The SREC prices in New Jersey have collapsed because investors installed too much solar compared to this years’ NJ State mandates. Month after month new solar arrays are being turned on adding more of a surplus. The New Jersey Office of Clean Energy announced this week that there were 41 Mw installed state-wide in March. This brings the installed capacity to 729Mw. There will be enough solar to produce at least 900,000 SRECs for energy year 2013. The current State law mandates the purchase of only 596,000 for energy year 2013. This year there will most likely be a surplus of 200,000 SRECs.
The NJ SREC market will most likely be oversupplied for years to come UNLESS there is new legislation requiring the energy companies to purchase more SRECs. There is a high possibility that this may happen in the next few months. The reason is because current State law mandating solar is outdated based upon the significantly lower cost to install solar today. When the law was put into place in January of 2010 it assumed that the cost to install solar would drop by 2.5% per year. Install costs have dropped 30% to 40% in the last 2 years. There is now an opportunity to adjust the law to take advantage of these positive developments. The adjustments that can be made would soak up the oversupply created in the last year, reduce ratepayer exposure by lowering the fine or SACP level, and accelerate the rate of solar installations. The States’ Renewable Portfolio Standard goals would be achieved sooner and cheaper then previously anticipated.
One reason why the market is continually adding capacity when it is so grossly oversupplied is because solar facilities that were given fixed long term contracts at higher prices under the EDC financing continue to be built. The owners of those projects have no SREC price risk. The ratepayer makes up any losses for those fixed rate contracts, which last 10 years. Once those projects finish, the monthly build rates are expected to drop. This should happen this summer.