Karbone

Earlier last month, the U.S. Department of Energy (DOE) and the Internal Revenue Service (IRS) issued guidance on technology-neutral clean energy tax credits via the #IRA. These guidelines come amid rising prices for carbon-free electricity attributes, like California Carbon-Free Specified Source, whose prices have remained above ~$25/MWh since January. The IRA’s tax credits aim to expand financial incentives for carbon-free electricity facilities beyond #wind and #solar, extending to hydropower, nuclear, and certain waste-to-energy and waste recovery technologies. Importantly, the credits are only applicable to projects with a commercial operation date on or after December 31, 2024. - The Clean Electricity Investment Credit (CEIC) targets investments in zero-emission electricity generating facilities and select energy storage facilities with a base credit rate of 6%, potentially increasing to 30% for facilities adhering to wage and apprenticeship standards. - The Clean Electricity Production Credit (CEPC) applies to facilities generating clean energy with zero greenhouse gas emissions, offering a base credit rate of 0.3 cents per kWh ($3/MWh), increasing to 1.5 cents for smaller facilities meeting wage and apprenticeship standards. This credit is available for 10 years from the in-service date of the facilities. Both the CEIC and CEPC will phase out starting in 2032 or when U.S. electricity production emissions are reduced to 25% of 2022 levels, with a complete phase-out occurring four years later. Long-term tax credit revenue streams and strong pricing for Carbon-Free and Emission-Free Energy Certificates (EFECs) create an ideal investment environment for carbon-free resources. However, as tax credits increasingly contribute to revenue, the prices for carbon-free attributes may retreat due to the resulting increase in cash flow. For more insight into IRA guidance and updates on Carbon-free Specified Source pricing, register for the Karbone Data Hub!

California Book and Claim (B&C) REC prices have plummeted to all-time lows as CA LCFS prices continue on their volatile trajectory, bottoming out around the $45 mark due to persistent oversupply and CARB's relative inaction on promises of tougher targets. - Given the intrinsic connection between B&C RECs and LCFS credits, the uncertain market sentiment affecting the CA LCFS market is contributing to the price dip in the B&C REC market.  - Notably, although electricity crediting has accounted for almost a quarter of LCFS credits over the past six quarters, most registered Pathways already operate strictly on zero-CI electricity, further driving down market demand for B&C RECs. With CA LCFS prices recently hitting lows of $44.50, the break-even point for CA B&C/LCFS arbitrage stands at approximately $13.00, just $2.00 above the historic lows in the B&C market. This implies that, as a general benchmark, arbitrage opportunities are viable only if B&C prices remain below $13.00 given the current LCFS price. These margins will remain thin unless B&C prices decline further or CA LCFS prices begin to rise. LCFS participants continue to wait for final details on an ongoing California rulemaking process considering higher annual targets. California regulators have scheduled a public hearing on these concepts for November 8th, and plan to release the final language for a 15-day comment period prior to that meeting. While CARB's changes have the potential to stabilize the LCFS credit marketplace, current fundamentals indicate notable oversupply through 2024, with more bullish fundamentals anticipated beginning in 2025. For an in-depth analysis on the CA LCFS and CA B&C markets, contact research@karbone.com. #LCFS #RECs #CARB #California

As Maryland's SREC market navigates an evolving policy landscape, the passage of Senate Bill 783, the Brighter Tomorrow Act, promises to alleviate the strained supply-demand dynamics in the state. In our latest whitepaper, we delve into the nuances of this legislation and its potential market impact. - The Brighter Tomorrow Act, signed by Governor Wes Moore on May 9th, introduces the “Small Solar Energy Generating Incentive Program”. This program offers "Certified SRECs" with a 150% compliance value, targeting new solar projects within a specific size and COD criteria. - Despite ongoing interconnection challenges, this legislation aims to boost SREC supply and provide some relief to the undersupplied market, potentially exerting a downward pressure on prices that are already trading in close proximity to the SACP. Maryland's solar future holds potential, but the rate of new project build and market balance will ultimately hinge on the success of the PJM interconnection queue reforms and other regulatory changes in the state’s RPS. For a closer look at SB 783 and its expected impact on Maryland's supply-demand dynamics, access our whitepaper via the link below. Also keep an eye out for our PJM SREC Merchant Curves that will soon be accessible on the Karbone Data Hub! #CleanEnergy #Solar #SREC #Maryland #BrighterTomorrowAct #RenewableEnergy #EnergyPolicy #SolarEnergy #KarboneInsights

The Biden administration announced significant tariff increases on various imports from China. These include 2x the duties on #solar cells, 4x #tariffs on electric vehicles, and more than 3x the rates on lithium-ion batteries. The new tariffs affect not just #EVs and solar panels, but also raw materials and semiconductors. While the proposal provides some relief through tariff exclusions for items like essential machinery for domestic manufacturing, if the plan is ultimately implemented, increased tariffs will inflate CAPEX and OPEX requirements. Project cash flow streams will eventually need to make up the difference, including environmental attributes like #RECs. As impactful as these tariffs will be on the sector, they will likely only reaffirm existing trends in heavily undersupplied REC markets such as PJM Tier I’s. - Given that a majority of PJM Tier I REC markets currently trade near or at the ACP due to undersupply, significant price hikes are unlikely due to the already-constrained price movements within these markets.  - Existing interconnection queue delays have already slowed new project build, significantly restricting the near-term supply fundamentals for many states.  - Our long-term outlook for PJM Tier I markets was, and certainly now remains, #bullish.  Considering that many REC markets are already pushed to their upper-pricing bounds, significant volatility through the tariffs isn’t particularly likely. If you are interested in a long-term outlook on the #PJM REC markets, contact research@karbone.com about our Merchant REC pricing forecasts! #renewableenergy #marketresearch #supplychain #commodities

Our National #CRS Listed Merchant Curves are officially live on the Karbone Data Hub! But that's not all – we're gearing up to make subscriptions to our PJM Tier I and SREC Merchant Curves accessible on the Hub very soon. Stay tuned for our comprehensive H1 Hub update where we'll delve into all of our latest features and additions to the Data Hub, including our new MISO Capacity Forward pricing spread charts. Reach out to research@karbone.com for more information on the Karbone Data Hub and tailored subscription options available to you.

