Solar Renewable Energy Credits Research Articles

The Social Geography of the Solar Renewable Energy Credits (SREC) Market

The Social Geography of the Solar Renewable Energy Credits (SREC) Market

Interstate protectionism: the case of solar renewable energy credits

AbstractSolar Renewable Energy Credits (SRECs) are financial instruments created by state policies to offer incentives for generating solar energy. In an effort to support in‐state solar energy sectors and boost local employment opportunities, some states have closed off their SREC markets to out‐of‐state solar facilities. We examine the merits of such protectionist policy from the protectionist state's perspective. We find that SREC market closure leads to higher in‐state SREC prices and greater solar installation, and is associated with lower electricity prices. The study illustrates the economic incentives for protecting in‐state SREC markets from out‐of‐state solar energy producers.

The Implications of Policy Uncertainty on Solar Photovoltaic Investment

Policy and electricity price uncertainty provide disincentives to investors considering renewable energy investments. While electricity price uncertainty impacts on investment decisions relating to any energy investment, whether renewable or non-renewable, policy uncertainty will affect renewable energy investment decisions to a far greater extent. In this study, we consider the two main sources of uncertainty a solar Photovoltaic (PV) project is exposed to: electricity price uncertainty and policy uncertainty. We focus our analysis on utility-scale solar photovoltaics in the Pennsylvania, Jersey, Maryland Power Pool (PJM) electricity market and the New Jersey Solar Renewable Energy Credit (SREC) market. Using Solar Renewable Energy Credits as a proxy for policy, we find that there is considerable volatility in both electricity prices and policy. In a sample covering eleven years, we implement univariate Generalized Autoregressive Conditional Heteroskedastic (GARCH) and combinations of GARCH models with different weighting schemes and find that combination models provide superior forecasts. In renewable energy markets, policy supports have a significant impact on an investment’s profitability. The implication for policymakers is clear: to foster investment in solar PV, policy stability is critical.

Reliability versus renewables: Modeling costs and revenue in CAISO and PJM

While electrification has been proposed as a key mechanism for combating global warming, fossil fuels are still the mainstay of the electricity sector in the US. Power generation technologies were evaluated in two regions: California (CAISO) and the Mid-Atlantic (PJM). Technologies are ordered via multiobjective optimization using genetic algorithms to resolve a bounded knapsack problem. Price factors for each technology are established. A net present value is assessed for representative projects in each region and technology, including capacity payments and renewable energy credits in PJM. Local sensitivity analysis is performed. Renewables were selected most frequently in the cost optimization with no constraints on variable renewable energy. However, when solar photovoltaic and onshore wind generation are constrained to 30–70 % of the total capacity addition, natural gas is the most selected technology. Profitability was highest for natural gas based plants in PJM except where solar renewable energy credits are available. Selectivity of incentives to natural gas plants from PJM capacity payments are intensified by the recent order to extend the minimum offer price rule. This calls into question the suitability of carbon pricing in the region.

Drivers of growth in commercial-scale solar PV capacity

This paper examines the impact of policy incentives for solar power on capacity growth of the commercial market segment. We use county level data from 2005 to 2013 for 13 states in the Northeast United States including the District of Columbia. In estimating the relationship between incentives and solar PV capacity, we control for insolation, market factors, and demographic characteristics. We also account for indicators of pro-environmental attitudes and preferences for solar technology. Results indicate that factors affecting financial returns from a solar PV installation like electricity price and insolation are highly significant. Among policy variables, rebates, solar renewable energy credit price, and sales tax waivers are significant, along with years of Renewable Portfolio Standard implementation. Indicators of environmental preferences and familiarity with solar technology are not as important, which is in contrast with findings in the residential solar market. This suggests that commercial installations are driven mostly by its promise of financial returns, and continued growth in this market segment is likely to depend on falling installation costs and availability of incentives.

Solar Renewable Energy Credit Price Volatility and Investment Returns: Have Policies Stranded Capital Investment?

Pennsylvania is one of a number of U.S. states that provide incentives for the generation of electricity by solar energy through Solar Renewal Energy Credits (SRECs). This article develops a return on investment model for solar energy generation in the PJM (mid-­Atlantic) region of the United States. Model results indicate that SREC values of roughly $150 are needed for residential scale systems to break even over a 25-­year project period at 3% interest. Market prices for SRECs in Pennsylvania have been well below this range from late 2011 through the first half of 2016, indicating that previous capital investments in solar generation have been stranded as a result of steep declines in the value of SRECs. A simple conceptual supply and demand model is developed to explain the sharp decline in market prices for SRECs. Also discussed is a possible policy remedy that would add unsold SRECs in a given year to the SREC quota for the subsequent year.

The comparative effectiveness of residential solar incentives

We use temporal and spatial variation to evaluate the effectiveness of nearly all (over 400) state and utility incentives that promote the installation of residential solar photovoltaic (PV) panels. Using a unique data set that values a wide array of solar incentives including cash incentives, tax credits, and solar renewable energy credits, we evaluate and compare the impact of incentives using a standardized net present value of each incentive. We pair these data the amount of new residential solar installations within each state and year to examine the relationship between incentive type and new residential PV installations. We find that each additional dollar of incentives has led to on average, an additional 500 W of additional installed capacity per thousand residential electric customers. This effect is enabled by the presence of net metering and financing availability. Direct cash incentives, when coupled with financing initiatives and net metering, drive much of the impact on installations. Results are consistent with research that shows that incentive salience may drive variation in effectiveness. Results suggest that approximately 67% of state and utility incentives, up to $1.9 billion over 11 years, were likely spent on incentives that did not increase residential solar PV installations.

Lower electricity prices and greenhouse gas emissions due to rooftop solar: empirical results for Massachusetts

Monthly and hourly correlations among photovoltaic (PV) capacity utilization, electricity prices, electricity consumption, and the thermal efficiency of power plants in Massachusetts reduce electricity prices and carbon emissions beyond average calculations. PV utilization rates are highest when the thermal efficiencies of natural gas fired power plants are lowest, which reduces emissions of CO2 and CH4 by 0.3% relative to the annual average emission rate. There is a positive correlation between PV utilization rates and electricity prices, which raises the implied price of PV electricity by up to 10% relative to the annual average price, such that the average MWh reduces electricity prices by $0.26–$1.86 per MWh. These price reductions save Massachusetts rate-payers $184 million between 2010 and 2012. The current and net present values of these savings are greater than the cost of solar renewable energy credits which is the policy instrument that is used to accelerate the installation of PV capacity. Together, these results suggest that rooftop PV is an economically viable source of power in Massachusetts even though it has not reached socket parity.

Comparative economic analysis of supporting policies for residential solar PV in the United States: Solar Renewable Energy Credit (SREC) potential

Numerous studies and market reports suggest that the solar photovoltaic markets rely heavily, if not entirely, upon governmental support policies at present. Unlike in other countries where these policies are enacted at a national level, the 50 states in the US pursue different policies in an attempt to foster the growth of renewable energy, and specifically solar photovoltaics. This paper provides an economic and financial analysis of the US federal and state level policies in states with solar-targeted policies that have Solar Renewable Energy Credits (SREC) markets. After putting a value on SRECs, this study further compares solar carve-outs with other incentives including the federal tax credit, net metering, and state personal tax credits. Our findings show that SREC markets can certainly be strong, with New Jersey, Delaware, and Massachusetts having the most potential. Despite their strong potential as effective renewable policies, the lack of a guaranteed minimum and the uncertainty attached are major drawbacks of SREC markets. However, the leveraging of this high value offers hope that the policies will indeed stimulate residential solar photovoltaic markets.