Solar Renewable Energy Credits (SRECs) are like the “green” value of the electricity your solar panels produce. They aren’t sold with the actual electricity but act as proof that your solar panels generated electricity. Think of them as “vouchers.” You earn one SREC for every 1,000 kWh of electricity your solar panel system produces. These SRECs are valuable because many utilities are required to buy a certain amount each year to meet state sustainability standards outlined in the renewable portfolio standard.
Why Are SRECs Used?
In some states, there are laws called renewable portfolio standards (RPS). These laws make it mandatory for utilities or energy providers to get a certain percentage of their electricity from renewable sources. If they don’t meet this requirement, they might face fines called Alternative Compliance Payments. RPS laws cover various renewable energies like solar and wind. Solar, in particular, might have its own requirement within the RPS, meaning a certain percentage of the renewable energy must come from solar.
Utilities can fulfill this requirement by either building their solar projects or buying renewable energy credits on the open Solar Renewable Energy Credit (SREC) market. These credits help utilities meet their solar requirements under the RPS. Once you install solar panels, you can sell your SRECs in the market.
What Are SRECs Valued At?
Utilities and suppliers that need to meet RPS standards have a few options to comply. They can generate or buy the required renewable energy themselves, or they can purchase renewable energy credits (RECs) from renewable energy owners, such as homeowners with solar roofs. If utility companies choose to buy RECs instead of building their solar farms, it can make your SRECs more valuable.
Two main factors affect the price of RECs:
- Alternative Compliance Payment (ACP): This is a penalty that utilities or suppliers pay if they fail to meet the RPS. It acts as a backup plan. Companies might find it cheaper to pay the ACP than to buy or generate the required renewable energy.
- Availability of RECs in the Market: RECs are traded in a market similar to stocks. The price of a REC is determined by the laws of supply and demand. If there are many RECs available, the price tends to be lower.
The ACP also sets a limit on the price. It won’t be higher than the cost of the ACP because utilities would prefer to pay the penalty if it’s cheaper than buying RECs.
SREC Prices Change
SRECs are like stocks, traded on an open market where their price can vary. Several factors influence their price, and it’s a simple supply-and-demand situation: when the price of SRECs is high, utilities want more, and when the price drops, so does the demand.
The SREC market operates much like a stock market, with prices changing based on the availability of SRECs. It’s crucial to note that each state has its own renewable portfolio standard, making the value of SRECs different from one state to another. So, if you’re considering going solar, it’s essential to be aware of the SREC market specifics in your state.
How Many SRECs Can My System Produce?
For every 1,000 kWh (one megawatt-hour) of electricity your solar system generates, it creates one SREC. To estimate how many SRECs your system will produce, simply multiply its size by 1.2. For instance, a 5-kilowatt solar system would generate around 6 SRECs per year.
This post was written by Daniel Massaad, owner and expert solar technician at Energy Solutions Direct! ESD Solar offers knowledgeable and efficient solar panel installation in Tampa FL! Our licensed and certified contractors are masters of their craft; with years of experience servicing the great Tampa Bay area and beyond, the choice is simple. ESD excels at offering you the best in solar value!
