Due to the quick adoption of solar panels by both residents and businesses, Massachusetts is reaching its goals for solar production ahead of schedule. As a result, SRECTrade released an analysis of the Massachusetts SREC market in June, 2012, and it confirmed suspicions that the SREC market is rapidly becoming oversupplied, which will result in downward pressure on SREC pricing.
Solar REC under supply in previous compliance periods led to SRECs pricing just below the Solar Alternative Compliance Payment (SACP). Pricing right below the SACP is common in the early stages of a market with a Solar Carve-Out requirement in a state’s Renewable Portfolio Standard (RPS). As the market matures and attracts more participants, typically due to high SREC prices, the market sees an overbuild of solar which quickly turns to an oversupplied market and pricing declines. As the Massachusetts 2012 compliance year moves on, the prospect of oversupply has become apparent.
Their analysis includes three separate projections, one in which the rate of new projects decreases, one in which it remains constant, and one in which it increases. In all three scenarios, the 2012 market will become oversupplied.
Thankfully, the Mass. CEC had the foresight to establish a price floor of $300/SREC. So even if the worst case of oversupply were to occur, SRECs would still sell for that price, which is reassuring.