How do SRECs work?

All about solar renewable energy credits

Last update: Dec. 2015

SRECs are credits that homeowners in a few northeastern states get from having a solar PV system that makes electricity, which they can then sell for cash. You probably don't live in one of these states, so you probably don't qualify to get these credits, but you might be able to get rebates for installing solar from your utility, city, or state, and you might qualify for a federal tax credit.

Once you know how much you can get in credits or rebates, use my solar PV cost calculator to find out how much it will cost to have your system installed. In most cases, it will be less than you're paying for grid electricity

How do I get my SRECs?

Thomas, a reader in Maryland, shared with us how he actually gets and sells the SRECs he earns from having rooftop solar:

Every couple of months I log into my utility company's website.
I enter the monthly production values for my solar photovoltaic system on the generation page.
One month after I enter enough production to get to 1MWh [1000 kWh], I am issued an SREC which exists completely digitally.
When I notice the certificate in my inbox I place a sale notice on an SREC exchange like flettexchange.com noting the quantity of SRECS, the sale price and the production state. There are several exchanges all of which have different terms regarding fees and other details. (Mine charges $2.50 for a sale.) The SREC price floats with the market and varies by exchange and state. Some exchanges offer the ability to purchase an annuity where you get paid a fixed price per SREC regardless of market fluctuations.
When the exchange has found a buyer I either get a check in the mail or an ACH deposit in my bank account for the sale price minus any exchange commissions.

The price of SRECs is trending downward, and that will continue. They started at around 70¢/kWh, are about 15¢/kWh as I write this in Dec. 2015, are expected to go down to 5¢/kWh by 2023, and should keep going down after that. That's because the supply of SRECs is going up (as solar becomes more popular), and demand is going down (as utilities, which are the buyers of the SRECs, can pay ever-decreasing penalties in lieu of buying the SRECs).

Why do we have SRECs?

We have SRECs because lawmakers wanted a market-based way to promote solar energy. Here's how it works: certain state legislatures told utilities that a minimum amount of electricity used by their customers has to come from solar. The utilities have three ways to comply with that:

Install their own solar photovoltaic systems, and/or
Buy SRECs that their customers generate from rooftop solar, and/or
Pay a fine ("ACP") if they didn't do enough of #1 and #2. The price of these fines is set to go down year after year, making SRECs less valuable over time.

With or without SRECs, solar PV systems are now cheaper than grid energy in most cases. See my solar price calculator for more.