Your Quick Guide To Solar Renewable Energy Credits (SRECs)

If you’re thinking about putting solar panels on your home, you might have heard about SRECs – Solar Renewable Energy Credits, sometimes called Solar Renewable Energy Certificates – and wonder how you could cash in on solar.

Only seven states have viable SREC (pronounced Ess-reck) markets, so they’re available to a limited number of homeowners. Still, it’s helpful to understand what SRECs are and how they work.

Let’s explore some key facts and information that homeowners should know about SRECs.

What Are SRECs?

According to the Environmental Protection Agency (EPA), an SREC “represents the property rights to the environmental, social and other nonpower attributes of renewable electricity generation. Solar RECs (SRECs) are created for each megawatt-hour of electricity generated from solar energy systems.”

An SREC represents one megawatt-hour (MWh) of power generated by a solar energy system. It can also provide data about energy production and distribution. SRECs differ from renewable energy credits (RECs), which can apply to any form of renewable energy generation, including geothermal or wind.

In short, an SREC is recognition for generating solar power. So, would it make sense to pay for that recognition?

How Do SRECs Work?

Buying and selling SRECs often requires a third party – sometimes known as an SREC aggregator – like SRECtrade.com. A homeowner selling an SREC would first sell it to the aggregator, who would then trade it among other entities like utility companies.

In some cases, utility companies can purchase SRECs directly from a homeowner or other owner of a renewable energy source. Utility companies can save time by buying a large number from an aggregator, though.

Why Do Utility Companies Pay For SRECs?

SRECs can be important for utility companies in states with a renewable portfolio standard (RPS), which is also known as a renewable electricity standard (RES). The U.S. Energy Information Administration defines these as “policies designed to increase the use of renewable energy sources for electricity generation.”

RPS or RES requires that renewable sources are responsible for a certain amount of electricity that utility companies provide customers. If utility companies can’t meet the minimum requirement with their own equipment, they might be fined or required to make a solar alternative compliance payment (SACP) if they fall short of the RPS requirements.

Utility companies can avoid fines by paying a source of renewable power generation for SRECs. Residential solar projects are a legitimate source of solar electricity that help utility companies meet RPS requirements.

How Many States Have RPS Programs?

By the beginning of 2022, 31 states and the District of Columbia had RPS programs. Seventeen of those states have a “carve-out” that calls specifically for solar energy sources. Drilling even further down, eight of those 17 states and the District of Columbia have solar carve-outs and viable SREC markets. The eight states are:

●      Delaware

●      Illinois

●      Maryland

●      Massachusetts

●      New Jersey

●      Ohio

●      Pennsylvania

●      Virginia

As of 2022, Massachusetts and New Jersey stopped accepting new applications for their SREC programs.

There are also seven states with nonbinding renewable energy portfolio goals. Finally, 13 states have neither RPS programs nor goals, including Louisiana, Mississippi and Florida, a leading state for solar energy.

What’s The Value Of An SREC?

SREC prices fluctuate but are generally tied to the price of SACPs and supply and demand. Current values range from $3.50 for an SREC in Ohio to $370 in Washington, D.C. 

In Illinois, some solar installers are paying customers upfront for the value of the SRECs that their system is expected to produce in the next 15 years. This can significantly reduce the upfront costs incurred by solar homeowners. But the price paid for those SRECs is the current rate – future prices might rise. It could be worth hanging onto the SRECs in hopes that their value increases in the future.

How Do Homeowners Sell SRECs?

If you want to sell SRECs from your home photovoltaic (PV) system, you’ll need to live in an area with a viable SREC market. You’ll also need to own your solar panels, because selling SRECs isn’t an option for people with leased solar panels or power purchase agreements (PPAs). In addition, you’ll need to sell to a utility company that operates in your area.

The process also varies by SREC market and solar installer. Some installers, including Palmetto, will help customers sign up with SRECTrade. In other cases, you might need to register your system with a utility or electricity transmission company.

You might also need to decide whether to sell your SRECs individually on the open market, sell all your system’s rights for an upfront payment or make a contract to sell them over a period of time.

FAQs: Understanding The Fine Points Of SRECs

Here are a few questions that homeowners often ask about SRECs.

How do I sell SRECs?

The process for selling your SRECs will vary by market and electricity supplier. If you live in a state or region with an SREC market, be sure to seek guidance from your solar company.

What are the disadvantages of selling SRECs?

If you sell your SRECs, you can’t make any solar power use claims about your home. You also can’t make claims about reducing your carbon footprint. This is mainly because buying SRECs allow utility companies to take credit for solar power generated at your address. This may impact what you’re allowed to say in a listing if you are looking to sell your home. Check with your real estate agent and read the fine print of an SREC deal before making a decision.

How much can I make selling SRECs?

SRECs have no set market price. For example, New Mexico’s largest electricity provider, PNM, offers only marginal payment for SRECs and also requires homeowners to pay a $150 application fee to participate, offsetting any minimal payments further. At the opposite end of the spectrum, Washington, D.C. solar system owners can sell SRECs for $370. Amounts will fluctuate in every market, as will the money-making potential of your solar system.

How many SRECs can my home solar installation generate?

It depends on the size of your solar system. A typical SREC according to SRECTrade equals about 1 megawatt of solar electricity. For a sample home with a 6-kW solar panel system, you could expect to produce approximately 7,200 kilowatt-hours (kWh) of power each year (location dependent). That’s equal to 7.2 MWh, or 7.2 SRECs.

Is going solar still worth it if I can’t sell SRECs?

With solar incentives such as tax credits, rebates and net metering, installing a PV system is still a strong investment without selling SRECs. Solar payback periods – the amount of time it takes for solar panels to pay for themselves – range from 8 to 15 years on average, with today’s panels typically having a lifespan of 25 or more years.

The Bottom Line: Selling SRECs Isn’t For Every Solar Homeowner

Selling SRECs is only an option for homeowners in areas with SREC trading markets. Even if you live somewhere without an SREC market or with weak values for SRECs, there are still powerful financial incentives that make buying solar panels more affordable. You’ll also reduce your carbon footprint while saving money on electricity.

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Rocket Solar does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.