In 2012 New Jersey was recognized as the fastest growing market for solar, beating out California, a state more than 20 times its size and traditionally the largest market for solar in the U.S. That may not happen in 2013 as purchase prices for the state’s solar renewable energy credits (SRECs) remain low and incentives tighten. That’s according to one industry insider.
New Jersey, like some of its neighbors, is suffering from an overheated SREC market, where the tantalizing offer of returns on solar investments prompted more companies and people to install solar than the state’s utilities or electric commission anticipated would. SRECs are traded on the market and purchased by the state’s electric companies to meet state renewable portfolio standard requirements.
They only have to purchase a certain amount and after they’ve met the yearly quotas they don’t have to purchase more, and right now they’ve got lots of options. So the abundance of systems producing electricity with solar means that the price of SRECs have dipped below $100 per credit. Each SREC represents the value of 1 megawatt hour of electricity generated by a system. “Right now, we know that the SREC pricing is still less than $100 even on the spot market,” said Gaurav Naik, a principal and co-owner at GeoGenix, a residential and commercial solar integrator in New Jersey. Before the holidays it was somewhere in the $85 range. It’s crept up slightly,” since then, he said.
“You need them to be in the range of $115 to $175,” Naik said. “And you need a predictable, long-term contract…where you can sell those SRECs in future years for the same levels. Unfortunately that is not happening in the marketplace right now,” he said.
To help shore up the market New Jersey and Gov. Chris Christie (R) enacted legislation in 2012 to speed up how many SRECs companies had to buy. “It really hasn’t done what we anticipated it would do to stabilize the market for this year,” Naik said. He anticipated that it would have more of an impact in 2014 and 2015, though.
The oversupplied market has slowed down GeoGenix’ project pipeline, according to Naik. Customers have installed systems, but might not have hooked them up at this point, because they’re waiting for the market to recover. Naik anticipated that in 2013 the SREC price would recover somewhat and systems would become more feasible when SRECs are around $125, though the price could rise to $150.
The biggest impact will be on commercial and larger systems which are chiefly driven at this point by SRECs since module prices keep coming down as do incentive programs. Some systems will still try to qualify for the 1603 cash grant program, by starting construction by the end of 2012, but systems that don’t will have to access the most cost-effective financing available, and higher SREC prices will make such projects more likely.
Smaller installations, like residential installations won’t be stymied as much, according to Naik. In that market, the power companies offer different incentives for people to go solar. “Everybody is looking forward to the smaller programs, EDC programs are going to start in the next quarter [of 2013]. That could foster installation activity in the last 2 quarters of 2013,” he said. He anticipates that the new round of EDC incentives should be announced around April.