Solar Renewable Energy Certificates (SRECs) or Solar Renewable Energy Credits:
Are a form of Renewable Energy Certificate or “Green tag” existing in the United States of America. SRECs exist in states that have Renewable Portfolio Standard (RPS) legislation with specific requirements for solar energy, usually referred to as a “solar carve-out”. The additional income received from selling SRECs increases the economic value of a solar investment and assists with the financing of solar technology. In conjunction with state and federal incentives, solar system owners can recover their investment in solar by selling their SRECs through spot market sales or long-term sales, both described below.
QUICK SREC FACTS
- 1 SREC = 1 MWh of solar electricity
- A 10 kW facility generates around 12 SRECs annually
- SRECs are sold separately from the electricity
- Value is determined by market supply and demand mechanics
- Facilities must be certified by a state to sell SRECs
Since 2008, Maryland SRECs have been one of the most stable SREC markets in the country since 2008. Early in 2016, SREC prices fell drastically the market took a turn. The price for Maryland SRECs decreased substantially due to an oversupply of SRECs in the market compared to the state’s low demand for solar energy credits related to Maryland’s renewable portfolio standard (RPS) in 2016.
On May 22nd 2019, Maryland raised the bar on its renewable portfolio standards passing legislation (PDF): SENATE BILL 516 that would require the state to generate 50% of its electricity from renewable energy by 2030 and evaluate steps to reaching 100% clean energy by 2040 AT LEAST 14.5% TO BE DERIVED FROM SOLAR ENERGY. Maryland SREC market prices have rebounded since.
Maryland Department of Natural Resources (PDF): Maryland’s Renewable Energy Portfolio Standard (RPS)
Maryland Department of Natural Resources (PDF): FINAL Report Concerning the Maryland Renewable Portfolio
Sell Your Maryland SRECs
All bid pricing and notes included are indicative and subject to change. Please contact https://srectrade.com/ for most current markets.
1/12/2021 Latest Bid Price: $80.00 See SRECTrade Link Above for most current markets
Sell Your Delaware SRECs
Established in 2012, this Program procures SRECs for Delmarva Power so they can meet their requirement under the Delaware Renewable Portfolio Standard. Each year, typically in the spring, a competitive solicitation is held and eligible projects can bid into the program.
To be eligible for the program the solar generator must either have or be qualified to obtain a Delaware State Certification number from the Delaware Public Service Commission. Information regarding the next Procurement will be announced on https://srecdelaware.com/ or sent to anyone on SRECDelaware Program’s mailing list to register https://portal.srecdelaware.com/app/auth/register_recaptcha as soon as an official decision has been made. For further details click either link below:
Sell Your Pennsylvania SRECs
Pennsylvania’s Alternative Energy Portfolio Standard
A variety of federal and state incentives, including SRECs, led to a substantial build-out of solar in the state. And until 2017, Pennsylvania allowed systems located outside of the state to register for and participate in the PA SREC market, further impacting supply. However, in 2017, see legislation (Website Link) Pennsylvania passed Act No. 40, which restricted geographical eligibility for the PA SREC market to Pennsylvania-sited solar photovoltaic systems effective October 30, 2017. The law may also impact out-of-state systems which were certified prior to the rule change. The Pennsylvania Public Utilities Commission will be reviewing the Act and issuing an Order regarding eligibility in the program in the coming months.
For a period of time before January 2011, PA-sited systems were eligible to apply to the DC SREC market; today, PA-sited systems are only eligible for PA and OH.
- Pennsylvania’s Alternative Energy Portfolio Standard (AEPS) requires that 18% of the state’s electricity be sourced from renewable energy by 2021, with a 0.5% carve-out specifically for solar energy. 8% of the electricity must be supplied by Tier I resources and 10% must be supplied by Tier II resources.
- The Solar Alternative Compliance Payment (SACP) is 200% of the average market price of SRECs sold during the reporting period within the service region of PJM-GATS.
- SRECs up to three years old can be sold in the Pennsylvania market. Therefore, customers who have registered their system on their own or through an aggregator will still be able to sell their SRECs, provided they were minted in the last three years.
- For more details on Pennsylvania’s regulations, see website link below.
Pennsylvania’s Alternative Energy Portfolio Standard (AEPS), created by S.B. 1030 on November 30, 2004,
Act of Nov. 30, 2004, P.L. 1672, No. 213Cl. 66
Requires each electric distribution company (EDC) and electric generation supplier (EGS) to retail electric customers in Pennsylvania to supply roughly 18% of its electricity using alternative-energy resources — roughly 8% from Tier I technologies and 10% from Tier II technologies — by 2021. The standard also contains a solar set-aside requiring obligated entities to procure a small percentage of their electricity sales from photovoltaic (PV) systems as part of the Tier I requirement. As with the other components of Pennsylvania’s AEPS, the percentage requirement ramps up slowly over time. The obligation was set at 0.0120% for the compliance year running from June 2009 – May 2010, accelerating to an ultimate target of 0.5% in compliance year 2020-2021.
