Massachusetts SREC Market Strong, But For How Long?

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The results of the Q1 2012 SREC auction from SRECTrade are in and it was a banner quarter as SRECs sold at $540 each, which is about 98% of the maximum $550 payment for 2012.

As most of you know, each SREC represents 1 MW of electricity generated from solar sources.  Massachusetts SREC auctions are held quarterly and SRECs in this auction were the result of those generated in Q4 2011.  Unfortunately, I did not generate a full SREC by the end of last year so I won’t sell my first SREC until next quarter’s auction in July.  Thankfully, partial SRECs carry forward to the next quarter so I won’t lose any production.

This is the second consecutive quarter with SRECs selling at $540 each, which taken in a vacuum seems very promising.  However, the popularity of the solar program is resulting in many installations in the pipeline and it is already exerting downward pressure on future SREC prices in over the counter markets.  Meaning those who trade SRECs in advance are expecting much lower prices.

As a result, I expect the value of future SRECs to rapidly head towards the minimum value of $300 and reach that level within the next couple years.  This is the reason I use $400 as an average value for SRECs in my breakeven calculations despite them selling near their maximums currently.

Later,

Gary

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