New York solar energy advocates are pushing for the adoption of a new bill that would create a solar renewable energy credit (SREC) market. If enacted, the New York Solar Industry Development and Jobs Act would launch an SREC market starting in 2013.
An SREC represents the environmental attributes from a solar facility and is generated each time a certified and registered solar power system produces one thousand killowatt-hours (KWh) of energy. For every 1000 killowatt-hours of electricity produced by an eligible solar facility, one SREC is awarded which can then be sold on an SREC specific market, typically to utility companies that are required to purchase SRECs in order to comply with renewable portfolio standards (where state utilities are required to purchase or generate a percentage of their electricity from renewable energy resources). Depending on the size of the solar system, the typical residential solar system can produce one SREC every two months.
While there are a number of excellent New York solar rebates to help interested residents go solar, the state is trying to ramp up its solar production, particularly in light of the fact that its neighbor, New Jersey, currently ranks second in the nation in total installed solar capacity, while relatively green New York is only seventh. In terms of total solar capacity, New York is likely to pass the 100 megawatt mark this year, compared to New Jersey’s installed base of 500 megawatt. The thinking is, if New Jersey can be a solar mecca, why can’t New York. And the difference appears to be the SRECs.
The New York Solar Industry Development and Jobs Act contains numerous provisions that are similar to New Jersey and have helped make New Jersey solar a powerhouse in the U.S. Specifically, the bill provides for the unbundling of SRECs (power and SREC can be sold separately) and two-year banking (SREC can be sold in the year it was generated or in the following two years – provides consumer/generator economic flexibility).
New York, however, is making some notable differences to make the creation of their SREC market unique. The first requires utilities to offer some SREC contracts for as long as 15 years, as opposed to how it is in New Jersey where contracts generally run no longer than three to four years. The goal is to make solar projects more financially attractive as utilities are required to purchase SRECs for up to 15 years.
The other unique provisions require that 20% of New York SRECs be sourced from solar systems that are smaller than 50 kilowatts, which would help prevent large utility-scale solar systems from dominating the SREC market. In essence, the bill would guarantee that residential solar markets will be able to participate in the market.
Currently missing from the bill is a non-compliance penalty. In New Jersey, for utilities that do not hit their renewable energy targets, there is a penalty of $675 per missing megawatt. If the price of an SREC were to rise above the $675 compliance payment, no SRECs would be purchased, therefore creating a price ceiling. The cost of penalties there cannot be passed to ratepayers, while the costs of purchasing SRECs can be, giving utilities an additional incentive to purchase the credits.
While there is substantial support for the bill right now, it is going to take some additional revisions and soothing to bring all of the necessary parties, including the unions, into agreement. The next step is a review of the bill by the Governor’s office in January and a cost-benefit analysis of establishing the SREC market in New York. If New York does succeed in adopting an SREC market, it could truly allow solar power in New York to dominate.
Rendering of New York Solar-Powered Education & Arts Center via Engineering for Change. New Jersey Solar Incentives. More on New Jersey solar incentives.
Prior to joining Clean Energy Experts, Reggie ran operations for the first completely carbon-neutral water company in the U.S., Nika Water Company that donates 100% of its profits to support projects that bring clean water and safe distribution to under-developed areas around the world. Prior to Nika, Reggie was a corporate & securities attorney for Wilson Sonsini, Goodrich & Rosati where he represented high-growth consumer and technology focused start-up companies. Earlier, Reggie was a staff attorney for the U.S. Securities & Exchange Commission in Washington, D.C. He holds a LLM from University of San Diego School of Law, a JD from University of California Hastings College of the Law and an AB in English from Stanford University.