SRECs, An Explainer
A Solar Renewable Energy Credit (SREC) represents the “green” value of your electricity. SREC is s tradable and intangible certificate that represents proof of the generation of 1,000 kWh (1MWh) of solar power. These SREC certificates are valuable because many utilities must buy a certain number of them each year to meet sustainability requirements set by the renewable portfolio standard (RPS) in each state.
Why do SRECs exist?
Certain states have passed legislation called renewable portfolio standards (RPS). These laws require utilities and/or other energy suppliers to source a certain percentage of the electricity they generate or sell from renewable sources. If the standard is not met, they are subject to fines called Alternative Compliance Payments (ACPs). RPS laws generally apply to many different types of renewable energy including wind and solar. As part of the RPS, the legislation can implement a solar carve out requiring a certain amount of this renewable power to come from solar. Utilities can secure this solar power by building their own solar projects or by purchasing the renewable energy credit on an open SREC market. The utilities can use these purchased credits to fulfill the RPS solar carve out requirements. Once you have installed solar, you can sell the SRECs you generate into this market.
How much are SRECs worth?
It depends on what state you are in, but here is list of what the SREC currently is worth:
- Washington DC: $440
- Massachusetts: $315
- New Jersey: $225
- Maryland: $77
- Pennsylvania: $40
- Ohio: $7.50
The price of these SRECs is determined two factors:
- Price of the Alternative Compliance Payment (ACP)
- Supply of RECs on the market.
The ACP is the penalty utilities and/or suppliers would pay for not meeting the RPS. These companies buy RECs on a market, similar to stocks. The price of a REC is determined by supply and demand. The more RECs available on the market, the lower their cost.
Additionally, the ACP sets a price ceiling. The price of a REC won’t go higher than the ACP because then the utility would find it less expensive to pay the ACP.
My system will produce how many SRECs?
1,000 kWh of electricity = 1 SREC
One can estimate the number of SRECs your system will produce by multiplying the size of the system by 1.2. For example, a 5-kilowatt system will produce approximately 6 SRECs each year.
How do I sell my SRECs?
- Register your system with a solar broker or on your own via your state.
- Choose how you want to sell your SRECs
Once you’re registered, you can sell your SRECs. You have three options:
- Sell the rights to all of your system’s SRECs for an upfront payment.
- Sell your SRECs via a contract for a set period of time, usually three, five, or ten years.
- Sell your SRECs on the spot market as you produce them.
SRECs are an excellent incentive to start installing solar today. Contact us to learn more.