Clear Energy is pleased to announce that Michael Rizzo has joined the environmental commodities brokerage team. Michael comes to the group with nearly 25 years of experience as a broker of illiquid and complex markets, and is a veteran in building trusted relationships over the long term. Previously, Michael was the Head of Trading and Senior Broker at Clarkeson Research Group, where he built and serviced trade relationships with major primary and regional dealers as well as hedge funds and money managers. He managed a group of five brokers as Desk Head, and was pivotal in driving business for the firm. The team looks forward to his invaluable experience as he picks up the reigns to service our NEPOOL REC and SREC clients.
Michael can be reached at Michael.firstname.lastname@example.org or at (516) 665-1788. You can find out more about him at http://clearenergybrokerage.com/team/.back
Illinois: Like Chevy Chase on his sled in the movie “A Christmas Vacation”, prices seem to have shot down the hill at silicon based kitchen lubricant speed and liquidity is hiding in the Christmas tree. Non wind offers abound and buyers don’t have any trouble finding willing sellers. The long-term forecast for this market indicates that we will be here for a while unless legislative issues forces a change. Wind prices trade at a slight premium to Green-e. View PDFback
Illinois: With the legislature out of session, HB2607 seems to have faded away as a concern for this compliance market at present. It is possible this legislation will be reintroduced in the next session. The bill would have increased the RPS and moved REC purchases away from current obligated parties to the IPA. View PDFback
Upside for Texas compliance REC prices remains limited
By Amanda Luhavalja of SNL Energy
Upside momentum for renewable energy credit compliance prices in Texas remains limited, amid little change in the state’s supply and demand picture, market sources indicate.
Latest assessments from SNL Energy for over-the-counter compliance REC prices in Texas are lackluster, with the 2014 market priced at an index of 43 cents/MWh and the 2015 market assessed at an average of about 50 cents/MWh.
Texas compliance RECs for 2014 and 2015 had been sitting on either side of $1.00/MWh in December 2014 and gradually began to leak lower during the first few months of 2015. Apart from abundant supply and overall lackluster demand, market sources also attributed the gradual weakness in Texas compliance REC pricing at the time to the expectation that legislation that would repeal the state’s RPS at the end of this year would be passed. The legislation, which had been passed in the Texas Senate, was drafted to terminate the state’s 10,000-MW renewable portfolio standard and transition the Texas mandatory REC program to voluntary.
However, the bill died in the Texas Legislature, which ended its 2015 legislative session at the end of May. The Texas Legislature meets in a regular session every two years, convening in January of every odd-numbered year. The Texas Legislature meets next in 2017.
“For near-term market interests, the potential legislative change sparked a negative price breakout, and unless load increases or there is some other material expansion of voluntary demand, it’s not clear if/when Texas REC pricing will recover,” Jonathan Burnston, a partner in the Energy and Environmental Markets Group at Karbone Inc. said.
“Pricing has improved slightly with the end of the Texas legislative session and the corresponding ‘death’ of the RPS legislation. However, the continued oversupply coupled with the construction of new wind facilities, means that the fundamentals remain the same; with low REC prices expected for the short and medium terms,” Ryan Cook, vice president at Clear Energy Brokerage & Consulting LLC, said.
According to the Electric Reliability Council of Texas Inc., Texas had 64,122 MW of total generation capacity under study as of June 30, compared to 64,209 MW as of May 31, according to the grid operator’s June generator interconnection status report. Wind project requests totaled 25,467 MW as of June 30, compared to 25,142 MW as of May 31. ERCOT reported that installed wind capacity totaled 13,424 MW as of June 30, with 2,941 MW noted as planned 2015 capacity with signed interconnection agreements and financial security posted.
In 2014, at about 40.6 million MWh, wind generation continued to account for the largest share of the renewable energy generation picture in the Lone Star State, according to the Texas renewable energy credit program annual report, filed with the Public Utility Commission of Texas. Overall, the 2014 annual report showed that renewable energy generation in Texas increased 10% from 2013. For 2014, renewable facilities in Texas generated almost 42 million MWh in 2014, up from 38.1 million MWh in 2013.
The Texas RPS initially required 2,000 MW of new renewable energy capacity to be installed statewide by 2009. In 2005, the program was expanded to accommodate 5,880 MW by 2015 and included a target of 10,000 MW by 2025. In early 2010, Texas reached the 10,000 MW goal 15 years ahead of schedule.
Apart from the abundant supply situation in Texas, weakness in the national Green-e voluntary REC market is also keeping a lid on Texas compliance RECs, as well as Texas Green-e wind REC markets, sources said. Most recently, national Green-e national market prices for the back half 2015/front half of 2016 were assessed at 40 cents/MWh to 60 cents/MWh. Texas Green-e wind RECs for 2015 were pegged at 40 cents/MWh to 55 cents/MWh, with 2016 eyed at 50 cents/MWh to 70 cents/MWh.
