A good summary of the Delaware REC Market was just emailed out by a local major supplier of PV Solar installations in Delaware:
February 17, 2012
Dear Delaware Solar Owner:
In recent months a number of important developments have occurred in the Delaware SREC market that must be brought to the attention of PV solar system owners. These developments have significantly impacted the spot market value of Delaware SRECs in both positive and negative ways. This report has been prepared for customers so they can understand the impact of these developments on their solar investment.
A History of the Delaware RPS
Delaware’s Renewable Portfolio Standard (“RPS”) requires utilities to obtain 25% of their power from renewables and 3.5% from solar by 2012. The law has been amended 3 times since its original passage in 2005.
In 2010, the requirements were expanded to their current percentages and schedule (see Delaware RPS). Under the latest revision in the law The solar RPS requirement was increased to account for the large portion of the SREC market that would be consumed by the installation of the Dover Sun Park (10 MW utility scale PV system built by the City of Dover). Also municipal and cooperative electric companies will now be subject to the RPS from 2013 on.
The 2010 legislation also created the Renewable Energy Taskforce In order to create more stable markets and protect solar systems of all sizes. The task force worked throughout 2011 to create a long term SREC contracting program for new solar projects. This program will be implemented in the spring of 2012. Under the program, Delmarva Power will enter into contracts to purchase the SRECs generated by new installed Solar PV system for 20 years at fixed rates. This program will provide a bankable rate of financial return for new Solar PV systems installed in the state of Delaware. Unfortunately, under the current pilot version of the forward contract program, PV systems which became operational before December 1, 2010 are ineligible to enter into these forward contracts.
SB 124 and the Introduction of Bloom Energy into the Delaware RPS Program
Late in the 2011 legislative session a fast moving bill, SB124, allowed fuel cell technology to qualify for SRECs. This bill was designed to attract fuel cell manufacturer, Bloom Energy, to open a manufacturing plant in Delaware. Unfortunately, allowing fuel cell technology to generate SRECs may eventually consume as much as 30% of the Delaware SREC market.
SB124 also makes Delmarva Power (“DPL”) responsible for the RPS compliance of third party suppliers in its EDC (electrical distribution company) territory. Whereas previously all third party suppliers, like WGES, Constellation, etc. had to purchase SRECs based on how much power they introduced into the Delaware market now DPL is responsible for the RPS compliance of all of these companies. This means that essentially there is only one in state purchaser now for Delaware SRECs, Delmarva Power, until 2013 when the Delaware Electric Coop and the Municipal power companies will be required to participate in the RPS. Unfortunately the Coop has already demonstrated its intention to participate via large utility scale systems.
2012 Crisis in the Delaware SREC Market
As indicated earlier, DPL has committed to purchasing its future SREC compliance requirement through the 20 year forward contract process. This is excellent news for PV system owners who installed their solarafter December 1, 2010. These owners will have the opportunity to lock in their SREC income at very favorable rates (up to $312 per SREC for the first 10 years). However, this leaves older existing customers essentially without a buyer for their SRECs until 2013 when the municipal coops and DEC enter into the market.
Historically, the ability to sell Delaware SRECs into other RPS compliance markets such as Maryland, Pennsylvania, and Washington DC have provided a safety valve for surplus Delaware SRECs.
Unfortunately access to these markets has been diminishing. Both Washington, DC and Maryland closed their markets to out of state SRECs at the end of 2011. At the same time, the Pennsylvania RPS market is experiencing serious oversupply (due to dumping of out of state SRECs) depressing PA SREC prices to extremely low levels.
The net result of this combination of factors is an anemic spot market for Delaware SRECs with very low valuations.
What Does This Mean for You?
Customers whose systems were activated after December 1, 2010 are eligible to enter into the DPL forward contracts for their SRECs for the next 20 years.
Customers whose systems were installed before December 1, 2010 are in a more difficult situation, at least temporarily. Under current market conditions, SRECs are trading at very unattractive prices. These low prices are likely to continue until at least 2013-14 unless changes are made to either the Delaware RPS or the forward contract procurement system. Recently, the Delaware Renewable Energy Task Force indicated that at least some older customers will be eligible to enter into the next round of DPL forward contracts which is likely to occur at the end of 2012. This will provide relief to some customers in this position.
We encourage you to contact your state legislators and request that they address the current crisis in the Delaware SREC market.
Please mention these facts:
- Delaware’s solar carve out is too small. There is a surplus of SRECs, while RECs derived from wind and other sources have to be imported from out of state.
- Large utility scale projects and other technologies have been allowed to gobble up too much of the SREC market.
- The use of fuel cells for SREC compliance has nearly eliminated the growth in the solar carve out that would have been created by the 2010 legislation.
- Small solar owners are struggling to pay for their systems.
- The lack of an SREC market is slowing job creation and economic development in Delaware.
Action from the Delaware General Assembly is needed to correct the oversubscribed SREC markets. In order for this to occur, your elected officials need to hear your concerns. Attached you will find a suggested form letter and links to the web pages of these officials. We encourage you to edit and personalize the letter highlighting your specific individual concerns.
Thank you in advance for your effort to help the SREC market in Delaware.
Given that the State subsidized 50% of my installation cost and my system has been in for 5 years (I was a very early adopter), I’ve almost fully recouped my installation costs. But for those who came in after me with a smaller government subsidy and now new rules, they’ve gotten screwed for trying to do the right thing to support our intrepid global-warming fighting governor… They’ll think twice the next time.