EnergyRealist

In 2010 I wrote a short comment on SREC’s (here).  Basically SRECs are certificates that public utilities can buy to reach their state mandated alternative energy goals.  They were the basis of any solar sales pitch, that by selling SREC’s year after year the owner of the solar plant would recoup the capital costs and then start to earn profits.

My concerns were two:

• SREC’s relied on government will to continue the mandate for alternative energy, and

• SRECs being tradable instruments were subject to the vagaries of the market

It appears that the market for SREC’s in NJ has dropped by a large amount, with pricing for September 2011 in the $200 range, compared to previous prices in the high $500s to $600+ range.  The effect on individual home owners is clear.  Also, there will be slowdown in installations – which is part of the self-regulating feature of the SREC scheme – and so a drop in jobs.  Indirect effects will be seen where local government has committed to solar power on the promise of SRECs – as in this blog.

There is some discussion that prices may stabilize if the alternative energy goals are brought forward so raising the demand again.  Can this be done in the political climate?  There seems to be much more impetus to drill for more oil and frack for more gas than to push for more clean energy. (And no, no matter what the ads say, coal, oil and gas are not “clean”).

I can only see one solution, which seems ever more distant; a coherent national energy policy with long term guaranteed incentives to drive the change in energy supply and to drive energy conservation.  “The market” may get us there in the long run, but most likely with all sorts of bubbles, busts and distortions on the way – to say nothing of the jobs lost and the advantage gained by other countries with a clearer vision on energy.