SOLAR RENEWABLE ENERGY CREDITS

by Jenny Kim | Last Updated: November 3, 2021
 

Solar Renewable Energy Credits, or SRECs, can be the most confusing part of the going solar. Nevertheless they are vitally important to understand because they will be worth a significant amount of money over the life of your system.

How you handle your SRECs depends on your individual financial needs and risk tolerance, so everyone approaches SRECs differently.

What is an SREC?

An SREC represents the “green” value of your electricity.SRECs are separate from the physical electricity that your solar panels produce. Think of them like a “voucher” that proves that the electricity from your solar panels is renewable.

You get one SREC for every 1,000 kWh of electricity produced by a solar system.

These SREC “vouchers” are valuable because many utilities are required to purchase a certain number of them each year in order to meet sustainability requirements.

This video does a good job of further explaining how SRECs work.

Why do we have SRECs?

Many states have developed Renewable Energy Portfolio Standards (RPS). These laws require utilities to get a certain portion of their electricity from renewable energy. Rather than meeting this requirement by building their own solar projects, utilities can buy solar renewable energy credits (SRECs) on an open SREC market. The utilities can use these purchased credits to fulfill these requirements. Once you’ve installed solar, you can sell the SRECs you generate into this market.

How much are SRECs worth?

Because SRECs are bought and sold on an open market, there are a number of factors that influence their price. The most important thing to remember is that SREC prices are determined by supply and demand. The more demand for SRECs there is from utilities, the higher the price. On the flip side, the more SRECs that are supplied to the market from solar projects, the lower the price.It’s important to remember that the SREC market can change at any time and the price changes depending on the supply of SRECs. SRECs are high now, but you can’t be sure they will stay that way. Think of the SREC market like the stock market—it can change.

How many SRECs will my system produce?

Once it has been certified and registered, your system will produce one SREC every time it produces a megawatt-hour (1,000 kWh) of electricity. As a rule of thumb, you can estimate the number of SRECs a system will produce by multiplying the size of the system by 1.2. For example, a 5-kilowatt system will produce approximately 6 SRECs each year.

How do I sell my SRECs?

Once your system is complete, your installer should register it with the Public Service Commission. If they don’t register it for you, ask an SREC company or register it yourself. Once the approval has been given, you will receive an email and a hard copy of your approval in the mail.

Your installer can then help you use the certification number you receive to register your system on the Generation Attribute Tracking System (“GATS”) administered by PJM. PJM is a regional transmission organization that manages the electric grid for 13 states and the District of Columbia. Once you enter the website, you need to register your system with the certification number that you have from your utility commission and submit it to the GATS administrator. GATS should issue an approval in five to seven business days and your system will begin to generate credits.

Once you’re registered, you can sell your SRECs. The are three options for doing this. You can:

  1. Sell the rights to all of your system’s SRECs upfront for a cash payment.
  2. Sell your SRECs via a contract for a set period of time, usually three, five, or ten years.
  3. Register your SRECs yourself and trade them on the spot market (like trading stocks on the stock market).

Let’s break down the benefits and drawbacks of each approach.

Upfront Payment
SREC Contract
Spot Market

Where can I sell my SRECs?

Some installers will purchase your SRECs from you directly. You can also sell your SRECs yourself. The following are some commonly used companies. To get current prices for SRECs, give them a call:

  • SolSystems
  • SRECTrade.com
  • USPV
  • Flett Exchange

NOTE: In our experience with homeowners and installers in the District, the companies above are most commonly used but there are other providers in the market. We make no recommendations as to which company you should use. For a full list of aggregators and brokers who service the District, check out this list on the PJM website.

How do SRECs work with a solar lease or PPA?

If you are considering a residential solar lease (rather than the purchase of a system) you should inquire as to who controls the SRECs. Typically, in lease deals, the solar company will typically keep the system’s SRECs. Solar leasing is effectively the same as a power purchase agreement (PPA); a term commonly used to describe an arrangement where one entity agrees to locate the system, and another agrees to install and maintain the system – and harvest the SREC and tax benefits – sharing the use of the electricity with the partner.

Are SRECs taxable?

There is not a clear consensus on whether SRECs are taxable, as there are many different views and no clear guidance from the IRS. Please consult your accountant.
 
Jenny Kim - President, joined DC Sun in 2016 with the simple goal of helping make solar power more accessible and affordable to anyone that wants to take advantage of the many benefits. As President, she has led an effort to assist more than 400 homeowners in the Washington DC area to go solar. Jenny holds a Master of Science in electrical engineering from Virginia Tech where she paid her way through college as a top-performing inside sales representative for SolarCity. You can connect with Jenny on LinkedIN.