The Future of Solar: An Analysis of New Jersey’s Market for Solar Renewable Energy Credits (SRECs)

Abstract

An increase in New Jersey’s SREC supply has led to a decrease in SREC prices. The high volatility in SREC prices in recent years makes the SREC market risky for investment. This thesis models SREC generation based on an understanding of how decision-makers on the generation side may behave. We use our generation forecasts to model SREC prices. Calibration of the model is done to fit the forecasted prices and generations to historical data, and policies are proposed to help mitigate the problem of price volatility. Finally, we test a second approach to modeling generation, in which we introduce a feedback loop between generation and price. We then predict future feedback levels and their effects on the market.