We get asked all the time why the price of SRECs has dropped so much after the legislative “fix” signed by Governor Christie.  While we believe that the fix will keep NJ from seeing prices go down to the PA price range ($25), the issue of current and future oversupply is still an issue for SREC pricing.

The legislation increased the demand for NJ 2014 SRECs (starting June, 2013) from about 770,000 to over 1,600,000 SRECs.   This is an increase of OVER 100%, so why have prices dropped since the legislation was signed?  The simple reason is current oversupply and expected new supply.

As of August 31, 2012 NJ has installed about 876 MW of solar and the state is still installing over 20 MW/month.   At that rate, we will create about 1,100,00 SRECs for the 2013 SREC year.   That is about 525,000 more SRECs than required.  In 2012, we had an excess of about 257,000 SRECs.  So, combined we will have about 782,000 excess SRECs heading into the 2014 SREC year.

The table below goes over a few scenarios.  The charts assume build rates effective September 2012.  At an average build of 15 MW/month, we won’t get into balance until the 2015 SREC year and would be short in 2016 based on that build rate.   A build rate of 20 MW/month, would keep us long all the way through the 2016 SREC year.

If we drop immediately to 10MW/month, the market will be short in 2015 and we would see prices move up if we start seeing that build rate.  As long as installations are in the 20 MW range, prices will stay under pressure.