Under Pennsylvania law, a solar alternative energy credit (SAEC) represents proof that 1 megawatt-hour (MWh) of electricity was generated by a qualifying PV facility. In many other states the term “solar renewable energy certificate” or “SREC” is used to represent the functional equivalent (i.e., a means of compliance with a solar energy standard) of an SAEC in Pennsylvania. Electricity suppliers must purchase SAECs in order to meet their compliance obligations under the law, or pay a Solar Alternative Compliance Payment (SACP) for any shortfalls in SAEC purchases.
In Pennsylvania the SACP varies from year to year based largely on the market price of SAECs traded during the prior compliance year, thus it is only known after the end of a compliance year. The SACP is for a given year is calculated as 200% times the sum of (1) the market value of SAECs of the reporting period and (2) the levelled value of up-front rebates received by sellers of SAECs (see PUC order listed above for a more detailed description). For the 2011-2012 compliance year the SACP was $360.79, the largest part of which is attributable to the weighted average SAEC market price of $180.39 per SAEC for the period. The average market price for Pennsylvania-sourced credits for the year 2014 has ranged from roughly $13 – $60 per SAEC/SREC as tracked at SRECtrade, with significant variations above and below this average for individual transactions.*
Under this system SAECs represent a potentially significant source of revenue for owners of qualifying PV facilities with a value determined by demand in the trading market. Eligible generators in Pennsylvania, including on-site generators, retain ownership of SAECs generated by their system until they voluntarily transfer them to another party. A generator remains eligible to generate SAECs for as long as the facility remains certified as an eligible generator. An SAEC may generally be used for compliance by a utility for the compliance year during which it was generated or the two subsequent compliance years. However, SAECs purchased by a utility during a time period for which the utility is under rate caps — rate caps for some utilities did not expire until January 1, 2011 — may be used by the utility in the compliance year the rate caps are lifted or in the subsequent compliance year.
In order to begin producing SAECs that can be used for compliance with Pennsylvania’s AEPS, a generator must apply for and be certified as an eligible generator. In order to be considered an eligible generator for the purpose of the AEPS, the generator must generally be located either within the state of Pennsylvania or within the broader PJM region. The exception to this rule is that energy from resources located within the footprint of the Midwest Independent Systems Operator (MISO) — which also serves a small portion of Pennsylvania — may be used for compliance in areas served by the MISO. The practical impact of this exception is that out-of-state resources located in the MISO may only be used for compliance by the Pennsylvania Power Co. or energy suppliers operating within its service territory.
Systems must be operational before the owner can apply for a certification number. Once a generator has received a certification number from the program administrator, they may create an account on the PJM-EIS Generation Attributes Tracking System (GATS). The GATS is used to track the generation and transfer of SAECs from an eligible facility. The GATS issues SAECs to correspond with energy generation readings that the system owner uploads to the system. Systems of 15 kilowatts (kW) or less that are not equipped with production meters may elect to use an engineering estimate of expected energy production in lieu of uploading actual meter readings into GATS.
Pennsylvania will only recognize the generation of SAECs by a system after the date of the application for certification. If the facility is located in another state that allows the use of energy production estimates for systems of 10 kW or less, the same estimates will be used in Pennsylvania, provided that the system meets the Pennsylvania requirements for allowing estimates.
The program website contains additional information on Pennsylvania’s AEPS, registering a facility, and using credit brokers and aggregators.
*It is important to note that SAECs/SRECs produced by facilities located in Pennsylvania may be eligible for other compliance markets such as that in Ohio. The prices quoted here include transactions where Pennsylvania-sourced SAECs/SRECs have been sold into markets beyond Pennsylvania.
For more details on Pennsylvania’s regulations, & AEPS/SRECs See Website Links Below.
Or contact https://srectrade.com/ for most current markets. All bid pricing and notes included are indicative and subject to change.
1/12/2021 Latest Bid Price: $21.00 See SRECTrade Link Below for most current markets
SRECs represent the environmental attributes from a solar facility, and are produced each time a solar system produces one thousand Kilowatt-hours (KWh) of electricity. For every 1000 kilowatt-hours of electricity produced by an eligible solar facility, one SREC is awarded. In order for a solar facility to be credited with that SREC, the system must be certified and registered.
In order to produce SRECs, a solar system must first be certified by state regulatory agencies, usually public service commissions or public utility commissions, and then registered with the registry authorized by the state to create and track SRECs. Once a solar system is certified with the state agency and registered with a registry such as PJM-GATS or NEPOOL-GIS (for Massachusetts), SRECs can be issued using either estimates or actual meter readings depending upon state regulations. In some cases, smaller installations may be able to use estimates, while actual meter readings are required for large installations. Solar installations may be registered in states other than the state in which they are physically located and many SREC aggregators will navigate the certification process on behalf of their customers to ensure that systems are certified in the states with the highest SREC values so as to ensure long-term price stability.
