Solar Renewable Energy Certificate Markets Mature

Claire Kreycik's picture

Extra, extra, read all about it! A new NREL report about solar renewable energy certificate (SREC) markets is now available. The report compiles helpful information about SREC policy design and market issues.

And on January 18 from 3 pm – 4:30 pm ET or 1 pm – 2:30 pm MT there will be a free webinar reviewing the status and trends in SREC markets, building off of the same report, Solar Renewable Energy Certificate Markets: Status and Trends. Speakers will include Lori Bird (National Renewable Energy Lab), Brad Bowery (SRECTrade), Michael Judge (Massachusetts Department of Energy Resources), and Michael Winka (Director Office of Clean Energy NJBPU). Participants will need to register.

SRECs represent the green attributes of one megawatt-hour (MWh) of electricity generated from solar energy. In some jurisdictions, states use SRECs to demonstrate compliance with RPS solar set-asides. Brokers and electric utilities buy SRECs from solar generators to trade in the market or retire for compliance.

The report discusses key policy issues in SREC markets, including alternative compliance payments, long-term contracting provisions, and geographic eligibility of SREC generators. It also summarizes how utilities in each state are procuring their SRECs (whether through exchanges, competitive solicitations, and standard offer contracts, or by building their own plants). Finally, the report also compiles data from the states about compliance, prices, geographic sourcing of SRECs, and sizes of registered solar generators.

Here I share some of the report's key findings.

Figure 1

Figure 1: Trends in system size PJM-GATS

Project size trends

In the PJM Interconnection, projects supported by SREC markets are trending larger. Between 2003 and mid-2011, an increasing number of projects greater than 250kW have come online annually (see Figure 1).

SREC markets were originally developed to support mostly small to mid-sized solar systems on customer sites, yet only two SREC programs cap the size of individual generators (District of Columbia, at 5 MWDC, and Massachusetts, at 6 MWDC). As PV module prices come down, utility-scale solar projects could play a bigger role in many of these markets.

New Jersey currently leads in utility-scale (>1 MW) solar deployment with 59 plants operational as of November 1, 2011. More of these larger projects are planned for the next few years. There is an aggregate 250 MW of large projects in New Jersey's project pipeline as of October 2011. Given the recent drop in SREC pricing, many of these projects may not be built.

Geographic Sourcing

Several states are sourcing SRECs primarily from in-state systems, while others are sourcing more broadly. New Jersey, Massachusetts, and Delaware currently have in-state requirements. An in-state requirement will go into effect in Maryland in 2012. Other jurisdictions express preferences for in-state projects, others have in-region requirements, and a few have no requirements.

In 2010, Washington D.C., Maryland, Ohio, and Pennsylvania used SRECs from multiple states to meet solar requirements. For example, while Pennsylvania has a substantial number of in-state registered generators, only about one-third of SRECs supplying Pennsylvania's solar requirement were sourced from in-state facilities in 2010 (see Figure 2). This dynamic may change going forward.

Figure 2

Figure 2: Source of Pennsylvania SRECs retired for compliance (other include Maryland, Virginia, and West Virginia)

SREC Markets in Regulated States

Missouri and North Carolina, both regulated states, have emerging SREC markets. Both states allow for broad geographic sourcing of RECs. Utilities in these states are regulated and must submit procurement plans for their solar requirements that describe how utilities are going about SREC procurement.

These utilities are using a variety of strategies, including purchasing SRECs from in-state generators, out-of-state brokers, and independent power producers through bilateral contracts. Additionally, several of these investor owned utilities have created standard offer programs through which they buy SRECs from retail electricity customers. Finally, Duke Energy Carolinas and Ameren Missouri have invested in their own solar power plants (mostly in the few hundred kilowatt to one megawatt range) hosted either on their own land or on customer rooftops. Furthermore, they have indicated that they will continue to pursue opportunities to install and own PV.


This diagram shows trends in recent SREC prices between August 2009 and August 2011. The predominant trend across the state markets is downward since the beginning of 2011. The most marked drop in pricing is in New Jersey, where SREC were trading between $600 and $700 from August 2009 and May 2011. Pricing dropped to below $200 in August 2011. SRECs are trading between $500 and $600 in Massachusetts, and in all other markets at $400 or below.

Figure 3. SREC Prices between 2009 and 2011

The following graph shows a snapshot of SREC prices in 2010-2011. Historically, SRECs from New Jersey have seen the highest prices, ranging from $400/MWh to approximately $650/MWh in recent years, while SRECs from most other states have ranged from $200/MWh to $500/MWh (Figure 3). However, in 2011, SREC prices fell, sometimes dramatically, in all markets except for Massachusetts and Ohio (in-state SRECs only). In New Jersey, spot prices fell from between $600/MWh and $700/MWh in 2009 and 2010 to less than $200/MWh in September 2011.

With more and more solar capacity coming on line, SREC supply has outstripped demand in some of these markets. SREC pricing is expected to be low until compliance demand catches up in the coming years. Solar stakeholders in several states have been lobbying to increase solar set-aside requirements as a stopgap measure to boost prices.

The report covers these trends and others. NREL is tracking these markets as they mature and support larger quantities of solar development.