SREC Solar: What They Are and How They Work
                     SREC Solar: What They Are and How They  
Work
Have you ever considered earning money from your solar panels besides lowering 
 your electricity bills? If you live in a state with an SREC solar market, you may 
be  able to earn income by selling solar renewable energy certificates, or SRECs.
Are you curious about SRECs, renewable energy credits and how they 
function?  In this article, we will go over all the details concerning SRECs, 
including their  description, generation process, trading procedures, and possible 
earnings.
1. What is an SREC?
SREC, or Solar Renewable Energy Certificate, is a financial mechanism that  
indicates the positive impact of producing solar power. Your solar system  
generates one SREC solar for every 1,000 kilowatt-hours (kWh) of electricity. For 
 example, if your solar system produces 5,000 kWh of electricity each year, you  
will receive five SRECs.
You should understand that your solar panels produce electricity and SRECs  
separately. This means you can use all of the solar panel electricity you generate 
while  still collecting SRECs. You can also sell your SRECs to utilities or other 
buyers  who need to meet their renewable energy obligations.
2. What's the difference between SRECs and RECs?
SRECs and RECs are certificates that show the positive impact of generating  
renewable electricity. However, there are significant differences between the two.
 SREC solar is only connected to solar energy, whereas RECs can come from 
a  variety of renewable sources, including wind, hydro, biomass, and others.
 SRECs are only available in states that have adopted a solar carve-out policy.
This policy includes a specific requirement for solar energy in the 
Renewable  Portfolio Standards (RPS).
 On the other hand, RECs are accessible in any state with an RPS, which
requires utilities to generate a particular percentage of their electricity from 
 renewable sources.
 SRECs are usually more valuable than RECs because solar panel energy is  
more expensive and less abundant than other renewable sources. The price 
of
SRECs depends on the supply and demand of the market as well as state  
regulations. RECs have a lower and more stable price because they are 
more  widely available and less regulated.
To recap, SRECs and RECs are both methods to promote renewable energy and  
reduce your environmental effect; but, SRECs are more specialized, limited, and 
 profitable than RECs.
3. What is the purpose of SRECs?
SRECs are in existence to help utilities fulfil their renewable portfolio standards  
(RPS), which are state regulations mandating utilities to generate a specific 
portion  of their electricity from renewable sources. Over 30 states have 
implemented  renewable portfolio standards.
Apart from generating renewable energy themselves, utilities have the option to  
purchase renewable energy certificates (RECs) to meet these standards and 
avoid  penalties.
SREC solar is a type of REC that utilities can purchase to comply with their state's  
renewable portfolio standards. This is important because only a few states require 
a  certain portion of renewable energy to come specifically from solar power, 
which  is known as solar carve-outs.
4. In which states the SRECS solar are available?
Not all states have a renewable portfolio mandate, and those that do may 
not  include a solar carve-out. The following states have active SREC 
markets:
Here's a table displaying the key features of SREC programs across different states. 
 The data is sourced from DSIRE and World Population Review. The table consists 
 of the following columns:
 State: The name of the state with an SREC market.
 RPS Target: The required percentage of electricity sales from renewable 
 sources by a specific year, as per the state's Renewable Portfolio 
Standard  (RPS).
 Solar Carve-Out: The mandated percentage of electricity sales from solar 
 sources by a certain year, as part of the RPS criteria.
 SACP: The Solar Alternative Compliance Payment, which is the penalty
that electricity suppliers must pay per megawatt-hour (MWh) if they fail 
to  meet their solar RPS obligation.
 SREC Price: The average price of an SREC in the state market, as of
February 2024.
 SREC Lifetime: The duration for which an SREC can be utilized for 
 compliance after its generation.
Let me break down the information about the table in simpler terms:
Think of it like this: if the RPS target and solar carve-out are higher in a state, there 
 will be a greater demand for SRECs. This increased demand leads to a higher 
price  for SRECs.
Similarly, if the SACP (solar alternative compliance payment) is higher, 
electricity  suppliers are more likely to buy SRECs instead of paying the penalty. 
This also  drives up the price of SRECs.
Furthermore, if the SREC lifetime is longer, SREC owners have more flexibility to 
 sell their SRECs when the price is favourable. This increases the potential value 
of  the SRECs.
5. How can your SRECs be sold?
Selling your SRECs can be an easy process, but it will differ depending on 
where  you live and the specific protocols in place in your state. Here are the 
main steps  you can take, but be sure to conduct some research particular to your 
location to  ensure you're following the right process.
A. Register for your state's SREC program.
Once your PV solar system is installed in your home, you must register with your  
state's SREC tracking system. The specific system used will vary by state, so  
consult the Database of State Incentives for Renewables and Efficiency or 
conduct  an online search for details on your state's program.
Make sure you only register on official.gov websites. In certain situations, 
your  solar installation company can handle the registration for you.
B. Generate solar power from your home
After registering, you'll need to wait until your solar power system has generated 
at  least one SREC. This typically takes around two to three months for a standard  
system.
C. Find a buyer for your SREC:
This stage can be extremely involved, depending on your current status.  
Homeowners in SREC states typically locate brokers or collectors online to 
assist  them sell their SRECs. Some well-known choices include SREC Trade, Sol 
Systems  and many more.
You can also register to sell your credits by posting on the GATS (Generation  
Attribute Tracking System) bulletin in the majority of SREC states. This 
bulletin  might also help you understand the supply and demand in your area.
D. Negotiate a selling price.
After locating a buyer, you may need to negotiate a price based on supply and  
demand. Brokers can help you determine the highest fair market price to ask 
for.
E. Complete the transaction:
To complete the transaction, you will need to use your state's SREC transfer  
program. Whether you engage with a broker or a platform that handles 
SREC  transactions, the process should be rather straightforward.
There isn't a perfect time to sell SRECs since prices fluctuate regularly. Demand 
is  usually highest in April and May when companies need to show they have met 
the  RPS goals during the late spring or early summer compliance periods in most  
states.
It is best to track SREC solar values throughout the year and sell when the price is  
at its highest. Ideally, seek to sell when the price is near to the ACP, though timing 
 the selling can be difficult. Remember to sell your SRECs before they expire, 
even  if it means offering a reduced price.
Conclusion:
To summarize, SREC solar allows solar panel owners to make money by 
selling  certificates for their solar energy production. Understanding the market 
and  specifics of SRECs allows homeowners to optimize their financial returns 
while  also promoting renewable energy. SRECs are worth more than standard 
RECs,  particularly in jurisdictions with solar requirements.
Want to save money and the environment with solar? Find out more about our  
residential solar services here. Alternatively, use our solar estimate tool to 
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