity, many schools and universities are reluctant to sell them as doing so may be seen as contradictory to meeting their environmental goals. Many entities have contacted Sol Systems on whether there is a way to reconcile this. And the answer is yes. SRECs can be a powerful tool to not only help finance the cost of a solar PV system, but to also help achieve a smaller environmental footprint. Here’s how:

Because renewable energy credits (RECs) from solar projects are high in value (prices can range from $150-$675 depending on the project location and length of SREC contract), the income associated with selling SRECs can be used in a number of ways to further a school or university’s environmental goals. For example, SREC income from one solar project can be used to finance another solar project on campus or finance another type of environmental project such as implementing energy efficiency or water conservation measures. SREC income can also be utilized to purchase less expensive RECs from other renewable energy sources such as wind. Should a school or university opt to replace their SRECs with wind RECs, Sol Systems can design a seamless transaction to assist with this. Rather than engaging in two separate purchase and sale agreements, Sol Systems can design one contract to meet a school or university’s unique needs.

As fall classes resume and school task forces reconvene, we hope that the topic of utilizing SRECs to meet sustainability goals is incorporated into the decision making process.

Sol Systems is a Washington D.C. based solar energy finance and development firm that was built on the principal 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. Our primary goal is to leverage our expertise and resources to allow our customers to maximize the value of their SRECs. We have helped over 1000 customers across 13 states realize the value of their SRECs.

An Installer’s Guide to SREC Sale Strategies

by George Ashton

As a residential solar installer, you have without question been challenged by prospective customers regarding the high price tag of solar; a typical residential system (3kW in size) can cost between $18,000 and $24,000. Luckily, there are a number of incentives available at the federal, state, and local levels that you can present to your customers to help them realize that solar can be more affordable than often perceived. Federal and state incentives are relatively easy and straightforward to explain. The concept of selling SRECs, however, is more allusive and harder for customers to grasp.

Because SREC income can significantly improve a project’s economics (reducing costs by 20-40% depending on location) and can increase a customer’s return on investment, ensuring that customers understand their SREC options and take advantage of the sale options available will assist your business with closing more sales. This article provides an overview of SRECs and explains the pros and cons of different SREC sale options.

What Are SRECs?
An SREC is a tradable credit that represents the clean energy benefits of electricity generated from a solar energy system. Each time a solar system generates 1000 kWh (1 MWh) of electricity, an SREC is issued which can be sold or traded separately from the power. SRECs have high value in some states where there is legislation called a Renewable Portfolio Standard (RPS). An RPS requires energy suppliers to either produce solar energy from their own projects or purchase credits from individuals or businesses that own solar energy systems.

How Are SREC Prices Determined?
RPS Compliance fee schedules dictate how much energy suppliers must pay for each SREC they fail to produce or acquire. As a result, SREC prices usually trade at or below the dollar amount of these compliance fees. In some states, the fee remains the same dollar amount year over year while in other states, like New Jersey and Ohio, the fee decreases over time which will result in a decrease of the price for SRECs over time.

SREC Supply
SREC supply will increase in the coming years. As solar panel prices fall, solar will become more affordable and more popular. As more solar systems are installed, more SRECs will be available on the market. Additionally, as credit markets continue to improve, more large projects will become financeable and built, resulting in more SRECs. Both of these trends will put downward pressure on SREC prices.

SREC Demand
SREC demand will also increase in the coming years. The demand for SRECs in a given state is set by RPS legislation that determines the overall number of SRECs energy suppliers are required to acquire each year, and this number quickly increases year over year in every state with an RPS. Because SRECs are a compliance commodity, if there are more SRECs supplied than demanded in a given state market, the pricing for excess SRECs will likely be equivalent to pricing seen on voluntary SREC markets, which today trade at $15-$30 per credit.

What are the Options for Selling SRECs and the Risks of Each Option?
Selling SRECs on the open market is analogous to day trading in the stock market. Your customers may make good money, but there is no certainty with regards to their long-term profitability. If SREC prices fall for any of the reasons mentioned above, they will receive a lot less for their SRECs. This option is best recommended for SREC sellers who do not rely on SREC proceeds to pay for the cost of a solar energy system and have a little extra time on their hands to monitor the market.

Selling SRECs into a long-term contract can be a strategy that provides adequate returns, but with less risk than selling on the open market. A typical long-term contract offers a fixed price per SREC for a 3-5 year term. By choosing this option, your customers will know exactly how much income they will receive over the contract term. However, the true value of a long-term SREC offer depends heavily on what supports that offer.

