Current REC markets and future projections

Carrie Sisto

7 June 2011

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Agenda

• New Jersey markets face oversupply

• Connecticut, Pennsylvania and Maryland turning in-state

• Massachusetts, North Carolina solar mandates drive

development

• Existing contracts could stifle California REC market

New Jersey compliance by fuel

Wind61%

LFG27%

NJ LFG12%

NJ Wind0%

ACP0%

2010

Note: ACP stands for alternative compliance payment. Source: New Jersey Office of Clean Energy Draft 2010

Compliance Report

Wind48%

LFG38%

NJ LFG14%

NJ Wind0%

ACP0%

2009

New capacity hits forward prices

400

450

500

550

600

650

700

Jun-10 Aug-10 Nov-10 Mar-11 May-11

$/M

Wh

New Jersey solar RECs: 2011 vs 2012

2011 2012

SREC market backs capacity additions

0

50

100

150

200

250

300

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

MW

Source: NJ BPU Draft 2010 compliance report

New Jersey solar installations by year

Capacity added Installed capacity

ORECs

• New Jersey goal of 1,100MW of offshore wind

• No compliance schedule set

• Applications to be an OREC generator due next week

NEPOOL deadline eclipses oversupply

10

13

16

19

22

3-Jan 9-Feb 18-Mar 24-Apr 31-May

$/M

Wh

Connecticut Class I RECs: 2010 vs 2011

2010 2011

Historical Connecticut Class I compliance

Conn.2.5%

Maine54.8%

Mass.3.7%

N.H.19.3%

N.Y.6.4% R.I.

10.2%

Vt.3.0%

ACP0.2%

2007

Conn.4.0%

Maine45.0%

Mass.5.0%

N.H.29.0%

N.Y.5.0%

R.I.6.0%

Quebec 1.0%

Vt.5.0%

2008

Note: 2009 not yet available. ACP stands for alternative class compliance. Source: Connecticut DPUC RPS

compliance reports

New legislation?

• 450MW solar goal

– SREC price cap at $350/MWh

• Utility-funded solar incentives

• Long-term, in-state contract requirements

• Combine Departments of Public Utility Control and

Environmental Protection

• New CHP incentives for up to 50MW of in-state facilities

Solar market extinguished by wave of supply

75

125

175

225

275

3-Jan 9-Feb 18-Mar 24-Apr 31-May

$/M

Wh

Pennsylvania vintage 2011 solar RECs

Supply tight in first year of program

400

450

500

550

600

3-Jan 9-Feb 18-Mar 24-Apr 31-May

$/M

Wh

Massachusetts vintage 2011 solar RECs

Compliance needs driving solar development

0

5

10

15

20

Pre-2010 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11

MW

Note: Data as of 6 May 2011. 16.195MW are eligible but are not operational. Source:

Massachusetts DOER

Massachusetts eligible solar capacity on line

Capacity added Installed capacity

Maryland 2009 compliance by fuel

Solar0%

Wind1% LFG

12%

WDS25%

BLQ28%

WAT*34%

Tier I

MSW**19%

WAT *81%

Tier II

*Hydro systems must be <30MW for Tier I; other than pumped storage for Tier II Source: Maryland Energy

Administration

**MSW qualifies as Tier I from 1 October 2011.

Projected sources of Maryland RPS compliance

Regional

RECs69%

MD offshore

wind0%

MD onshore wind10%

MD biomas

s20%

MD solar1%

Current

Regional

RECs35%

MD offshore

wind37%

MD onshore wind

9%

MD biomas

s9%

MD solar10%

2022

Source: Governor Martin O'Malley, Maryland Energy Summit

Capacity swells before start of program

North Carolina eligible capacity

(as of 27 May 2011)

Fuel Capacity (MW) In-state capacity (MW)

Biomass* 260.85 210.86

Landfill Methane 74.16 69.36

Poultry Methane 1.63

Swine Methane 1.87 1.63

Hydro 57.9 35.5

Solar 84.7 53.6

Wind 5,942 0.1

Total 6,423.11 371.05

*Biomass includes Co-gen, ethanol and wood waste Source:

NCUC

Rules in limbo

• Whole tree biomass?

– NCUC decision challenged by Environmental Defense Fund

• “Electric demand reduction”

– Utilities can meet part or all of their RPS compliance with

voluntary actions by their customers

• Alternative compliance payment?

– No penalties or alternative compliance mechanisms in place

– NCUC has authority to enforce the RPS

Contracts in the California pipeline loom large

897 1,306

6,034

1,530

394

6,382

215881

13,368

0

4,000

8,000

12,000

16,000

Cancelled Delayed On track

con

tracts

Source: California Energy Commission

Renewable energy capacity contract status as of Apr-11

PG&E SCE SDG&E

Utilities on pace to meet 33pc target

20.8 21.4

25.1

20.9

25.4

28.7

12.6

16.1

24.9

0

5

10

15

20

25

30

35

2011 2012 2013

perc

en

t

Source: California PUC Q1-11RPS compliance report

Projected RPS compliance based on retail sales forecasts

PG&E SCE SDG&E

Conclusions

• Excess supply encumbers PJM markets

• Massachusetts solar just getting started

• Connecticut, Maryland, Pennsylvania looking to in-state

sources

• North Carolina rules in flux

• Existing contracts could hamper California REC markets

Thank you!

Carrie Sisto

Editor, Argus Air Daily

carrie.sisto@argusmedia.com

202.349.2881

London, Houston, Washington, Jersey City, Portland, Calgary, Santiago, Bogotá,

Johannesburg, Dubai, Singapore, Tokyo, Beijing, Sydney, Moscow, Astana, Kiev and Berlin