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What Happened to the Solar Renewable Energy Credit Market in New Jersey?

Earlier this summer, New Jersey policymakers tried to fix the solar renewable energy credit (SREC) market that had helped the state to become one of the largest solar energy producers in the country. Is the legislative solution working? Not so much, said a solar project developer at the Renewable Energy Finance Forum in San Francisco on Thursday.

“For all intents and purposes, the New Jersey market is dead,” said Paul Detering, CEO of Tioga Energy, on a panel at the conference. “The fix is not enough, and the general prognosis is the market will stay oversupplied of the (SRECs) through 2015.”

SRECs have played a big role in New Jersey’s rise as the No. 2 market for photovoltaic installations, behind California. Each solar energy generation project creates an SREC for each megawatt-hour (MWh) it produces, which the developer can sell to help finance his next project. Each credit fetched over $600 just a few years ago, but the price crashed to nearly 25 percent of that value toward the end of 2011.

The crash came because developers flooded the market with energy credits. It was a classic problem that is plaguing the market for solar panels worldwide and leading to many factory closures and bankruptcies in North America, Europe and Asia.

Detering said New Jersey's energy credit market, while appearing to be attractive, hasn't been well run to start. So it didn't help when developers then began to offer credits without paying close attention to the likelihood of creating a big imbalance of supply and demand. 

The glut of SRECs was so severe that the state Legislature and Gov. Chris Christie intervened. They passed and signed a law in July that will require utilities to buy more solar energy. In fact, with the new law, the utilities will have to speed up their solar energy purchases by about four years. Solar will have to make up 4.10 percent of the state's electricity sales by 2028. That requirement was meant to boost demand for the energy credits. Utilities can meet the renewable energy mandate by buying the energy credits from project developers. While the new mandate hasn't been in place for long, Detering said there remains too many credits for sale, and that glut will take longer to absorb even with the new legislation. 

Developers can also hold onto the credits for five years instead of three, a change that will give them more time to sell the credits at an opportune time. On the other hand, it also makes it tougher to forecast the energy credit market, according to the Solar Energy Industries Association.

While low prices aren’t good news for developers, they have forced developers to figure out ways to lower their installation costs. That in turn has led to lower-cost solar electricity. 

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