Today, the Massachusetts Department of Energy Resources (DOER) has announced a change that may affect the price of Solar Renewable Energy Credits in 2011. The agency announced a 8.3% reduction to the Alternative Compliance Payment (ACP) for this year. They have the right to make these changes in accordance with 225 CMR 14.08(3)(b)2.
The marketplace for Solar Renewable Energy Credits (SRECs) in Massachusetts opened in January 2010. SRECs are tradeable certificates that represent all the positive environmental attributes of electricity generated from a solar electric system. Each time a PV system generates 1,000 kilowatt hours (1 megawatt hour) of electricity, an SREC is issued which can then be sold or traded separately.
The price of SRECs in Massachusetts is based on market availability. In 2010, that range could have been anywhere from $285/MWh to $600/MWh. The Solar Credit Clearinghouse Auction essentially creates the price floor because they will purchase any SRECS that cannot be sold on the open market for $300/MWh minus a 5% administrative charge, or $285/MWh. If electricity suppliers fall short of their SREC requirement for their RPS obligation, they will have to pay an Alternative Compliance Payment, or a penalty of $600/MWh. This is how we get to the price ceiling because the market value of SRECs will never be greater than that penalty.
It is acceptable for DOER make a 10% rate reduction to the ACP if it is announced by January 31st of that year. Today’s announced change for 2011 will reduce the Alternative Compliance Payment from $600/MWh to $550/MWh. DOER has cited that the reduction was made because of falling PV equipment prices and the agency used conservative projections in their initial analysis.
So what does this mean to those who are interested in pursuing a solar installation or just recently purchased a PV system in 2010? Perhaps, very little. The prices for Massachusetts SRECS were over $500 in 2010. As I mentioned above, SRECs are based on market availability. SREC aggregators, who are closest to the market, believe that electricity suppliers will not meet their 2011 solar carve-out requirements and SREC prices should remain above $500. However, there is no guarantee of the future and I will be watching and waiting to see what happens as everyone else is.
Between falling solar equipment prices and federal and state incentives, there has never been a better time to invest in a solar installation in Massachusetts. Brightstar Solar is a licensed solar installer and we work with our customers to help navigate the installation process, maximize incentives, and manage all of the rebate and permitting paperwork involved. If you have a home or business in Massachusetts and are interested in solar power, please contact us for a free evaluation.
Hmmm… Some bad news, but some good news in your article as well. 10% seems like an awful lot to drop the SACP, but given that market makers believe that they believe SRECs will continue to trade above $500, solar energy owners should not be losing out too much.
Thanks for the write up.
I, previously, wrote 10%, but it’s actually an 8.3% reduction.