What is an SREC? Solar renewable energy credits explained

Updated

As climate change continues to pummel the US, we’re more aware than ever of the need to switch to renewable resources like solar energy. Many state governments have created excellent solar incentive programs to promote the switch to clean energy. Among these solar incentives are solar renewable energy certificates, or SRECs.

Although SRECs can be one of the most difficult solar incentives to understand, they have the potential to put a lot of extra cash into your pockets.

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    What is an SREC

    What is an SREC?

    Solar Renewable Energy Credits, also referred to as SRECs are ‘certificates’ that show how much electricity a solar system produces. SRECs represent the positive environmental value of generating solar energy. 

    One SREC is earned for every megawatt-hour (MWh), or 1,000 kilowatt-hours (kWh) of solar electricity a solar panel system generates. The price of SRECs varies between different states, and can reach prices of over $400! 

    SRECs exist because of state regulations known as Renewable Portfolio Standards (RPS). An RPS requires electricity suppliers to generate a portion of their electrical power from a renewable energy resource. Some RPSs have a solar carve-out, which dictate the amount of energy that must be procured from solar. Solar-carve outs help drive SREC markets. 

    A total of 38 states (and Washington DC) have an RPS in place, but only 6 of those states have SREC programs. The following states have SREC programs:

    • New Jersey*
    • Massachusetts*
    • Pennsylvania
    • Maryland
    • Washington D.C
    • Ohio

    *States that still have an SREC market, but are no longer accepting new applications for the program.

    Who buys SRECS?

    Utility companies purchase SRECs in order to meet their RPS requirements. SRECs are sold independently from electricity. That means homeowners not only earn money from selling SRECs, they also receive net metering credits for their solar energy production. 

    So, you still use the energy your solar panels produce and enjoy all the benefits of solar, all while getting paid extra for it. 

    How much can you earn with SRECs based on your location? 

    How much are SRECs worth?

    The value of an SREC, like a stock, is tradeable, and it fluctuates according to the supply and demand of SRECs in a state’s market. So what exactly are SRECs worth right now? SRECs are selling for anywhere between $5 and almost $500, depending on the state. 

    The following table outlines how much SRECs are selling for throughout the U.S:

    SREC prices by state
    State SREC price
    New Jersey*

    $229

    Massachusetts* $282
    Maryland $80
    Ohio $10.25
    Pennsylvania $20
    Washington DC $435

    *States that still have an SREC market, but are no longer accepting new applications for the program.

    **Price per SREC may vary depending on your utility provider. 

    The maximum price an SREC sells for is determined by a state’s solar Alternative Compliance Payment (ACP). An ACP is a fine utility companies must pay per MWh if they don’t collect enough SRECs. 

    In order to save money, utilities buy SRECs to avoid paying the higher value ACP. In this way, the ACP value serves as the cap of SREC prices.

    SREC prices vary between locations depending on different supply and demand market conditions including:

    • Lower solar power generation in the winter
    • Higher consumption of electricity
    • Legislative changes impacting the solar market
    • The number of solar systems installed in a state

    How do you sell SRECs?

    There are a few different ways you can sell SRECs, but the most common way is to partner with an SREC aggregator. Typically, your solar installer will register your solar panel system so that you can start generating SRECs. 

    You can try to sell SRECs on your own to utilities, however, utilities rarely purchase SRECs from individual homeowners, as they want to purchase from the least amount of sellers as possible.

    This is where SREC aggregators come in. When you enter an agreement with an SREC aggregator or broker, such as SRECTrade.com, they will sell your SRECs directly to utilities in exchange for a small fee. 

    In some cases, your solar installer may offer to buy all of the SRECs your system is predicted to produce over its lifetime when you install the system. This can greatly decrease the upfront costs of installing a solar energy system. However, you will have to sell the SRECs for their current price, meaning you can’t take advantage of any SREC market price increases in the future. 

    The exact options available for selling SRECs can vary from state to state. Ask your local solar company about the best way to sell SRECs in your area. 

    SRECs increase your return on investment

    States with healthy SREC markets will likely see a shorter return on investment for solar panels. For example, the payback period for solar projects in Washington D.C is just under 3 years. That means D.C. residents can enjoy free solar power for over 20 years! 

    The short payback period is largely attributed to the high value of SRECs. Even in places where SRECs sell for less, like Pennsylvania, the payback period of the solar panel system is much lower than in states without SRECs. 

    There are also many other great solar incentive programs throughout the country, such as net metering and the federal tax credit, which make going solar a smart investment. 

    To find out about all of the solar incentives available to you right now in your area, try out our solar calculator

    Check how much solar panels cost and how much they can save you

    Key takeaways

    • SRECs represent the environmental benefit of generating 1 MWh of electricity with solar panels.
    • SRECs are purchased by utility companies so they can meet their renewable energy generation requirements that are outlined in their respective state’s renewable portfolio standard.
    • 6 states have SREC programs: New Jersey, Massachusetts, Pennsylvania, Maryland Washington D.C, and Ohio.
    • To sell your SRECs, you can partner with an SREC aggregator or sell them yourself - but most people choose to go with an aggregator.
    • The value of SRECs varies from state to state and has the potential to greatly reduce your solar payback period.
     

     - Author of Solar Reviews

    Catherine Lane

    SolarReviews Blog Author

    Catherine is a researcher and content specialist at SolarReviews. She has strong interests in issues related to climate and sustainability which led her to pursue a degree in environmental science at Ramapo College of New Jersey.

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