Accelerated Growth in New Jersey and Pennsylvania Solar Markets Causes SRECs to Plunge
09-19-2011
The number of solar PV installations rose tremendously in Pennsylvania and New Jersey this past year, sending Solar Renewable Energy Credits (SRECs) plummeting downward last week. This makes it more difficult for customers to finance solar panel installations, putting the industry at risk.
Both New Jersey and Pennsylvania's programs for rewarding credit in order to help finance solar panel installations were incredibly successful over the past year. Pennsylvania reached 100 MW of installed solar capacity last week, according to a Citizens for Pennsylvania's Future (PennFuture) press release. This marks an increase from just 3 MW of installed solar capacity four years ago. New Jersey saw a similar surge in solar panel installations with solar capacity doubling in the past year, putting the state second only to California.
While this is a great accomplishment, the faster-than-projected growth in the solar market is creating a crash in the Solar Renewable Energy Credit (SREC) market. SRECs constitute a significant financing mechanism for installing solar panels in states that have Renewable Energy Portfolio Standards (REPS) such as Pennsylvania and New Jersey. SRECs used to sell for $300 in Pennsylvania and $600 in New Jersey, but now go for as low as $100 in Pennsylvania and $150 in New Jersey. Low SREC prices will cause immediate economic hardship to those people who depend on them in order to finance their installations.
Both New Jersey and Pennsylvania have Renewable Energy Portfolio Standards, which means that state utility companies must buy a certain percentage of their electricity from renewable energy sources. Pennsylvania's Renewable Energy Portfolio Standard requires utility companies to generate 18% of their electricity from renewable sources by 2021, and contains a 0.5% set-aside for solar PV. Pennsylvania has already reached its target for 2013, meaning that the number of this year's solar PV installations went above and beyond expectations.
Pennsylvania State Representative Chris Ross has proposed the Solar Jobs Bill (HB 1580), which would increase Pennsylvania's solar energy requirements for the next three years and force utility companies to buy more SRECs, thus raising their prices. There have been discussions of a similar proposal in New Jersey. Some caution that this is simply a temporary measure that raises immediate demand. It was also pointed out that this is just part of normal market fluctuations, and that previously high prices were unsustainable. Whether either of these legislative fixes will provide support to the SREC market remains to be seen.
