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

Thursday, January 20th, 2011

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 .

Tags: DC solar, District of Columbia, Renewable Portfolio Standard, RPS, solar REC, solar renewable energy credits, SREC, SRECs, Washington DC Solar
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An Outlook On Solar in 2011

Monday, January 17th, 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.

Tags: China, Chinese support for solar, future of solar, module costs, Residential solar, solar, Solar finance, Solar incentives, solar industry, solar renewable energy credits, SREC, SRECs, State Renewable Energy Incentive Programs
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Federal 1603 Investment Tax Grant Extended

Friday, December 17th, 2010

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.

Tags: 1603, Financing, Project Finance, Sol Systems, Sol Upfront, solar financing, SREC, Tax Credit
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Why are spot market and long-term SRECs priced differently?

Monday, December 13th, 2010

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.

Tags: Renewable Portfolio Standard, solar, solar REC, solar renewable energy credits, SREC, SREC long term contract, SREC Prices, SRECs
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Sol Systems Unveils Utility-Backed Solar SREC Financing Option in MA

Thursday, December 2nd, 2010

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.

Tags: Affordable solar, MA solar SREC, MA SREC, Massachusetts solar, Solar finance, solar REC, solar renewable energy credits, SREC, SRECs
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Sol Systems Partners with Standard Solar

Monday, November 22nd, 2010

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.

Tags: PPA, Sol Systems, Solar finance, solar lease, SREC, SRECs, Standard SOlar
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Mid Size Commercial Solar Projects Require Guaranteed Long Term SREC Contracts

Monday, November 15th, 2010

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.

Tags: Affordable solar, PA SREC, Pennsylvania SREC, renewable energy, Renewable Portfolio Standard, RPS legislation, Sol Systems, Solar finance, solar renewable energy credits, SREC, SREC demand, SREC long term contract, SREC supply, State Renewable Energy Incentive Programs
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Sol Systems is Hiring: Solar Analyst

Wednesday, November 10th, 2010

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.

Tags: renewable energy career, renewable energy job, Solar finance, solar job, solar renewable energy credits, SREC, SRECs
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SREC Monitoring, Reporting, and Verification, Explained

Monday, October 18th, 2010

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.

Tags: MA SREC, PA SREC, Renewable Portfolio Standard, Sol Systems, SREC, SRECs
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The Massachusetts Solar Carve Out Program and SREC Market

Friday, October 15th, 2010

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

Tags: MA solar SREC, MA SREC, Massachusetts solar, Massachusetts Solar Carve Out, solar renewable energy credits, SREC
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