Owners of Solar Celebrate: Clearinghouse Auction is a Success

Clearinghouse Auction is a Success

Owners of Solar Celebrate

This past week was the Commonwealth’s first Solar Clearinghouse Auction for certificates created during 2012. To summarize, it’s good news for solar owners.

A Solar Renewable Energy Certificate (SREC for short) is issued to the owner of a solar project. The more clean solar energy it produces, the more SRECs are issued. The utilities purchase these certificates and the market price is somewhat regulated by the Commonwealth. Part of this regulating function is a “last chance to sell” provided by a Clearinghouse Auction at the end of each year.

Many solar owners, and those of us in the business, were watching closely as this first ever auction played-out.  Would it indeed “clear” meaning to sell all of the remaining 2012 SRECs? If so, confidence in the program and the Commonwealth’s ability to sufficiently regulate the market would be bolstered. The Clearinghouse Auction did not clear Friday, which would have been bad news; but the Department of Energy Resources (DOER) immediately stepped in and offered to purchase any unsold Certificates in the auction. That’s very good news. They’ve been quietly holding this ace and poised to play it, but waited to monitor the entire auction process first.

What does this mean to owners of Certificates in the auction? They achieved a higher price than has been seen on the open market in over a year. In fact, at $285 these Certificates garnered about 30% higher value than those sold just a month ago.

Good News for the Short-term and the Long-term

The immediate news is welcome for those that held out–waiting for this backstop. The long-term implications of this auction result are also positive for everyone who already owns or is considering solar. Here is why: The regulation governing the SREC market has a feature where the auction process itself triggers the future market demand to increase. The details are complicated, but this creates additional pressure on the utilities to buy more SRECs and to purchase them sooner. In this way, the auction process for 2012 has already driven the prices of 2013 SRECs upward in recent days and we will likely see a continuation of that trend.

We’ll be able to gauge the market reaction over the next week or so as more of the first 2013 SRECs are sold on the open market.

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