Tuesday, June 7, 2011

Success Drops Solar Credit Prices: Boom-Bust-Boom Cycle

Solar Renewable Energy Credit (SREC) Prices have fallen substantially in Pennsylvania.  A year ago SRECs traded for around $300 and have been going down since then.  In May, 2011 SREC prices reached $80.

So does this mean that solar is doing badly?  No.  It actually means that solar projects in Pennsylvania are booming but that success is creating a problem that could cause a major slow down for 2 years in Pa solar projects. 

Here is the story:

The 2004 Alternative Energy Portfolio Standards Act requires companies selling retail electricity products to use increasing percentages of alternative energy.  The AEPS has a solar requirement of 0.5% by 2021of all electricity sold being supplied from solar.  About 800 megawatts of solar capacity will be needed in 2021.

The AEPS establishes annual requirements that slowly increase toward the 0.5% goal.  As a result of a solar boom in Pennsylvania, with PA crossing the 100 megawatt solar threshold years earlier than expected, Pennsylvania is ahead of the solar deployment schedule required in the AEPS.

In fact, Pennsylvania may be two to three years ahead of the schedule set forth in the 2004 AEPS.  The Boom leads to the Bust, and then the Boom resumes around 2014 when the AEPS requirement will match or exceed the amount of PA solar projects.

Representative Chris Ross, a Republican from Chester County and a prime sponsor of the 2004 AEPS, has proposed new legislation to smooth out a boom-bust-boom cycle.

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