Solar renewable energy credits, or solar renewable energy certificates, known as SRECs, are tradable energy commodities that represent the environmental benefit of producing one megawatt-hour of electricity using renewable solar technology.
In the eight SREC states, the Renewable Portfolio Standard requires electricity suppliers to secure a portion of their electricity from solar generators. An SREC can be created for every megawatt-hour of solar electricity created.
An SREC is sold separately from the electricity and represents the “solar” part of the electricity produced. The market- supply and demand- determines the SREC value.
The supply piece is the number of solar installations producing SRECs and trading them. The demand is determined by the state’s Renewable Portfolio Standard requirements and the Solar Alternative Compliance Penalty each state sets. A renewable portfolio standard requires energy suppliers in certain states produce a portion of their energy using renewables. To meet the requirements the company can develop its own renewable energy facility, or it can purchase renewable energy certificates from companies that own renewable facilities. Some legislation requires that some of the energy must be solar. Because developing new facilities can be expensive, many utilities choose to buy renewable energy certificates, or specifically for solar, solar renewable energy certificates from homeowners and businesses.
Each state’s SREC program is unique and the value of SRECs varies due to regulations.
Future value of SRECs is hard to determine since they are market commodities.
Solar owners can sell SRECs by working with companies like SRECTrade, which created a public marketplace to connect sellers directly to suppliers, or with companies like Sol Systems, which is an aggregator and financier for SRECs.
To be eligible, once a solar system is installed, the system must be certified by the states in which is wants to sell SRECs and then must create an account with the tracking platform used by the state.
Once registered the tracking platform issues SRECs each month based on your systems generation. In some states, estimated generation is used for systems under 10kW, while other systems require submission of generation monthly. One SREC is created for every 1000kWh of electricity.
Some states will certify solar electric systems from out-of-state and allow the SRECs from those facilities to count towards the RPS.