Introduction Before we dive into all of the ins and outs of SRECs, we want to acknowledge that SRECs can be the most confusing part of the whole solarization process. The reason we get into the details is because they are worth a lot of money and we want you be able to get the most benefit out of your SRECs. How you handle your SRECs depends on your individual financial needs and risk tolerance, so everyone approaches SRECs differently. What is an SREC? An SREC is a Solar Renewable Energy Credit and it represents the green value of your electricity. SRECs are separate from the physical electricity that your solar panels produce. Think of them like a voucher that proves that the electricity from your solar panels is renewable. You get one SREC for every 1,000 kwh of electricity produced by a solar system. These SREC vouchers are valuable because utilities in some states are required to purchase a certain number of SRECs each year in order to meet sustainability requirements. While there are no requirements for Virginia s utilities, Pennsylvania utilities are able to meet their sustainability goals from anywhere in the mid-atlantic including Virginia. A great video explaining SRECs is available here. Why do we have SRECs? In most states around Virginia, state legislatures passed a law to establish a Renewable Energy Portfolio Standard (RPS). This RPS requires utilities to get a certain portion of their electricity from renewable energy. Rather than meeting this requirement by building their own solar projects, utilities buy solar renewable energy credits (SRECs) on an open SREC market. Most states in the region (like
Maryland and Washington, DC) require their SRECs to come from within the state. And Virginia itself has no requirements at all. But people who install solar in Virginia can sell their SRECs into the Pennsylvania market, which accepts SRECs from anywhere in the mid-atlantic. How much are SRECs worth? Because SRECs are bought and sold on an open market, there are a number of factors that influence their price. The most important thing to remember is that SREC prices are determined by supply and demand. The more demand for SRECs there is from utilities, the higher the price. On the flip side, the more SRECs that are supplied to the market from solar projects in the region, the lower the price. A utility s demand for SRECs is determined by state law. The Pennsylvania government requires that each utility procure a certain amount of its electricity from renewable sources. This is outline in the state s Renewable Portfolio Standard (RPS). Within the Pennsylvania RPS there is a solar carve out that requires that a portion of the DC s renewable energy comes from solar. In 2014 that requirement was 0.084% total electricity generated. It increases every year until 2021, when PA must have.50% of total electricity generated must come from solar. This table breaks down the RPS s solar requirement by year. It is expressed in megawatts (MW). One MW = 1,000 kw. Year Solar Carve Out % 2007 0.0013% 2008 0.0030% 2009 0.0063% 2010 0.0120% 2011 0.0203% 2012 0.0325% 2013 0.0510% 2014 0.0840% 2015 0.1440% 2016 0.2500% 2017 0.2933% 2018 0.3400%
2019 0.3900% 2020 0.4433% 2021 0.5000% To meet the solar carve out, PA utilities must purchase SRECs from solar projects installed in the mid-atlantic. Because the PA carve out requirements significantly increased the amount of local SRECs needed in 2014, the supply and demand of SRECs has evened out. The prices of SRECs in PA are therefore where analysts expect them to hover for the long-haul. If PA utilities do not meet the Renewable Portfolio Standard s solar carve out, an Alternative Compliance Payment is required a penalty equal to twice the average SREC price in the previous year. Source: SRECTrade.com Given high supply for SRECs from solar homeowners, SRECs are currently trading at low prices since 2011. Over time, however, as carve out requirements increase (beginning in 2014) supply and demand will come into balance. As of early 2014, the price per SREC in Pennsylvania is between $55 and $60 up from as little as $10 in 2013.
It s important to remember that the SREC market can change at any time and the price changes depending on the supply of SRECs. SRECs are high now but you can t be sure they will stay that way. Think of the SREC market like the stock market it can change! How many SRECs will my system produce? Once it has been certified and registered, your system will produce one SREC every time it produces a megawatt-hour (1,000 kwh) of electricity. As a rule of thumb, you can estimate the number of SRECs a system will produce by multiplying the size of the system by 1.2. For example, a 10-kilowatt system will produce approximately 12 SRECs each year. How do I sell my SRECs? Once your system is complete your installer should register it with an SREC broker or aggregator like Sol Systems or SRECTrade. The company will verify your system s details with your installer and mail you a contract to sign. With a signed contract in hand, the company will register your system on the Generation Attribute Tracking System ( GATS ) administered by PJM. Once you enter the website, you need to register your system with the certification number that you have from DCPSC (paperwork) and submit it to the GATS administrator. If approved, which takes typically 5 to 7 business days, GATS will issue an approval and your system will begin to generate credits. Once you re registered you can then sell your SRECs on the spot market just as if you were selling stocks or bonds. While homeowners in other states have different options, this is the only available in option in Virginia right now. Where can I sell my SRECs? Some installers will purchase your SRECs from you directly. You can also sell your SRECs yourself. The following are some commonly used companies. To get current prices for SRECs, give them a call: SolSystems SRECTrade.com USPV
Are SRECs taxable? There is not a clear consensus on whether SRECs are taxable, as there are many different views and no clear guidance from the IRS. Please consult your accountant.