Though only available in a few states, SRECs are one of the best solar incentives
In the states where they’re available, SRECs are one of the most valuable incentives to go solar. At first glance, they might seem complicated compared to some of the more common types of incentive – but that shouldn’t scare you away from this valuable way to save more money by going solar. In this article, as part of our continuing efforts to take the mystery out of residential solar, we’ll be explaining all the moving parts of these lucrative solar incentive policies.
What is an SREC?
SRECs (Solar Renewable Energy Credits) are a way that certain states with Renewable Portfolio Standards compensate solar-empowered homeowners for generating clean energy.
Many of the most solar-friendly states have passed laws setting Renewable Portfolio Standard (RPS) in place. An RPS sets goals for how much of the energy generated in the state must come from renewable sources by certain dates. In some states, the RPS has a “solar carve-out” which specifically says a certain portion of the state’s energy must come from solar. In states with SREC policies, utilities can work toward achieving their solar generation goals by purchasing SRECs from homeowners. It’s a win-win – homeowners get more financial return from going solar, and utilities find buying SRECs cheaper than building new renewable energy infrastructure or being fined for failing to hit the RPS target.
Typically, for every 1 megawatt-hour of energy your solar system produces, you earn one SREC. The exact value of one SREC varies by state, and can change over time according to the laws of supply and demand, ranging from hundreds of dollars a year in returns to thousands.
How do I sell SRECs?
The potential for SRECs to shift in value over time means that homeowners have to decide on a strategy for selling their SRECs that balances risk and possible return, much like you would with your stock portfolio.
You can opt to sell the rights to all the SRECs your system will ever produce upfront for a single lump sum payment. This strategy eliminates risk, but also pays significantly less than other strategies. Another option is to agree to a contract to sell all your SRECs at a fixed rate over a period of time such as five or ten years. This strategy means you know exactly how much you’ll earn from your SRECs, but locking in the price also means you miss out if the value of SRECs goes up. Finally, there is the “spot sale” option, where you sell each SREC as your system produces it. This strategy gives you the greatest potential return, but also carries the most risk, and requires the most management on your part.
If the process of selling the SRECs your solar system earns for you sounds complicated, good news: there are several companies which act as brokers to handle the administrative aspects of selling SRECs and ensure homeowners maximize their return in exchange for a small percentage of the earnings. Zenernet has established a partnership with SREC Trade, one of the leading companies in this field. If you live in an SREC state and go solar with Zenernet, management through SRECTrade is included with your installation.
TRECs: Not a dinosaur, but still not relevant
In reading discussions of SREC incentives on other sites, you might also sometimes see the acronym TREC. Depending on context, this can have a couple of different meanings. The state of New Jersey has a program called the Transitional Renewable Energy Credit which is meant to fill the gap between the state’s old SREC policy and a future solar incentive program still being formulated; however, the TREC incentive is not taking applications for any new participants. TREC might also refer to Tradable Renewable Energy Credits, a program used in California. California, while a very good “solar state” in many other respects, does not have a solar “carve-out” in its RPS and selling credits for solar energy generation does not figure into the value proposition of going solar in the Golden State.
Where can I take advantage of SRECs?
Several states currently have SREC programs for solar-empowered homeowners: Maryland, Pennsylvania, Illinois, Delaware, and Washington, D.C. Virginia is also emerging as an SREC market after enacting a new RPS in 2020.
Want to learn more?
If you live in a state with a good SREC market and want to take advantage of this valuable incentive, schedule a talk with one of our Zenernet energy consultants today. Even if you don’t live in an SREC state, our experts can still help you understand all of the federal and local incentives you can use to make going solar more affordable. If you want to make sure you don’t miss any of our solar explainers or updates on state solar incentive policies, follow us on social media.