The most secure offers come directly from energy suppliers as they are the ultimate purchasers of all compliance eligible SRECs. However, very few energy suppliers offer contracts directly to non-commercial system owners. The next best offer is a contract from a select few SREC companies that back up their promises to purchase SRECs with their own long-term contracts to sell those SRECs to energy suppliers. These SREC companies have negotiated to sell your SRECs to energy suppliers at a specific price for 3-10 years at a time and can pass that guarantee on to you. Beware of SREC companies offering long-term contracts that have not negotiated fixed price long-term contracts to sell SRECs. If they have nothing to support their promises, and the market price falls, it will be difficult for them to honor your customer’s contracts.

Selling your SRECs for an upfront, lump sum payment is the SREC market’s version of a risk free investment; the return is a noticeably lower than the other options, but there is absolutely no risk. With this option, you will sell the rights to your future SRECs in exchange for a discounted one-time payment received close to the date of installation. You keep that money regardless of what happens to SREC markets. This option is recommended for solar energy system owners that are risk averse or having trouble with accessing financing through banks.

Educating your customers on all three SREC sale options and helping them evaluate their risk tolerance and financial needs will be a key strategy to selling more solar energy systems. The metrics presented in this article should help you identify the best route for your customers. Regardless of which option a customer chooses, monetizing their SRECs will play a critical role in financing their solar energy system.

George Ashton is Vice President and CFO of Sol Systems, a solar energy finance company located in Washington DC.

The End of Renewables As a Political Issue

The International Energy Agency (IEA) recently noted that solar electricity could represent up to 20% to 25% of total global electricity production by 2050 based on their Solar Photovoltaic (PV) Roadmap and Concentrating Solar Power (CSP) Roadmap, which are meant to assist governments, industry and financial partners accelerate energy technology development and uptake. The report concluded that PV technology will become competitive globally by 2030 on the utility-scale in some of the areas with the best insolation given the right climatic factors. Further, the report indicates that PV has the potential to provide more than eleven percent of all electricity worldwide.

This analysis is good news for those of us in the solar energy space; however, the stated assumption is that governments, like the United States, will implement more concerted policies to facilitate solar energy. Even as some argue that solar energy will soon pass cost parity with nuclear energy, solar energy will likely remain at a competitive disadvantage to traditional fossil fuels unless governments implement policies that recognize the numerous positive externalities of solar energy.

One may wonder: is this political support likely in a country that has failed to pass a comprehensive energy bill? Are the key political drivers that change how our government engages and incentivizes the development of solar and other renewables changing? Will they in the future?

Answer: Almost certainly so. The political and economic interests that have prevented a significant comprehensive approach to solar energy and other renewable energies are changing, and will continue to change dramatically.
Perhaps the single largest driver for political change is the economic change that has taken place in this country in the last two decades. As detailed in a fascinating article in the Washington Post by David Callahan, the United States has moved from a country where thirty-seven percent (37%) of the wealth for the country’s top 400 individuals came from oil and manufacturing in 1982 to merely seventeen percent (17%) in 2006. An overwhelming number of the richest individuals (and the largest political contributors) now represent industries such as finance and technology.

The political implications of these changes are enormous. Currently, according to Open Secrets, an estimated 17.4 percent of all state and national campaign dollars come from the top 100 donors, a hugely disproportionate share. As the political clout of traditional energy wanes, the clout of other industries has grown.

As Callahan points out, although John McCain far outraised Obama among employees of energy and natural resources companies in 2008, pulling in $4 million from this group, Obama simply went elsewhere, and raised $25.5 million from the finance and technology sector. Similarly, he oil and gas industry has been a traditional source of GOP cash and was consistently among the top 10 sources of money for federal candidates for decades, according to the Center for Responsive Politics. In 2008, it moved down to 16th. The entire energy and natural resources sector gave $77 million in campaign donations while lawyers gave $234 million, more than three times as much.

Moreover, many of the individuals in the financial and technology sector are committed to renewable energy. Last year, for example, George Soros pledged to make $1 billion in renewable-energy investments and other billionaires, including Warren Buffett, Bill Gates, John Doerr and Vinod Khosla, are also investing in the sector. Companies are doing the same. Google recently became an independent power producer with the creation of its affiliate, Google Energy LLC, so that it could purchase renewable energy for its large data centers and also purchase energy futures to hedge against an increase in electricity prices.

To make things more interestingly, Google’s most recent purchase of wind energy was from NextEra Energy Resources. NextEra is none other than large utility Florida Power and Light, which changed its name in January of 2009 to better market its commitment to renewable energy. Other utilities, including Duke, First Energy, Pepco Holdings Inc. and others have all made similar commitments to developing renewable energy resources either through direct development, or by helping to finance other projects. Exelon Energy, for example, recently developed a 10 MW solar project called City Solar that will provide energy to over a thousand homes.

