What is an SREC?

Estimated reading time: 4 minutes 

Renewable energy and solar power specifically have become popular investment tools, and there are many ways to reap the benefits of renewable energy investments. 

SRECs, or Solar Renewable Energy Credits, are a lesser-known incentive for solar systems, partly because they can get a little confusing. Here, we'll discuss SRECs and the SREC market:

What is an SREC?
Are SRECs available in all states?
SREC Markets and Trading
How Do I Claim SREC Credits?

"SREC" stands for "Solar Renewable Energy Credit" or "Solar Renewable Energy Certificate". They're basically just what they sound like: credits that you receive for producing renewable energy. 

The amount SRECs you can receive depends on how much energy your system produces: each SREC is equivalent to one megawatt hour (MWh) or 1,000 kilowatt hours (kWh). 

SRECs have been implemented to help some states with their Renewable Portfolio Standards. Renewable Portfolio Standards require a specific percentage of a state's energy to be generated from renewable sources. Utility companies buy Renewable Energy Credits (RECs) to meet these guidelines, proving that they are either producing or purchasing green energy. 

Since utilities are seeking these RECs to meet state guidelines, a market for them has been developed that solar customers can take advantage of. SRECs, a type of REC, are also bought and sold on this market--akin to a micro-wall-street. 

Currently, 8 states have an SREC market, and so does Washington DC:

Delaware, Illinois, Massachusetts, Maryland, New Jersey, Ohio, Pennsylvania, Virginia, and Washington DC have all implemented SREC programs. 

Additionally, areas in Indiana, Kentucky, Michigan, and West Virginia are available for the Ohio SREC market. Exact policies and rates will vary from state to state.

SRECs are not currently available in other states, though some states either already have or are in the process of developing similar state programs for energy credits. 

Like the stock market, SREC value also fluctuates with supply and demand. Rates will also vary by state, and can be further affected by things like winter seasons (lower solar production), the amount of customers purchasing solar, recent legislation/widespread news involving solar, and more. 

The Renewable Portfolio Standards discussed earlier play a big part in SREC pricing as well--states with a Renewable Portfolio Standard have fees for utility companies that fail to meet requirements, called an Alternative Compliance Payment (ACP).

For this reason, SREC prices stay lower than the ACP: why would the power company pay you more for your SRECs when they could pay a lesser fee?

With all the different factors, trading these credits can easily become quite the task, which is part of the reason why the majority of customers don't trade their SRECs themselves. 

The other reason is that utilities don't like to purchase individual customers' energy very often; making the least amount of purchases is most cost affective. 

To combat this, most customers use an SREC aggregator or broker to trade SRECs. An aggregator does exactly what the word suggests: collect and combine SRECs to trade and sell with utility companies. They'll perform this service as part of an agreement in exchange for a fee. 

An alternative is to have your solar installer purchase your SRECs from you, as some installers do offer this. This can be a good option in some cases, as it helps offset the upfront cost of the system--unfortunately, this also means that you won't be able to receive the benefits of selling them at their highest value. 

With an aggregator, your SRECs are traded and monitored by professionals, and can be strategically sold at high-value times. 

Larger systems will produce more energy and therefore be able to earn more SRECs. EnergySage provides a helpful estimate for how much can be earned from SRECs in some states. 

If you live in a state with SRECs, one of the best way to register for SRECs is through a broker or aggregator, as some of these will offer this service as part of the agreement. 

As mentioned earlier, some solar installers will purchase your SRECs for a flat cost, but this can mean missing out on more valuable credits in the future. Perhaps the most common aggregation provider, SRECTrade.com, is a great resource for registering, trading and selling SRECs. 

Project Solar does not currently purchase SRECs--our customers are free to register for and claim them as they choose. Remember that the value of and policies for these credits can vary, based on a few factors. We recommend contacting a a trusted aggregator or broker to facilitate your credits. 

If you're interested in starting a solar project so you can produce your own SRECs, check out our online calculator.