Solar Alternative Compliance Payment
Many states have a law called a Renewable Portfolio Standard (RPS) which mandates that the state’s utility must produce a minimum amount of solar power every year. If they cannot do so with their own power generation facilities they must purchase SRECs. The Solar Alternative Compliance Payment (SACP) is the fee that energy suppliers must pay if they fail to secure SRECs as required by their state’s RPS. Because energy suppliers and utilities may simply pay the fee if SREC prices approach the fee level, a state’s ACP generally sets a cap on the value of SRECs. In rare cases SREC prices have approached and even surpassed ACP levels because SRECs can sometimes be recovered by charging more to electricity customers (rate basing), while ACP payments are usually precluded. In many states, the SACP is scheduled to decline over time with the intention of eventually phasing out the solar industry’s reliance on SREC sales as an incentive for installing solar.
Solar RPS requirements are meant to create a marketplace for SRECs and a dynamic incentive for the solar industry. Solar RPS requirements demand that energy suppliers or utilities procure a certain percentage of electricity from qualified solar renewable energy resources in a state. These Energy suppliers and/or utilities can meet solar RPS requirements by purchasing SRECs from homeowners and businesses who own solar systems and produce SRECs. Homeowners and businesses can then utilize the sale of the SRECs they generate to help finance their solar systems. SRECs can be sold a variety of ways, such as on the spot market, at auction, or by negotiating long-term contracts.
Supply and demand
SREC supply in a particular state is determined by the number of solar installations qualified to produce SRECs and actually selling SRECs in that state. As more solar systems are built, SREC supply will increase. SREC demand is determined by a state’s RPS solar requirement, typically a requirement that a certain percentage of the energy supplied into a state originate from qualified solar energy resources. Load-Serving Entities or organizations that supply electricity into the state are required to meet these requirements. RPS solar requirements in many states are set to increase in the coming decade.
States with SREC Markets
There are currently 35 states (and Washington, D.C.) with existing Renewable Portfolio Standards (RPS). Of those 36, only 17 have specific solar carve-outs mandated in their RPS. And of the 17 with solar carve-outs, only 7 utilize SRECs as the incentive type. The following table shows 5 of the most competitive SREC markets in the U.S.:
|STATE||RPS SOLAR CARVE-OUT||Incentive Type|
|Washington DC||10% by 2041||SRECs|
|New Jersey||5.1% by 2021||SRECs|
|Maryland||14.5% by 2028||SRECs|
|Delaware||3.5% by 2025||SRECs|
|Pennsylvania||0.5% by 2021||SRECs|
Massachusetts has a very competitive SREC market as well, but recently closed new applications to the program in order to transition to a different type of incentive. Ohio is also no longer included in the list despite a previously successful SREC market, because the state passed legislation to eliminate their RPS altogether in 2026.
Typically, there is no assigned monetary value to an SREC. SREC prices are ultimately determined by market forces within the parameters set forth by the state. If there is a shortage in SREC supply, pricing will rise, resulting in an increase in the value of the incentive for solar systems and an intended acceleration in solar installations. As SREC supply catches up to SREC demand, pricing will likely decrease, resulting in an intended deceleration in solar installations. Over time, SREC markets are designed to find the equilibrium price that encourages enough installation to meet the growing demand set forth by the RPS. Generally speaking, SREC prices are a function of a state’s solar alternative compliance payment (SACP), the supply and demand for SRECs within the relevant state, and the term or length over which SRECs are sold.
Spot price for SRECs are generally higher than prices found in long-term contracts since the system owner is taking on market risk. If increases in supply outpace the growing demand, spot prices could fall. SRECs have traded as high as $680 in New Jersey. Meanwhile other state SREC market prices range from $45 in Delaware to $271.05 in Massachusetts. In addition to the strength of spot market demand in states experiencing supply shortages, the general lack of availability of viable long-term contracts and the heavy discounts applied to these contracts have left some system owners and project developers seeking ways to finance solar through spot transactions. In June 2010, Diamond Castle, a New York based private equity firm, announced that it would be financing projects strictly with equity in order to avoid the premiums paid in long-term contracts.
In addition to providing cash flow security and stability, long-term SREC contracts are often required by banks or other lending institutions unwilling to accept market and legislative risk associated with SREC markets. However, SREC contracts longer than 3 years can be difficult to secure in some SREC markets because in deregulated electricity markets, energy suppliers rarely have electricity supply contracts longer than three years. Some SREC aggregators have managed to negotiate 3-10 year agreements and are able to offer similar length contracts to their residential and commercial customers. In most cases, long-term contracts demand some sort of premium over market prices to compensate the off-taker for putting up the credit to guarantee the contract in the event that prices drop. This premium is also affected by the general lack of availability of credible off-takers in the market. In some markets, however, where short term supply has overtaken demand, long-term prices are competitive and can actually be better than spot prices.