Guide To Solar Renewable Energy Certificates [SRECS]
In this deep dive into SRECS, Solar Renewable Energy Credits, we’ll look at what SRECS are, and if you produce your own solar electricity, how you can benefit from joining a SRECS program and quickly breakeven and profit from your solar panels.
What Are SRECS?
Solar Renewable Energy Certificates [SRECS] are an incentive scheme set up by certain states that allows homeowners who generate their own solar electricity to sell some of the electricity they have generated back to the state’s energy providers. On average, you can earn one SREC for every 1,000 kilowatt hours (kWhs) your solar panels produce.
SRECS sold represent the “solar” part of the electricity generated by a homeowner or business.
Utility companies buy SRECS from, for example homeowners to meet their Renewable Portfolio Standard (RPI) obligations. We’ll chat more about what they are in a moment.
It’s worth noting that selling SRECS and using the electricity are different, as the solar energy you produce:
- Will offset your electricity bill
- Then you can sell any surplus to the utility company
This means that you can earn a significant amount of extra income if you have your own solar panels.
How Does SRECS Work?
For every megawatt per hour (MWh) you solar panels produce, you earn an SREC or credit.
Then, through what’s called a Solar Carve-Out, you sell the certificate to the energy companies which helps them show to the state that they are meeting their renewable energy commitments.
SRECS And RECS: What’s The Difference?
As well as SRECS there are also RECs, which are Renewable Energy Certificates. Similar to SRECS they are certificates that can be issued if you generate electricity from any renewable energy source, such as wind or hydro electric.
According to Investopedia, “Renewable Energy Certificates (RECs) are a market-based instrument that certifies the bearer owns one megawatt-hour (MWh) of electricity generated from a renewable energy resource. Once the power provider has fed the energy into the grid, the REC received can then be sold on the open market as an energy commodity. RECs earned may be sold, for example, to other entities that are polluting as a carbon credit to offset their emissions.”
If energy that feeds into the electricity grid is coming from different sources that include a renewable source you can claim a REC, which represents the renewable source of that electricity feed.
So the main difference is that SRECS are only for solar power and RECs are from any renewable source that is part of an overall electricity generating system.
What States Have A SRECS Program?
One question that is often asked is where Are SRECS Available? Unfortunately, not all states have this in place. Currently, only 7 states throughout The USA have SREC markets. They are:
- Washington DC
- New Jersey
Even though New Jersey and Massachusetts have an SREC program, they have stopped new homeowners from joining the scheme.
What Is A SRECS Market?
Some states that have an SREC scheme have also set up once called an SREC market. This means that instead of selling directly to the energy company, you work with a middleman, either a trader or energy broker, who buys and sells the certificate on your behalf.
How Is The Price Of SRECS Set?
The price is set by the Federal Government who establishes an upper and lower price level, this is the Renewable Portfolio Standard. The utility company has to purchase every year whatever the government has set for its upper limit, otherwise they have to pay a charge.
So it is in their interests to buy solar energy from independent providers, such as a homeowner. However, if the cost of the SREC is greater than the cost of the charge, then it ceases to be in their interest and they’ll pay the fee and avoid buying SRECS.
How Can I Sell My SRECS?
Who Buys SRECS?
Ultimately, it is the utility company that buys the electricity as they need to meet the Renewable Portfolio Standard set out by the state you live in.
Often though, to save time and resources, they prefer to buy from large producers or middlemen so they are not dealing with 1000s of homeowners. If they don’t deal straight with the producer, then you would sell your certificates to a broker or trader.
It’s always a good idea to speak to them directly and ask how their scheme works.
How Much Can I Earn By Selling SRECS?
As with any trading, the price will fluctuate with demand and market conditions. According to SREC Trade, the amount you can earn depends on each state. On average, it breaks down like this:
- “1 SREC = 1 MWh of solar electricity
- A 10 kW facility generates around 12 SRECS annually
- SRECS are sold separately from the electricity
- Value is determined by market supply and demand mechanics
- Facilities must be certified by a state to sell SRECS”
As of August 2021, the latest bid prices per state are:
- Washington District Of Columbia $385
- Delaware To be confirmed
- New Jersey $232
- Massachusetts $279
- Maryland $77
- Ohio $8
- Pennsylvania $41
As you can see, there is significant variation in SRECS bid prices per state.
How Will SRECS Impact My Solar Investment?
When looking at the big picture of your investment into a solar energy platform SRECS are critical.
First, they help you break even from the initial set-up costs of your solar panels and offset your electric bill per month.
Second, they provide monthly income once you have paid back your costs, usually break even is on average 7-8 years.
Check out our guide on how your solar panels can pay for themselves.
Even more, they form part of your renewable energy strategy which will also include Net Metering. These are similar to SRECS and allow any surplus electricity you generate, using solar panels or photovoltaic systems, to be exported back to the grid.
What Happens To SRECS If I Move?
The SRECS belongs to the solar platform that produces the electricity. That means that if you move house, then the new homeowner will then receive the benefits.
So we have discovered:
- What are SRECS, Solar Renewable Energy Certificates.
- How you can set them up and the difference with REC’s
- The States that have SREC programs
- How the prices and market works
- How much you can earn from them
If you would like to see how the leading solar panel suppliers compare against each other and how much you could save with solar, click on the link at the bottom of the page.