Last Updated: Oct 7, 2022
At the start of my net-zero home journey, I would not have dreamed my solar array would put me on a list of power generation facilities. And get me paid just for the act of generating power! That is what took me down the rabbit hole of learning more about Solar Renewable Energy Credits or SRECs and drew me into being an advocate for solar for consumers.
Solar Renewable Energy Credits (SRECs) are a subset of Renewable Energy Credits (RECs) (also known as renewable energy certificates) issued specifically for electricity generated from solar photovoltaic systems. SRECs are generated when one megawatt-hour (MWh) (or 1,000 KWh) of electricity enters the grid. Yes, it is just the act of providing the energy to the grid that earns the credit. SREC value differs from and is in addition to the net-metering value of the electricity produced from solar.
An SREC's value is, in part, created by its "character" or by its means of production; in this case, the power comes from a renewable source; solar. The owner of a solar power source is also the owner of the SREC, which amounts to a tradeable, yet non-tangible energy commodity.
In many cases, consumers allow third parties to install solar for them, especially rooftop solar. Many third parties offer power purchase agreements or PPAs. The advantage is that you give a company the use of your roof, and you get lower electric bills without paying for the equipment or installation. There may be disadvantages to this arrangement, including that you are not the system owner; therefore, you do not own the SRECs.
For an SREC buyer to have confidence, a third party usually attests that the power came from a certified solar installation and onto the grid. On the first of each month, I go out to my ground mount array and read the values on my power production (revenue-grade) meter. I then submit these values to my third party, a website called SREC Trade.
SREC Trade has enough details on my system and where it is to know a range for the kWh values that I submit. Interestingly, SREC Trade denied my production for one month. I checked the data and realized an unusually sunny month (November 2020) showed more production (kWh) than in October, as the "solar history" for my area dictates. Luckily, I logged production data from my trusty solar inverters to back up my reported values. SREC Trade then accepted my explanation and issued my SRECs.
SRECs incentivize the marketplace to produce power from renewable sources like solar or wind power facilities and thus encourage the non-power-related qualities of renewable energy generation. The purchaser of a SREC may or may not connect to the same grid where those megawatt-hours entered the grid.
Renewable Portfolio Standards (RPS) are found in many US states and several Canadian provinces. RPSs require that utilities deliver a specific portion of energy from renewable sources to the grid in many scenarios. Some areas go further and require that a segment of the renewable generation come from solar: a solar carve-out.
A few states take this further and "close the solar borders," meaning that a source in the same state must produce the SREC. The fraction of renewables in the RPS usually increases over time and with legislation.
In Pennsylvania, where I live, they call the legislation the AEPS – Alternative Energy Portfolio Standards. This law was signed in November 2004 and required PA utilities to obtain increasing retail electricity from alternative resources for a minimum of 18% by May 2021. The law included an increasing amount from solar, which has maxed out at 0.5%. New legislation proposes to increase these values.
Utilities do not have to build solar power plants; they can buy credits (SRECs) from grid-tied solar plant owners to meet their RPS requirements.
Twenty-two states plus the District of Columbia have Renewable Power Standards calling for solar or distributed generation in the US. The District of Columbia, Massachusetts, Maryland, New Jersey, Ohio, and Pennsylvania all have markets in which SRECs are bought and sold.
In Canada, Alberta, British Columbia, Saskatchewan, and New Brunswick all have an RPS and a renewable energy certificate process. (Prince Edward Island previously had an RPS but repealed it in 2016.) Yet, there is no specific call out for Solar in the REC system. It is not typical that an average consumer is involved in REC trading. Note that Canada already has a very high share of renewables (16.3%) in its energy supply. The majority, however, comes from large-scale hydropower, which has its own set of environmental consequences.
Like any trend, it is difficult to predict the future. Given the current political and social climate, which includes increased investor attention to ESG factors (environmental, social, and governance), SRECs incentivize in the drive to "clean" the grid, especially for investor-owned utilities.
Like many commodities, the value of 1 SREC varies from month to month. The value of SRECs vary based on several factors: the supply (number of qualified producers), the demand (the number of credits the utility companies need to purchase), the requirement to buy within the state (due to closed solar borders), and any fines utilities pay if they do not acquire enough SRECs.
Due to these dynamic factors, 1 SREC produced in Washington DC was worth $365 to $435 in the last year. While in Ohio, the range was $7 to $13 at the same time.
PA has closed its solar borders in 2017, which has enhanced the value of an SREC. Since registered in August 2020, I have seen the price of one SREC in PA vary from $21 to $41. I use a registered trading platform called SREC Trade which validates my solar production and is a commissioned broker for my trades. The net earnings for me in 10 months are just over $300 as I usually produce 1.1 MWh per month.
A SREC has a limited life which can range from 1 to 5 years, with half of the participating US states coming in at three years. So, if you are earning and trading on your own, be sure to mind the calendar!
I post my power production monthly by the 15th for the preceding month. It gets automatically traded by the end of the same month. I then receive a payout (direct deposit to my checking account) in the following month. Since my Solar production can be under or over 1 MWh per month, SREC Trade rounds down to the nearest 1 MWh to issue the credit and banks the remainder to accumulate with future production.
I am thrilled to have "found" SRECs. The additional money generated helps to offset the cost of installing the system and brings me closer to the payback day, after which my power will be free! Then I will be a proper solar farmer harvesting a benefit generated 93 million miles away.
Bill is a Mechanical Engineer who owns TruTech Tools, an award-winning web store. He regularly teaches on HVACR, building science, healthy homes, and Indoor Air Quality (IAQ) and hosts the RESTalk and Building HVAC Science Podcasts. He works on many committees and is on the board of directors of the Building Performance Association and the Green Home Institute, as well as on the advisory board for Solar United Neighbors of PA. Bill and his wife live in their new prefab net-zero home in Pennsylvania.