Market prices and included industry data are current as of the time of publication and are subject to change. For more detailed market data, including SNL power and natural gas index prices, as well as forwards and futures, visit our SNL Commodities pages. .back
Illinois: This quarter, the buyers all seem to have gone on spring break – we have plenty of offers in both IL ARES wind and nonwind credits, but no bids. While we have looked for a reason to explain this development, the only rationale seems to be that pending legislation in the state house has some buyers holding off on additional purchases. View PDFback
The EPA’s Clean Power Plan is considered something that should enhance the value of renewable generation and hopefully increase the price we are seeing on some Renewable Energy Credits (RECs). As I learned years ago from studying the then proposed Pennsylvania RPS to the final version (complete with final rule making), nothing is certain until the lawyers have left and the dust has settled. What may be a valuable asset in one draft, can be completely worthless in the final published (and ruled upon) document.
A number of Clear Energy clients have sited the Clean Power Plan as the reason behind not engaging in forward transactions due to the uncertainty it poses. There is no question that this legislation creates significant uncertainty in the power markets, especially renewables, but given that we are at best a few years away, if at all, sellers should feel comfortable in taking advantage of short term forward transactions when they arise.
The below article from SNL reflects my thinking on the timing of the plan and details nicely the challenges that the plan faces.
Clear Energy Brokerage & Consulting, LLC
From the www.snl.com website. Reposted with permission, highlights and bolding by Clear Energy, special thanks to Peter Marrin.
Tuesday, June 23, 2015 5:26 PM ET
Former EPA official: Clarity on Clean Power Plan another 3-4 years away
Legal challenges and state responses to the U.S. EPA’s proposed Clean Power Plan will extend through the next several years, making it nearly impossible to determine if and how the program will be implemented, a former agency official said June 23.
“When you see these sort of simple… solutions that are thrown up there as to how this is going to play out, I think they’re all wrong. I think this is going to take some time,” Bob Meyers, a Washington, D.C.-based attorney with Crowell & Moring and former acting assistant administrator for EPA’s Office of Air and Radiation, said at the Energy & Mineral Law Foundation’s annual institute in Amelia Island, Fla.
EPA’s final Clean Power Plan rule for cutting greenhouse gas emissions from existing power plants is expected in August, as is a rule for modified/reconstructed sources. State Implementation Plans are due a year later, but the near certainty of legal challenges and the complexity of crafting compliance plans are likely to cause delays.
“The first wave of litigation occurs on the rule [release], second wave occurs when the state plans come in. I don’t think that’s going to occur on schedule,” Meyers said. “I think that’s going to take some time. And this is going to play out across the country in the next three to four years I think before we really have some idea.”
The rule, which is being promulgated under Section 111(d) of the Clean Air Act, is projected to cut emissions by 30% from 2005 levels by 2030, according to EPA. The cuts can be achieved through four so-called building blocks: a 6% improvement in coal unit efficiency rates, increased dispatch of natural gas-fired generation, higher utilization of renewable energy resources and maintenance of the existing nuclear fleet, and a 1.5% improvement in demand-side energy efficiency.
The proposal has drawn the ire of coal producers and some utility industry representatives, with the U.S. Energy Information Administration estimating U.S. coal production under the rule could fall by up to 38% by 2040 compared with business as usual.
Although an initial challenge was thrown out because the rule is not final, plan opponents could raise a number of legal issues down the road.
Meyers said possible legal arguments include that the plan is unconstitutional because it violates the fifth amendment/takings clause by upsetting “settled investment expectations” and likely eliminating coal use in a dozen states. Opponents could also argue EPA’s determination of the “best system of emission reduction” cannot be stretched to include the entire electric grid and has no precedent in the Clean Air Act’s 40-year history. Challengers may also say EPA is precluded from regulating source categories under Section 111 of the Clean Air Act that are already being regulated under the agency’s new Mercury and Air Toxics Standards through Section 112.
But EPA and its supporters have an equally robust list of potential counterarguments. On the constitutional level, supporters could say the plan does not explicitly require the retirement of coal units or the adoption of a specific energy mix, undercutting the takings argument. They could also say business investments are not shielded from future regulation and that states can decline to form their own implementation plans and adopt a federal implementation plan, thereby avoiding violation of the Tenth Amendment and principles of federalism.
EPA can also argue the structure of the rule “allows broad state flexibility” in meeting emissions rate targets and is consistent with current EPA regulations, Meyers said.
There could be changes to proposed regulations for new power units to bolster the chances of the existing plant rule surviving. EPA is proposing a new rule under section 111(b) of the Clean Air Act that would require partial carbon capture for new coal units. Section 111(b) regulations are necessary to promulgate the 111(d) existing plant rule, but concerns about the feasibility of commercial-scale carbon capture could make EPA rethink those requirements.
“We expect them to dial back (b) and take away that vulnerability,” Meyers said.
reproduced with permission by snl.com (subscription required to access original article)
By Amanda Luhavalja
Illinois: The past quarter saw an increase in liquidity in the IL ARES wind and non-wind market. Pricing has maintained its premium to the Green-e market with increased prices for the outer years. As you will see from our table we have added an IL ARES Non-Wind section. This market will see a number of interesting developments in 2015 that we will explore in a bit more detail next issue.
Michigan: A new bill (House Bill 5205) passed the Michigan House of Representatives this quarter that would change the definition of renewable energy to include fuel manufactured from waste, i.e. tires. Last quarter we expected to see an expansion in the definition of supply and this fits the bill, although more may be coming. If placed into law, this would have negative effect on pricing. We should have final clarity on this next quarter or two. As of our publication date, the 2012 MI RPS RECs are no longer eligible for compliance purposes, having expired on Dec 31, 2014.View PDFback