We hope to see you at RNG & SAF Capital Markets in Houston, Texas for an insightful panel discussion about Fuel Marketers & Retailers Perspectives on Renewable Natural Gas (RNG) featuring our Senior Broker Divya Chandorkar! The panel will explore challenges and share insights on pricing volatility, supply-demand dynamics and more within the RNG market. Feel free to reach out to Divya directly to arrange a meeting, or email brokerage@karbone.com for any general inquiries related to our brokerage services.

We are thrilled to invite you to Aurora Energy Research - North America and Karbone's joint Public Webinar “MISO’s Capacity Market Dynamics: Updates on PRA results, Accreditation Methodology, and Contract Prices” from 11:00 am CT / 12:00 pm ET on Wednesday, May 8th. Please click the link on the image below to register. Note: if you are unable to register, please create a Zoom account with your email and try again. This webinar will delve into the price trends within MISO's capacity market, analyzing the dynamics between the PRA auction and bilateral contracts, as well as pertinent trends shaping the market's trajectory such as: - The ramifications of delayed coal retirements on resource adequacy, PRA, and bilateral contracts - Modifications to MISO’s proposed DLOL methodology and its potential impact on renewable accreditation  - The latest trends in capacity market financial contracting and the newly created outage market And much more. We are looking forward to seeing you there!

#MISO has launched the 24/25 capacity auction. While we expect MISO to secure adequate resources to maintain grid reliability, there are some wild cards in the deck. Supply-side dynamics will dictate the results of this auction cycle, with intrazonal imports keeping the lights on. Sentiments within the bilateral market, particularly within the North/Central Zones, grew bearish leading up the auction opening. As more information was released, supply flooded the market and bids dropped. The transactional curve below is in #contango as market participants expect a shortfall. For more insights on this year's auction or future planning years, check out our latest MISO Update on the #KarboneDataHub. #Karbone #CapacityAuctions #MISO #PRA #Brokerage

Following its tough end of 2023, the California #LCFS credit market is beginning to rebound. As market participants ride through the bumpy market while awaiting multiple regulatory updates, many are wondering whether this rebound will continue or if oversupply will suppress prices once again. In our latest Data Hub update, Karbone breaks down different #fuel and #feedstock trends, and discusses the potential impacts of upcoming regulatory hearings. - The market’s #oversupply remained persistent after the credit bank increased a staggering 50% from Q3 ‘22 to Q3 ‘23.  - However, prices have begun to rebound in early 2024 from a low of $56 in January to a recent high of $68 in March.  - Use the link below to find out what replaced used cooking oil as the primary feedstock for #renewablediesel in Q3 (Hint: it may be even less appetizing), or to learn which fashion style shares the name of a historically low spread that is affecting credit #margins and prices. Karbone continues to monitor #CARB’s regulatory process for updated #CI benchmarks and proposed amendments, such as the proposed auto-acceleration mechanism, which CARB plans to discuss during a mid-April workshop. As always, please contact our Commodity Desks for brokerage and #hedging opportunities, or our research desk for deep analysis and #forecasts of LCFS and other renewable fuel market fundamentals and prices. #Karbone #RenewableFuels #MarketResearch #CommodityInsights

The #offshorewind industry has reached a critical milestone: the first utility-scale offshore wind farm is now complete and delivering power to the grid, despite recent industry-wide setbacks. With Ørsted's 132 MW South Fork Wind Farm near Long Island, US offshore wind cumulative nameplate capacity continues to strengthen. Even amid state-level and federal-level support for offshore wind, exemplified by the Biden administration’s national goal of 30 GW of offshore wind by 2030, the offshore wind industry continues to face financial struggles and logistical issues for development. However, there are signs of industry resurgence suggesting a promising future ahead, especially after South Fork’s success. As state Renewable Portfolio Standards (RPS) targets increase, offshore wind will be critical towards their achievement. The East Coast’s environmental conditions make it an optimal location for deploying offshore wind resources, as evidenced by the substantial amount of offshore wind projects awaiting approval in the PJM and ISO-NE interconnection queues. - PJM, having recently revamped its interconnection queue process, aims to efficiently evaluate these projects by prioritizing projects that are nearing completion. - Almost 29 GWs of offshore wind capacity is scheduled for review until the end of 2026, and with PJM’s ideal timeline of 26 months for the interconnection process, this capacity could start to come online as soon as 2026. Given that New Jersey, Maryland, and Virginia already established offshore wind carveouts in their state RPS’, the viability of offshore wind projects in the PJM queue is crucial, and their success holds promise for alleviating the strained supply and pricing dynamics within PJM. Karbone Research is actively tracking offshore wind and RPS progress within PJM and ISO-NE, and houses region-wide supply and demand fundamentals for compliance REC markets on the Karbone Data Hub. Contact research@karbone.com for more information!