We've seen a drastic drop in the price of renewable energy certificates (RECs) over the last 2 weeks, from around $35 to $25. There are many reasons why the price of RECs can change so suddenly - most of it comes down to the fact that RECs are a traded certificate, and hence are subject to the laws of supply and demand.
On the supply side, the boom in solar power and solar hot water installations has seen a flood of RECs hit the market. This has been amplified by the solar credits scheme, which effectively creates 5x the RECs for a 1.5kW solar power system.
On the demand side, RECs are primarily purchased by energy generators and retailers to offset their emissions in order to provide green power to customers. With electricity prices going up, many people are switching away from green power. In addition to this, rumour is that the generators have satisfied their carbon credit requirements for the year, which has also seen demand drop off.
So what does the future of the RECs price look like? We wish we knew! The REC price has fluctuated wildly in the past, from a heady peak of $55 to a low of under $20. There is speculation that the RECs price will firm after 1 January 2011 when a proposed regulation will come into effect capping the RECs price at $40. Note, however, that this is a price cap - not a price floor, and the RECs price could drop further.
Indeed, further drops in the RECs price are likely as we see a rush on solar power in the lead up to the reduction in the solar credits multiplier. The bottom line - don't delay a purchase in the hope that the RECs price will recover, as it may never!
One final word of advice - be careful of solar power companies offering a RECs price of $30-$40. These companies will often bait you with a high RECs price, and then state in the fine print that the actual price you receive for your RECs will be the market price of RECs on the day of installation. This could result in you paying thousands more for your solar power system that you didn't budget for. And if they try and pull some line about them negotiating a special RECs price, don't believe it! At Neco, we'll always quote you an honest RECs price, and give you the option of locking in your RECs price if that is important to you.
