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Your Guide To Solar Renewable Energy Credits (SRECs)

Solar for Homeowners | 3 min read
Your Guide To SRECs

One of the lesser-known benefits of owning a solar energy system is Solar Renewable Energy Credits (SRECs). SRECs may not be a household name, but they can drastically improve the financial returns of owning a solar system, which means putting more money in your pocket. They are a great addition to the electric savings and tax benefits you will gain with solar power.

You likely have many questions like, “what are SRECs,” “how do SRECs work,” and “how much are SRECs worth.” This blog is here to help answer those questions and more.

 

What Are SRECs?

Solar Renewable Energy Certificates (SRECs) come from a program called the Renewable Portfolio Standard (RPS). RPS, which is enacted by 36 states in some form or another, is in place to develop the green portfolios of utility companies. This is how states meet their renewable energy production goals - like Maryland’s 25% by 2020 and New Jersey’s 50% by 2030. SRECs are the carve-out of the RPS that forces a percentage of the green energy production required to be fulfilled by solar energy.

The owner of a solar system can receive 1 SREC for every 1,000 kilowatt hours (kWh) or 1 megawatt hour (MWh) of solar electricity produced by their system. That certificate can then be registered and sold - generating additional revenue for the system owner.

Note: SRECs are only available for homeowners and businesses that own a solar system. Therefore, you will not be able to receive them if your system is leased or under a Power Purchase Agreement (PPA).

National Conference of State Legislatures RPS Map Check out this map from the National Conference of State Legislatures to see the states that have enacted Renewable Portfolio Standards regulations.

 

Where Are SRECs Available?

Although the RPS legislation is enforced in 36 states, not all of them have a carve-out specifically for solar energy. Currently, there are five states plus Washington D.C. that have an SREC market. The SREC requirements in each of these states vary and as a result, the value of the credits vary from state to state.

One specific regulation that varies by state is the location requirement of the solar system. A few states require that SRECs come from solar systems within the borders of their state - New Jersey is one of those. In contrast, other states accept SRECs purchased from solar systems that are located outside of their state borders. This could potentially be a great benefit for solar owners in states without solar carve-outs, but on the flip-side, these open border policies will drive down the price of SRECs.

Here’s a list of the states that currently have an SREC market:

  • Maryland
  • Massachusetts (as of 2018, MA is no longer accepting new solar systems into their market)
  • New Jersey
  • Pennsylvania (The PA SREC border was closed to all out-of-state systems as of Oct 31,2017)
  • Ohio
  • Washington, D.C. (closed to out-of-state systems)
Map of SREC Market by State SRECTrade's map showing which states have SREC markets. https://www.srectrade.com/srec_markets/introduction

 

How Will SRECs Impact My Solar Investment?

The value of SRECs will vary based on the supply (number of qualified producers) and the demand (the number of credits the utility company needs to purchase). Another factor that will impact the price of SRECs is the state’s Alternative Compliance Payment (ACP). This is the fine utility companies must pay if they don’t purchase enough SRECs. If the fine amount is less than the cost of an SREC, utility companies may choose to pay the fine instead of purchasing SRECs. As a result, demand and prices will drop.

For your reference, a 10 kW solar system (average residential system) will generate roughly 12 SRECs each year. If you live in New Jersey where prices are high, that could be an extra $2,700 in your pocket. In other states where prices are lower, it would likely pay you between $300 and $1000. 

As of September 2020, the price of SRECs is as follows in the chart below. Visit SRECtrade for the most up-to-date prices. 

State SREC Price
Maryland $79
Massachusetts $280
New Jersey $229
Pennsylvania $22.50
Ohio $9.50
Washington D.C. $430

Selling SRECs is a little like participating in the stock market. Prices fluctuate over time with demand and policy changes. This is why it can be beneficial to work with a solar company that manages your SREC portfolio for you. Here at Paradise Energy, we will handle the registration and selling for our customers. All you’ll need to do is sit back and wait for the check to arrive, because making money off of solar should be easy!

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