The value of Pennsylvania SRECs is a little more difficult to predict lately. In the past few years, the trading value of 1 SREC (1,000 kWh of produced solar electricity) has been as low as $3.
Recent Pennsylvania legislation designed to promote in-state solar energy growth has had positive but so far marginal influence on the SREC marketplace. Some referred to this as “closing the borders” because it discontinued allowing solar energy generated within neighboring states to be converted to tradable Pennsylvania SRECs. See more about the introduction and clarification of the new laws in our earlier post.
Impact of Renewable Energy Law
There are two factors to keep in mind when considering your SRECs in 2019:
- The requirement for energy sourced from renewables is increasing on schedule. The state mandated 6.0% for 2017 increased to 6.5% in 2018. The solar carve-out of this amount is < 0.5%. However, utilities are not limited to this value. They are free to buy more credits from solar generators if they are available.
- In compliance with the new “closing the border” law, a massive amount of out of state solar energy generating capacity became ineligible for creating PA credits. Some estimate this could be as high as 1 GW.
Impact of Solar Energy Market Behavior
While the rule changes are very positive for Pennsylvania solar energy generators, the net impact on SREC values has been slight to date. Analysts believe it will take a little more time for values to rise more sharply. A few reasons for this:
There remains a surplus of out-of-state credits for now. Many owners may have delayed their trading for as long as permissible. This creates a built in “bank” of credits not yet sold.
The renewable energy mandate is based on actual electricity demand for each year. So, in addition to the annual 0.5% increase in renewable energy requirement, any increase in state power demand results in the utilities needing to purchase additional credits. However, demand in Pennsylvania over the past year has been approximately flat.
The net result is that recently homeowners report seeing modest increases in the value of their credits. The oldest credits nearing expiration have traded for $6.50 to $7.00 on average in 2018.
Exact Solar Advice on SREC Outlook
Our goal is to keep our customers well-informed so they can make the best decisions and maximize credits, and therefore their lifetime solar savings. Here are some factors to keep in mind as you plan what to do with your credits:
- There are no forecasts for significant power demand increases. However, unusually cold winters and hot summers will certainly increase the need for electricity.
- In 2019 the renewable energy mandate stays on schedule and rises to 7.0%.
- Other renewable energy sources that qualify to allow utilities to meet their total mandates are not projecting large growth in the near future. Wind energy and hydropower are the state’s largest single clean energy sources, and the 2019 growth outlook is mostly flat. More solar credits could be traded to satisfy mandates outside of the solar carve-out.
- The “borders” are not perfectly “closed”. Larger utility scale out-of-state solar projects with direct contracts to Pennsylvania electric utilities are allowed to reapply for now. Outside solar developers may also continue to trade non-solar credits in Pennsylvania. For the most part, the solar carve-out stays off limits. It’s fair to say the borders will be “mostly” closed, however.
- Your credits expire after 3 years. Be aware that the credit years are not in sync with the calendar. The end date for each credit year is May 31.
- The value of “aging” credits will be less. As credits get older, utilities will offer a slightly lower value.
Until Pennsylvania SREC values begin to increase more, your management strategy should not take a lot of your time. One strategy might be to accrue your credits for longer. This allows the original surplus created by out-of-state generators to be further absorbed into the market. As the supply of credits shrinks, the value of existing and new credits begins to increase.
You could also let credits expire in an effort to join others in reducing supply. Because utility renewable energy requirements increase each year as described above, SREC demand increases. Holding back on supply is an option that can help tip the balance more quickly. And your financial sacrifice each year lately equates to a nice family dinner at your favorite restaurant. Some might say, “Why not?”
Another strategy would be to sell your credits once available.
We highly recommend you visit our SREC page to learn more. If you have not yet signed up with a trading partner, you will find a few suggested options.