For those who are eligible, SRECs might be some of the best solar incentives available. Albeit more complicated than most. But since SRECs can provide significant additional income to owners of solar power systems it’s worth a minute to jump into the details.
In essence an SREC is a certificate equal to a specific amount of electricity generated by a solar power system (or other renewable energy source like wind). And one SREC certificate is equal to 1,000 kilowatt hours (kWh) of electricity generated by a solar panel system. These certificates belong to the owner of the solar power system.
SRECs exist in a handful of states that have decided to get serious about their Renewable Portfolio Standards (RPS). 38 states and Washington D.C. have instituted an RPS, but only 7 of those states (and a district) have chosen to enforce the RPS with an economic incentive. These RPS laws require utilities and other energy suppliers to have a certain percentage of their electricity generated from renewable sources. And in the 7 states with an SREC market there is a fine, called an Alternative Compliance Payment (ACP), levied against the utility if the minimum percentage isn’t met.
There are two ways a utility can avoid the fine: 1) They could just build their own wind or solar array large enough to generate all of the power necessary to meet the required minimum (the RPS mentioned above); or, 2) they can buy their way out by purchasing SRECs – the amount they buy dictated by how far off they are from their goal. For example, if they’re short by 100,000 kWh of green power, then they’ll need to buy 100 SRECs.
There’s the SREC.
Unfortunately, there’s a bit more to review so let’s break for a snack…
Quick review: A Renewable Portfolio Standard requires that a utility have a certain percentage of their electricity generated by renewable sources like wind and solar. An Alternative Compliance Payment is a fine charged to the utility for each kWh by which they miss their clean electricity minimum. An SREC is a way for the utility to avoid the fine. And an SREC is a certificate equal to 1,000 kilowatt hours of electricity generated by a renewable source – like wind and solar. The SRECs belong to the owner of the renewable generation facility (could be a large solar farm operator or a single house with a solar system on top).
Do SRECs have value, you ask?
Yes, the owner of the SRECs is able to monetize them by selling them on an SREC market.
It’s easy. I’ve heard there’s a good SREC market in Baltimore. Each month you’ll just print out your certificates, head down to Mr. Pickles across from Camden Yards, stand out front and hold up your certificates. Not all the way, just head high. And don’t take the first offer.
Or…it’s got to be complicated. The market that has sprung up to handle these SRECs treats them very much like commodities. Fortunately, there are a number of good brokers out there that make what would be an involved trading process very easy. A couple that we recommend are SolSystems and SRECtrade. And both of them have very similar options: 1) Sell the rights to all of your system’s SRECs for an upfront payment; 2) Sell your SRECs via a contract for a set period of time, usually three, five, or ten years; or, 3) Sell your SRECs on the spot market as you produce them. If using a broker is not your thing there is an exchange available for those who want to manage it themselves and sell directly on the spot market (https://www.flettexchange.com/) – and this is typically where you find the highest rate but will lose any security of a guaranteed price.
Now, I think the answer you’re really looking for is HOW MUCH are these SRECs worth and how much can I make by generating them? Well, to make a complex system even more complexerer, each one of the 7 states with an Alternative Compliance Payment has set their own level, and therefore, each has a different SREC value.
Since you’ve been through enough getting to this point I’m going to just condense it into a chart so you can see how much (as of writing this article) you can expect for each SREC in each state.
|State||SREC Price (Spot Market)|
*States that still have an SREC market, but are no longer accepting new applications for the program.
So, let’s finally get to the point. I’ll try and wrap this all up by way of an example. Let’s say you live in Maryland and you just installed an 8 kW solar system (this is an average system size in the Mid-Atlantic). That 8 kW system would likely produce about 10,000 to 12,000 kWh per year, depending upon a few factors like shade and direction the panels are facing. Let’s be conservative and say 10,000 kWh. The math is simple here. That’s 10 SRECs (1 SREC = 1,000 kWhs). The going rate for an SREC in Maryland is $55 which means you could sell your certificates for $550. So, on top of saving money on your utility bills, and receiving a 30% tax credit from the federal government, you’re also making $550 per year trading the “production” of your solar system.
Boiled down, it’s not that complicated. It’s a market based incentive that rewards those willing to adopt clean energy (aided by a little bit of policy)…Merica!
Since the value of SRECs is based on supply and demand it’s hard to predict whether the value will go up or down. But our guess is that the country is trending toward higher and higher renewable portfolio standards which will result in more valuable SRECs. Fortune favors the bold.
Clean Power Club will be happy to create a custom solar design for your home, and walk you through all the details. Click here if you’d like your free custom design today.