About Solar Renewable Energy Credits (SRECs)
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 solar co-op 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 West Virginia’s
utilities, Pennsylvania utilities are able to meet their sustainability goals from
anywhere in the mid-Atlantic—including West Virginia.
A great video explaining SRECs is available here.
Why do we have SRECs?
In most states around West 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
About Solar Renewable Energy Credits (SRECs)
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 West Virginia itself has no requirements at all (our “Alternative &
Renewable Portfolio Standard” includes gas and certain types of coal). But
people who install solar in West Virginia can sell their SRECs into the
Pennsylvania and Ohio markets, which accept SRECs from anywhere in the midAtlantic.
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 outlined 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 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 %
2014
0.0840%
2015
0.1440%
2016
0.2500%
2017
0.2933%
2018
0.3400%
2019
0.3900%
2020
0.4433%
2021
0.5000%
About Solar Renewable Energy Credits (SRECs)
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 have been 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 higher now but
you can’t be sure they will stay that way. Think of the SREC market like the stock
market—it can change!
About Solar Renewable Energy Credits (SRECs)
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 West 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.