At a Cleantech Corridor event last evening in New York sponsored by law firm McCarter & English, panellists discussed a pending solar bill that is poised to reach Governor Andrew Cuomo’s desk by January 2012. The bill, if approved, could position New York competitively in the solar sector, opening the floodgates to private sector investment.
The New York Solar Industry Development and Jobs Act could create a solar market that is akin to the way that this alternative form of power is developed in the neighbouring state of New Jersey, which has among the highest installed capacity in the US and is second only to the state of California. New York is ranked eighth with about one-fifth of New Jersey’s installed solar capacity.
New Jersey adheres to what’s known as the Solar Renewable Energy Certificates (SREC) model, which in New York would open the door to long-term, multi-year contracts of up to 15 years. The model allows market participants to earn credits – comparable to emissions credits – that are then traded in the spot market across the state.
This trade can generate an impressive rate of return, especially when coupled with industry incentives that continue to accompany the progression of what remains a nascent industry that panellists compared to the computer sector in the 1980s. If the bill passes, New York could be operating under an SREC model by 2013.
The risk in the SREC model, though, is in price volatility, as the New Jersey SREC market saw the spot price plummet from approximately $600 to about $150 in 2011 alone when the market for solar became oversaturated amid a wave of government grants and write-off incentives. “This is private equity risking capital […] which we think is the right approach,” noted one panellist. “This is not Solyndra here,” he added referring to the debacle of the government funded and now defunct solar company.
Market participants contend, however, that both of those price levels are extreme and that a fair SREC value will rebound if investors are willing to wait.
“We keep building,” noted Alan Epstein, president and chief operating officer of KDC Solar, a solar developer. He added: “These are infrastructure projects. They are long-term and if someone is not prepared for that they are in the wrong business. [Solar] is not for a quick in-and-out profit and if you don’t have that view this is not the business for you.”
Panellists suggested that New York SREC demand is escalating. An alternative to this approach could be a feed-in-tariff model, which was widely adopted in Germany and other parts of Europe.