In sum, the economic constituency is shifting towards solar energy and other renewables, and so too will the political constituency. The new economy is producing a powerful group of companies and individuals that are committed to fundamentally changing the politics and economics of renewable energy; politicians, both Republicans and Democrats alike, will not be able to ignore this constituency.

The result is an emerging political consensus, among both Democrats and Republicans, traditional energy businesses and financial ones, that renewable energy resources like solar must be supported. This may be through a carbon cap and trade legislation, but more likely the proliferation of solar energy systems will occur through a more incremental approach such as a national renewable portfolio standard and economic incentives like solar renewable energy credits (SRECs). In either case, renewable energy will emerge in the next five years as a non-political issue, and our guess is that the required market incentives to ensure the success of solar energy and other technologies will be implemented.

Are SRECs taxable?

Today, many people are inclined to believe that income from solar renewable energy credits (“SRECs”) is not taxable because (1) the IRS does not have any publication or rule related to income received from the sale of SRECs and (2) the IRS has said that the sale of SRECs does not fit within the transaction types that would initiate the generation of a 1099 form.

However, one should consider that the underlying presumption of SREC income not being taxable is: SREC income is not “profit” – or at least SREC income is not profit for the vast majority of system owners who use SREC income to pay back the initial costs of investment. (In the majority of states where Sol Systems operates, the average system payback takes 4-8 years, although it can be shorter or longer depending on state incentives and SREC values).

What happens when the solar energy system is paid off? When the system is paid off, there is a chance that SREC income would be considered profit. In that case, the IRS may decide to tax SREC income and systems owners would need to disclose that source of revenue.

Taxing SREC income would be detrimental to the solar industry and for that reason, it is very important for solar installers to educate their customers on this matter. It would also be prudent for solar energy system owners to talk with a tax professional about their solar energy investment.

Please note that Sol Systems is not an official tax advisor and cannot give tax advice. We recommend that prospective and current system owners consult a tax accountant regarding their individual financial situations.

Sol Systems will continue to research this topic and inform our customers and partners as we become aware of any changes.

The Future Outlook of the Connecticut SREC Market

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.

As New Jersey Announces a New Round of Solar Funding, SRECs Remain Prominent in Project Finance

After several weeks of uncertainty, the New Jersey solar energy rebate program set a start date of September 1st, 2010 for the third funding cycle for solar energy systems. Known as the Renewable Energy Incentive Program (REIP), the program has been extremely popular with New Jersey homeowners looking to take advantage of the state solar incentives. In the previous round of funding in April, 2010 more than 1,000 applications were received within the first week – despite the fact that incentives had been lowered from $1.75 per watt to $1.35 for residential installations. The popularity of the program caused a delay in the new round of funding which was finally confirmed last week.

The current cycle of funding will offer $0.75 per watt in incentives limited to the first 7.5 kW of solar installations. Excluded from funding eligibility are commercially owned systems as well as all systems over 10kW. The current rates mark the lowest incentive offerings by the REIP since its inception.

Overall the REIP program has been very successful in making solar energy more affordable. However, as REIP incentives are scaled down and applications for incentives are backlogged, homeowners interested in installing solar energy are relying more heavily on SREC income to finance their solar energy systems. New Jersey SRECs remain the most valuable in the country and as state incentives decrease, SRECs will play an even larger role in making solar energy affordable to homeowners across the state.

Currently,  NJ homeowners and businesses interested in SREC financing have three different options to monetize their SRECs, each of which are available through Sol Systems: multi-year fixed-price contracts (Sol Annuity), upfront payment for SRECs (Sol Upfront), and a short-term market-based option which allows owners to sell SRECs at their current spot-market value (Sol Brokerage).

For more information on Sol Systems products, please click here. For more information on solar energy rebates and incentives in the state of New Jersey, please visit the Database of  State Incentives for Energy and Efficiency.

Sol Systems to Present at SEIA Solar Road Show

Sol Systems’ President and CEO, Yuri Horwitz, will be presenting at National SEIA’s road show conference on May 10, 2010 in Philadelphia.  The conference is tailored for small businesses and designed to give them the tools and information to maximize revenue and business growth.  Topics will include the following:

  • Latest policy and market information
  • SEIA’s installer campaign, including free marketing materials and legal resources to grow
  • New financing opportunities
  • State policies to benefit installers and their customers.

Horwitz will be presenting on the solar renewable energy credit (SREC) market and SREC financing for homeowners and businesses.  Horwitz will also be addressing market factors, such as supply and demand, for the Mid-Atlantic states.

The meeting will run from 10am to 4pm and will take place at the Philadelphia, Pennsylvania at the downtown Marriot Hotel.  For those interested in registering they can explore the opportunity here or register by email with pvdivision.rsvp@seia.org.