Energy

Renewable Energy Credits

State Renewable Portfolio Standards (RPS) have created several new and emerging markets for Renewable Energy Certificates (RECs) and Solar Renewable Energy Certificates (SRECs) as mechanisms to measure progress towards state renewable targets.

Increasing RPS targets and the rapid growth in REC markets makes it difficult for utilities, generators, developers, and investors to develop rational price forecasts for RECs or to understand the market dynamics, risks and opportunities of renewable markets.

To help clients navigate the intricacies of REC valuation and RPS regulations, Navigant has developed the REC Price Estimation Tool (RECPET©)—a proprietary modeling architecture for estimating REC prices. RECPET© is a linear optimization forecasting model that combines two separate estimates of variables affecting REC values across a state or regional market:

  • Project REC Prices. RECPET© estimates the incremental revenue required by renewable resources to provide targeted returns over the life of the project. This forms the basis of a theoretical REC price that assumes all other market forces are in equilibrium.
  • Market REC Prices. RECPET© integrates both the economics of renewable energy projects and aggregate supply and demand variables to simulate REC spot prices for up to 20 years.

In the case of SRECs, RECPET© results are calibrated against Navigant’s Solar Market Penetration Model so that SREC supply reflects market adoption of rooftop solar applications.

  • Estimating Forward REC Price Curves

    Published in Renewable Energy World | North America, August 2010

  • REC/SREC Price Forecasting and Valuation Services

 

RECPET© provides robust forward-looking REC/SREC price curves that provide REC buyers and sellers with greater valuation transparency while also identifying possible future price inflection points. Navigant also analyzes the state RPS market rules and recent and forecast regulatory changes, while also providing a regulatory risk assessment with each RECPET© forecast.

CASE STUDY:

SREC Forecast & Analysis

Navigant recently provided a private equity firm with a detailed market analysis of the New Jersey SREC program. The analysis was part of the due diligence of a potential acquisition and included:

  • Development of a 15-year SREC price forecast for the New Jersey SREC market based on RECPET© with multiple sensitivities
  • An estimate of the size of New Jersey’s distributed solar market, including a 10-year forecast of retail rooftop solar installations based on Navigant’s proprietary Solar Market Penetration model
  • Identification of the impact of regulatory risk to New Jersey’s State Renewable Portfolio Standard

Learn more about Navigant's insights on RECs and SRECs.

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