An SREC (Solar Renewable Energy Certificate) is minted for every MWh (1,000 kWhs) generated from a solar project. An SREC represents the environmental benefit of solar and is completely separate from electric savings and other benefits of solar. The value of an SREC varies significantly by state and is based on the demand for SRECs within any given state. States with requirements for SRECs include Pennsylvania, Ohio, Maryland, Delaware, and New Jersey.
The requirement for SRECs is based on state law, and typically increases over time. Electricity suppliers that do not meet the requirement are fined at the current SACP (solar alternative compliance payment). To avoid the fine, electricity suppliers buy SRECs, which provides the demand.
States also vary in requirements of solar project location. Some states – including New Jersey – require that SRECs used in compliance of their individual state laws be produced by solar projects within their state. On the other hand, some states accept SRECs produced anywhere in the PJM area. This has been the cause for lower SREC prices in PA, MD, and DE.
