On January 31, 2011, the Massachusetts Department of Energy Resources (DOER), pursuant to its authority under 225 CMR 14.08(3)(b)2, reduced the 2011 Solar Carve-Out Alternative Compliance Payment (ACP). This reduction may impact the market price of Solar Renewable Energy Certificates (SRECs) in the coming year. The DOER reduced the ACP 8.3%, from the initial 2010 rate of $600 per MWh to $550 per MWh.
An SREC is a tradeable certificate that represents the clean environmental attributes of electricity generated from a solar photovoltaic electric system. Every time a system generates 1 MWh (1,000 kWh) of electricity, an SREC is issued, provided that the generating system is registered with the Massachusetts Clean Energy Center (Mass CEC). Each minted SREC can then be sold or traded on the open market.
If a Massachusetts investor-owned electricity utility company (IOU) falls short of its solar Renewable Energy Portfolio Standard (RPS), it must pay an ACP. Massachusetts regulations provide for a clearinghouse auction (SREC Auction) in the event an SREC is not sold on the open market. The clearing price for SRECs sold in the SREC Auction is $300/MWh. Consequently, the ACP and SREC Auction clearing price effectively create a ceiling and floor for SREC pricing.
Since the market value of SRECs is predicted not to exceed the ACP rate, the $550/MWh rate becomes the effective price ceiling for SRECs in Massachusetts for 2011. The price of SRECs is based upon market availability, and in 2010, SRECs were traded or sold for over $500/MWh. SREC aggregators, who monitor the SREC market, believe that suppliers will not meet their 2011 RPS requirements, so SREC prices should remain in the $500 per MWh range realized in 2010.
Notwithstanding the ACP reduction, the combination of federal and state incentives and falling equipment prices makes this an excellent time to invest in a solar photovoltaic electric system in Massachusetts.
If you would like additional information about the ACP reduction, or want to learn more about renewable energy and energy efficiency regulations, please contact the authors of this Alert, Adam F. Braillard, at 617 456 8153 or abraillard@PrinceLobel.com, or Craig M. Tateronis, at 617 456 8021 or ctateronis@PrinceLobel.com.