Karbone

Data center power demand has surged over the past two years and is set to leg much higher, further tightening power availability in markets where generators are already racing to catch up with a reversion to growth in mainstream electricity demand. Capacity markets for power are catching new attention as a result, becoming a driving factor in prompting significant new investment flows. The Karbone Data Hub underlines the wild ride in store for power market participants - including data centers - in the coming years. A new commitment to $30 billion of capital investment in data centers and accompanying energy could, with debt, amount to a $100 billion infrastructure investment from Microsoft, BlackRock and GIP (which is soon to be part of BlackRock pending an announced acquisition). The scale of these additions on both the supply and demand side of the power markets has the potential to create significant new price dynamics. Capacity prices have been unevenly volatile to the upside in recent months, but local fundamentals still matter more. The California monthly system RA forward curves tracked sharply lower for January 2025 in the most recent Karbone Hub update, while MISO capacity zone 7 forward curves for 2026-2027 delivery shot higher on the week. https://karbone-hub.com/

Join Karbone's Commodities and Research team members at #REM2024 in Denver! We look forward to discussing the latest trends in the #cleanenergy market, our environmental market forecasts, and our views on procurement / sales strategies into Q4 and beyond. Contact [email protected] or [email protected] to learn more or set up a meeting.

As interconnection queues in the United States groan with unrealized but bankable renewable energy projects, the industry’s landmark gathering at RE 2024 in Anaheim, California from September 9-12 is zeroing in on the demand side of the market equation. The renewable energy sector is at an inflection point, where cost declines and performance improvements for underlying technology are again accelerating just as dealmaking, driven by hefty private capital raises, sustained tax policy support and falling interest rate expectations, is picking up again. Representatives from Karbone’s Research and REC Desk teams will be on the ground throughout RE , helping clients and counterparties navigate emergent volatility across power, environmental commodities and energy transition assets. For more information, or to schedule meetings with our team, contact us at [email protected] or [email protected].

Karbone’s Commodities and Research teams will be attending RE in Anaheim, CA this September. Come chat with us about the latest market trends and how we can provide you with the right tools to make informed decisions on your journey toward the energy transition! Ask us about: • Our commodity services and long-term hedging monetization strategies for #Electricity, #Capacity, #RECs, #SRECs, #Carbon, and #RenewableFuel products • Our expertise in modeling, analyzing, and supporting environmental commodity, #Power, and capacity pricing projections via bespoke analysis and the Karbone Data Hub To meet with Karbone Research email [email protected] To meet with Karbone Commodities email [email protected] We’re looking forward to catching up with you all in person!

On August 14, Dominion Energy secured an additional #offshorewind lease adjacent to its Coastal Virginia Offshore Wind (CVOW) project, which is currently under construction. Pending successful federal review and permitting for this new lease, Dominion remains on track to meet its 5.2 GW offshore wind capacity target by 2035, as mandated by the 2020 Virginia Clean Economy Act (VCEA). Offshore wind is a critical component of Virginia’s decarbonization strategy. Per the VCEA, Virginia aims to generate 30% of its electricity from renewable sources by 2030, and transition to 100% carbon-free electricity by 2050. Achieving the 5.2 GW offshore wind target by 2035 could enable the state to meet nearly 40% of its Renewable Portfolio Standards (RPS) demand from offshore wind alone by 2035. Karbone’s base case supply scenario projects that Virginia may achieve its 30% renewable electricity target closer to 2035. This projection depends on several key factors, including the successful implementation of PJM interconnection queue reforms, the rate at which offshore wind capacity is developed in the state, and other commercial market variables influencing supply-demand dynamics. Karbone anticipates the proliferation of offshore wind to exert downward pressure on Virginia REC prices. Our merchant curves, which incorporate these factors and the evolving supply-demand dynamics, will soon be available on the Karbone Data Hub. For further details, please contact [email protected]. https://karbone-hub.com/

2024 D3 RINs have been hovering above 6-month pricing highs of 339 cents, hitting 343 cents on August 1st and holding steady at an average of 339 cents throughout last week. Karbone’s fuels trading desk has been closely monitoring this trend, noting the market's fundamental undersupply in terms of adequate CNG dispensing capacity and the lack of a market ceiling amid the current absence of CWC waivers. This tightness is also impacting 2025 D3 RIN pricing. Looking ahead, the market seems poised for increased volatility, highly likely to be influenced by the upcoming election. The RIN market stands out from other environmental commodity markets due to the direct impact that the Executive Branch has on the EPA and subsequently the Renewable Fuel Standard (RFS). Each presidential administration has the authority to appoint the head of the EPA and approve market-impacting policies, such as the implementation of Small Refinery Exemptions (SREs). Moreover, the DC Circuit Court of Appeals has recently overturned the EPA's 2022 decision denying Small Refinery Exemptions (SREs) for the years 2016-2021. This ruling mandates the EPA to reassess its previous decision, potentially leading to the reversal of 105 SRE rejections. This development, along with the recent reversal of the Chevron decision and the upcoming election, may contribute to volatility and a pricing correction for D3 pricing in the near term. Stay tuned for more updates as we navigate potential volatility through the rest of the year! https://karbone-hub.com/ #D3 #RINs #EPA #RFS #CWC

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 [email protected]. #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 [email protected] about our Merchant REC pricing forecasts! #renewableenergy #marketresearch #supplychain #commodities