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CSAPR 2016 seasonal NOx prices begin to deflate after recent rally

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CSAPR 2016 seasonal NOx prices begin to deflate after recent rally

Afterrallying in recent weeks toward $400, Cross-State Air Pollution Rule seasonalNOx allowance price indications for 2016 eased during the week ended Sept. 22.

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Accordingto the latest broker data, seasonal NOx allowance indications ran in abid-and-offer range of $275 to $360, dropping from a level of $325 to $400 aweek earlier.

Duringthe week ended Sept. 22, seasonal NOx prices for 2017 were pegged in abid-and-offer spread of $600 to $1,700, easing on the bid end from $900 theweek prior.

SeasonalNOx prices for 2016 had been on the upswing due to increased buying interestbut really took off after the U.S. EPA on Sept. 7 finalized an update toCSAPR's seasonal NOx program. Under the update, beginning in May 2017, seasonalNOx allocations will be cut by more than 40%.

CSAPRannual 2016 NOx allowances were marked in a bid-and-ask range of $5 to $10,easing from $15 on the offer side the week before. CSAPR SO2 Group 1 allowancesfor 2016 were marked in a bid-and-offer spread of 50 cents to $3, while CSAPRSO2 Group 2 allowances were seen again between $1 and $6 headed into the end ofSeptember.

Maryland solar REC priceshold firm heading into end of September

Marylandsolar RECsfor calendar year 2016 posted an index at $25.00/MWh, flat on the week amid acurrent oversupply situation.

"TheSREC market is clearly oversupplied and the market is trading in line withexpectations that this will continue well into the future," according to arecent update from SRECTrade.

"ThroughAugust 2016 there were 157,377 SRECs left over from compliance years 2014 and2015. Thus far in 2016 (through July 2016 generation), 344,792 CY2016 SRECshave also been issued. Assuming that the observed average monthly build rate of21.4 MW/month continues through the year, we project that 293,183 additionalSRECs will be generated in compliance year 2016. Taking together the existinginventory of available prior-period SRECs together with the projectedproduction for the remainder of 2016, we foresee an oversupply of 363,600SRECs, or approximately 84% over the total 2016 RPS requirement, by the end ofthe year," SRECTrade added.

Assumingthat the build rate in Maryland will drop 50% to 75% from the current averageof 21.4 MW per month, the state's solar market is likely to be in a persistentstate of oversupply within the range of approximately 50% to 115% through 2018under current or vetoed renewable portfolio standard requirements.

Atthe end of May, Republican Gov. Larry Hogan vetoed House Bill 1106/Senate Bill 921, the Clean EnergyJobs Act, which would have required that 25% of electricity sold in Maryland beproduced by renewable energy resources by 2020. Under the currentstatute, 20% of electricity sold in Maryland by all providers is to be derivedfrom renewable resources by 2022, and at least 2% from solar energy resourcesby 2020.

SinceHogan vetoed the bill after the 2016 legislative session ended, the MarylandGeneral Assembly will consider the bill immediately at the next regular orspecial session, which would be in early 2017. In order to override thegovernor's veto, a three-fifths vote from both chambers would be required.

Elsewhere,New Jersey solar REC prices advanced sharply in value during the week underreview. New Jersey energy year 2016 SRECs posted an average at $270.42/MWh,rising more than $13, while energy year 2017 SRECs notched an average at$260.83/MWh, also climbing more than $13 on the week.

Atthe class I REC markets in New Jersey, prices continued to falter. Vintage2016s were pegged at an average of $10.21/MWh during the week under review,easing 85 cents week over week. New Jersey vintage 2017 class I RECs saw anindex at $10.60/MWh, retreating 82 cents from the week prior.

SNL Energy is an offering ofS&P Global Market Intelligence. Market prices and included industry dataare current as of the time of publication and are subject to change. For moredetailed market data, including power,naturalgas, and coalindex prices, as well as forwardsand futures,visit our Commodities Pages.