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At its meeting on November 9, 2011, The New Jersey Board of Public Utilities (“Board” or “BPU”) approved the results of the eighth solicitation under the SREC-Based Financing Program for ACE, JCP&L, and RECO. The eighth solicitation was held for a statewide planned quantity of 15,617.749 kW, divided as follows: 9,986.292 kW for JCP&L, 5,477.147 kW for ACE, and 154.310 kW for RECO. Bids were due on September 2, 2011.
The solicitation was oversubscribed with bids for 15Mw of solar with only 5.9Mw of available capacity. The prices were at an extreme discount to previous solicitations with large facilities awarded average SREC prices of $214.92 guaranteed for 10 years while smaller facilities <=50Kw awarded a fixed price of $232.98. These awards are at significant discounts to 10 year awards granted just over a year ago for the 5th solicitation. Solar projects for that solicitation were guaranteed a payment of $466.21 per SREC for ten years from the Local Distribution Companies with rate payer relief. This latest solicitation resulted in prices that are 50% less.
The significant discount in prices to 10 year contracts can be attributed to the oversubscription to the solicitation and not to the true cost of solar. A large majority of solar in New Jersey is developed and then sold to tax equity investors. The price that the investor pays the developer is largely dependent upon the SREC price. A long term SREC price at high levels enables the solar developer to flip the project at high margins. When the EDC solicitations are undersubscribed, which is widely known, developers demand higher prices and have been successful in doing so in 7 of the 8 solicitations. High prices granted by the EDCs are backed by the ratepayer who then has to sell the SRECs in the open market for the next 10 years. If the prices are lower for the next 10 years the ratepayer has to make up the shortfall.
Absent of the solicitations, developers have been trying for years to achieve 10 year SREC contracts in the mid to high $200 range. With current low panel prices, mid $100 10 year contracts are being sought after in the bilateral market. EDC contracts should achieve lower prices due to the public backing along with low or nonexistent credit checks on the side of the ultimate solar owner and recipient of the long term contract.
The EDC financing program has just ended its 3 year life. There are deliberations going on to discuss whether the EDC program should be continued and if it does what changes should be implemented. In the mean time the Solar Alliance has submitted a petition to the Board of Public Utilities to increase the planned quantities under the programs by 47.3mw for this coming year.
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