Since renewable energy tax credits began trading in Pennsylvania in 2008, prices spiked before retreating into a long and stubborn decline.
Then, sometime last fall, solar credits started gaining in value, more than tripling within a few months' time.
"The solar credit market has turned the corner, as have other [renewable energy credit] markets," said Ed Johnstonbaugh, a renewable energy educator with Penn State Extension Westmoreland who manages credits for 165 sellers in Pennsylvania. The vast majority are solar owners.
Renewable energy credits are an economic incentive to develop more alternative generation. Each megawatt hour of power produced by a renewable energy resource qualifies for one renewable energy certificate. Utilities are mandated by the state to buy alternative energy, either directly from generators or through these credits.
Solar credits in Pennsylvania, which peaked at $350 in 2009 and tumbled to a floor of $10 in the middle of last year, reversed course rapidly in the past few months.
In November, when a broker said he had a buyer willing to pay $17.50 for solar credits, Mr. Johnstonbaugh unloaded all his 2013 credits.
"Then they came back and said they'll pay $20 for the 2014s," he said. "The price then bounced up to $37.50, and we're selling some this week at $50.
"It's been a long time coming."
Mandates for utilities escalate each year and include a special requirement for solar energy. During the current year, for example, the renewable energy requirement is 4.5 percent of total electric demand. The solar requirement is .08 percent. Next year, those mandates increase to 5 percent and .14 percent.
For years, bills have been introduced in the Pennsylvania Legislature to further increase the mandates. They've all failed, but another such bill is in committee.
Without a substantial rise in demand, it's unclear why renewable energy credit prices are spiking suddenly.
Michael Flett, president of the Jersey City, N.J.-based Flett Exchange which trades solar credits, said it's possible speculators or trading houses are getting interested in anticipation of demand.
"When we were buying for our utility clients, it seems like there were other players that were jumping in front and offering higher prices," he said. "We don't know who the buyers are."
For residential customers with a few panels on the roof, the credits aren't much of an economic incentive. "Some customers pay attention, but I think it acts only as an added bonus," said Adam Rossi, president of Adam Solar Resources in Bridgeville.
Mr. Rossi only mentions the credits after a customer is ready to commit.
"I rarely sell on [return on investment] anymore," he said. "I want customers who want solar because it is the right thing to do, and that seems to be the clientele we usually attract."
The bigger the installation, the more consequential the credits.
Dave Hommrich, who owns Smith-based Sunrise Energy, has close to 1 megawatt of installed capacity and generates about 1,200 credits a year. Last year, he would have been able to get $12,000 for his credits. Today, that would be closer to $60,000.
"We have an illiquid market -- not a lot traded and not a good way to know" what is a fair price at any moment, he said. "It sets the stage for some pretty dramatic spikes. And for once it might be in our favor."
Even for Sunrise, the credits aren't a financing mechanism but more of an "upside" for the business, Mr. Hommrich said.
"There's a lot of disagreement over fair value," said Nick Culver, a renewable energy credit market analyst with Bloomberg New Energy Finance.
The Pennsylvania solar credit market is a market of last resort, he said. While most other states prohibit out-of-state solar projects from generating credits within their borders, anyone in the regional grid can sell into the Pennsylvania solar market.
"The reason we had a price spike is [solar development] has slowed down very significantly and there's also been generally price increases in other [solar credit] markets," Mr. Culver said.
That might have provoked some trading houses to predict that Pennsylvania prices would climb as well and jump on the opportunity to buy toward the bottom of the incline curve.
Solar credits in Pennsylvania are sold separately from other renewable energy certificates.
"It's been sort of jumpy," said Katie Bellezza, marketing manager with Lawrenceville-based EverPower Wind Holdings, which has four wind farms in Pennsylvania.
Credits from wind jumped last year from $3 to $14, she said. Then they fell to $8 and now are hovering around $18.
The volatility is unusual for a market that has been steadily falling virtually since it began.
For EverPower, which has about 300 megawatts of wind operating in Pennsylvania, the difference between a $3 credit and an $18 credit is a payday of $2 million vs. $12 million a year.
"If we had long-term stable high [credit] prices, we would be able to develop more farms," Ms. Bellezza said, especially since the federal production tax credit expired at the end of 2013.
According to Mr. Culver's calculation, wind credit demand isn't likely to outpace supply until 2018 or 2019, or maybe later.
For solar, "It's pretty straight forward." If development continues at the current depressed rate, the tipping point will be in 2017, he said.
Anya Litvak: email@example.com or 412-263-1455.