The Massachusetts solar renewable energy credit (SREC) market is undoubtedly one the most complex incentive programs. Among its complexities is the annual clearinghouse auction mechanism, which allows SREC sellers the opportunity to auction their SRECs at the end of each summer for a fixed price of $300/SREC, minus any auction and aggregation fees (most customers will net around $271). Having a fixed forward price eliminates the need to enter the auction and deal with reminted SRECs.
The first round of the SREC clearinghouse auction took place yesterday and did not clear; 141,504 SRECs were deposited. Anxious SREC sellers are hopeful all SRECs will be cleared by the end of round two, which is to be held today, 30th July, 2014. It makes sense for auctions to enter Round II as an increase in the shelf life of SRECs is beneficial for both, compliance entities and SREC owners.
The Mechanics of the Massachusetts Clearinghouse Auction
The auction mechanism is carried out as follows:
Round I: SRECs deposited in the auctions automatically get an added life of two years. Uncleared SRECs are deposited for Round II. All SRECs must be purchased for this round to clear. This took place yesterday.
Round II: SRECs entering Round II, which will take place today, get their life extended to another year, bringing it to a total of three additional years. Uncleared SRECs are deposited for Round III. All SRECs must be purchased for this round to clear.
Round III: If the SRECs are not cleared within the first two rounds then the following year’s Required Portfolio Standard (RPS) is increased in proportion to the amount of SRECs entered into Round I as per Department of Energy Resources (DOER) guidelines. SRECs sales are allotted in proportion to the amount entered into the auction and the rest are returned. This auction will take place on Friday, August 1st, 2014.
Upcoming Changes to the Massachusetts Solar Market
The success of the SREC I program resulted in the program approaching capacity limits, 400 MW, by the end of 2013, an amount that was not expected to be reached until years later. Currently the Solar Carve-Out program is being considered to be transformed from the ongoing SREC II program into a Performance Based Incentive (PBI), resembling a mixture of California and New York solar programs, with incentives stepping down to reflect reducing solar panel costs.
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