SRECs: Solar Renewable Energy Credits (Video)
As we describe in the video, an SREC is a Solar Renewable Energy Certificate (or credit). Your solar system produces a certain number of these credits every year, depending on its size and other factors. Utilities can then purchase the SRECs you produce to offset their non-renewable energy production and SREC markets exist in states where utilities are required to do that. In these states, SRECs are valued at a certain amount of money and homeowers can sell their SRECs on the open market or, more commonly, get a broker like SRECTrade to do that for them. In this way, solar can not only save money for homeowners in SREC states, it can actually generate income for them.
Can I redeem SRECs anywhere?
SRECs are currently only available in states where a Renewable Portfolio Standard (RPS) exists with a specification for solar power. In other words, it only exists in states which have made solar energy an option to meet renewable energy requirements. 30 US states have a Renewable Portfolio Standard, but not all of those have a provision for solar power (see a map of RPS states here).
Which States Offer SRECs?
States in which the SRECs are actively being traded now include Maryland, Massachusetts, Pennsylvania and New Jersey. Other states that have introduced SRECs include Ohio, North Carolina, Delaware, and Washington D.C. For a full up-to-date status on the SREC market in individual areas, please check this comprehensive listing of SREC markets by state at SRECTrade.
How much is an SREC worth?
The value of an SREC is determined by normal supply and demand forces, which ultimately depend on the number of solar installations qualified to produce SRECs, and the number of qualified system that actually sell those SRECs. SREC demand is also determined by the state’s RPS solar requirement, i.e. what percentage of electricity in the state must be produced by a renewable energy source.
Another important way SRECs are valuable.
If you’re leasing a solar system, your leasing provider may be the one to keep and sell the SRECs, instead of you. Many homeowners actually prefer this, because it eliminates the hassle of doing it themselves as well as the initial wait for payments. Instead, the value of those SRECs are then factored into the lifetime cost of the lease, bringing the homeowner’s monthly payments down even further. Many homeowners value this over getting direct SREC payments because the value of SRECs can change over time, whereas the SREC-related savings built into the lease are fixed. In short, in states that offer SRECs, homeowners can generally expect to get a great price on a solar lease.
How does a residential solar system get SREC certified?
In order to produce SRECs, a home solar system must be certified by state regulatory agencies, which usually means public service commissions or public utility commissions. Once that’s done, the system must be registered with a trading platform (your solar installer can help you with this). SRECs are then issues based on an estimate table or actual meter readings depending on state regulations. One SREC is created for every MWh of electricity.
Transcript of the Above Video on SRECs:
Hi, I’m Dave Llorens, CEO and founder of One Block Off the Grid.
Think of renewable energy credits (“also known as” SRECs, TRECs, RECS) like a voucher that proves the energy from your solar panels is renewable energy. Every time your solar system produces 1 mWh of juice, one of these vouchers pops out of it. Some utilities want to purchase these vouchers from you as a way of meeting the renewable standards that have been imposed on them. This, of course, begs the question, how much?
Unfortunately, like most things in solar, it’s more complicated than I’d like it to be. Currently, it depends on your state, your utility, and the how strict these renewable standards are. In states that have SREC programs, you can trade them on the open market and they behave similar to a stock: supply and demand determine the price of your SREC, meaning their value can change over time.
In some places, SRECs are worth a ton, like New Jersey. There, the utilities get slapped with steep fines if they don’t produce enough renewable energy. About $700 for the same amount of energy one SREC is worth. So naturally, they’d pay anything less than $700 all day long.
To put it in perspective, here a homeowner’s average sized solar system might produce about eight of these SRECs a year, and at the time this video was made, those eight SRECs would be worth about $5,500 on the market. Huge.
Their values vary in other states, and in many places you cannot yet trade or monetize them at all. In other places, state or local rebate programs will simply provide you with a higher rebate for the RECs, instead of purchasing them individually.
So if you’re in a place where they can be traded, how do you turn these things into money?
1. Sell them to a middle man. These guys lump together lots of SRECs like yours and sell them, usually to utilities. The benefit here is that they take on some of the risk for estimating future value of the SRECs (as well as paying you for them up front), as well as handle all the administration work. Of course, they will take a cut but that can be worth your time and peace of mind. Usually, if this is an option your solar installer will already have a relationship with one of these companies, and can hook you up with them.
2. Register your SRECs and trade them on the open market. Right now this is available in very limited places, and requires being a very savvy consumer.
Think of these two options as the difference between mutual funds and trading individual stocks. One’s safer and easier with a more consistent but limited benefit.
In summary, the bad news is, SRECs are ludicrously complicated. The good news is that they can be very lucrative to homeowners in some places and this number of places will grow over time. Even if you buy a system today, one day a year or two down the road, you may find your SRECs now have liquid value, and that your roof is now sputtering out cash.
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