How to Sell SRECs: A Beginner's Guide

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Want to make money from your solar panels? Here's how to sell Solar Renewable Energy Credits (SRECs):

Key things to know:

Selling MethodDescriptionRiskProfit PotentialSpot MarketSell at current pricesHighHighFixed PriceLock in a set priceLowLowUpfrontGet paid in advanceLowLowest

Remember: Stay on top of SREC market changes and state policies to maximize your earnings.

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How SRECs work

SRECs are like bonus points for solar energy producers. Here's the lowdown:

Creating and tracking SRECs

You earn 1 SREC for every 1,000 kWh (1 MWh) of solar electricity you produce. Simple, right?

Special meters track your solar output. Once you hit 1 MWh, a state-approved body verifies it and mints your SREC.

Renewable Portfolio Standards

Why do SRECs have value? It's all about government rules.

Many states have Renewable Portfolio Standards (RPS). These laws force utilities to use a certain percentage of renewable energy by a specific date.

If utilities don't comply? They pay big fines.

Here's a quick look at some state RPS goals:

StateTargetDeadlineCalifornia100%2045New York100%2030Texas10,000 MW2025Ohio8.5%2025

SREC markets by state

Only 7 states have active SREC markets:

Each state has its own rules. For instance, New Jersey requires you to register your solar system with their Clean Energy Program to earn SRECs.

SREC prices vary wildly - from $5 to $500 per SREC, depending on your state.

The price cap? It's set by each state's Alternative Compliance Payment (ACP) - the fine utilities pay for missing their renewable energy targets.

Remember: SRECs are separate from your electricity. You're selling the "green-ness" of your power, not the power itself.

That's SRECs in a nutshell. They're a way to earn extra cash from your solar panels while helping utilities meet green energy goals.

Getting ready to sell SRECs

Before you can start selling SRECs, you need to set up your solar system properly. Here's what you need to do:

Solar system setup and approval

First, install your solar panels and get them certified. This involves:

Why the special meter? It's the only way to accurately measure your solar output for SRECs.

"All solar energy systems eligible to earn SRECs must report system production based upon readings from a revenue-grade meter", - New Jersey Clean Energy Program

These meters aren't cheap. Basic installations cost $350 to $900, averaging $645. Remote reading capabilities? That's $1,250 to $2,500.

Joining SREC programs

After setup, join your state's SREC program. Each state has different rules:

StateProgramKey RequirementNew JerseySREC Registration Program (SRP)Register before constructionMassachusettsProduction Tracking System (PTS)Web-based applicationPennsylvaniaSREC ProgramRegister with Public Service Commission

Note: New Jersey's SRP closed on April 30, 2020. If you missed it, check out the Transition Incentive Program.

Setting up SREC tracking

Lastly, set up SREC monitoring:

Your installer might do this for you. If not, DIY or hire a broker.

Remember: SRECs are only for system owners. If you're leasing panels or have a Power Purchase Agreement, you're out of luck.

How to sell SRECs: Step-by-step

Want to cash in on your solar energy? Here's how to sell your SRECs:

1. Sign up with SREC platforms

Join an SREC marketplace like SolSystems or SRECTrade. For SolSystems:

2. Produce and record SRECs

Generate SRECs:

Track your SRECs:

"All solar energy systems eligible to earn SRECs must report system production based upon readings from a revenue-grade meter", - New Jersey Clean Energy Program

3. Find buyers and agree on terms

SREC selling options:

OptionDescriptionProsConsSpot marketCurrent pricesHigher potentialPrice swingsFixed priceSet priceStable incomeMiss increasesUpfrontAdvance paymentQuick cashLower total

Most homeowners use aggregators. They offer:

4. Finish the sale

To complete:

Don't forget:

What affects SREC prices

SREC prices can swing wildly. Here's why:

State renewable energy goals

Each state's Renewable Portfolio Standard (RPS) drives SREC demand:

Supply and demand

It's simple:

Alternative Compliance Payments (ACPs)

ACPs cap SREC prices. Utilities won't pay more for SRECs than their state's ACP:

StateACPSREC PriceMassachusetts$330$315Maryland$60$55

SREC age

Newer SRECs often sell for more:

SREC AgePrice Impact0-3 monthsHighest3-6 monthsSlight drop6+ monthsLowest

SREC markets are tricky. Prices can change fast. Stay in the loop to get the most from your SRECs.

"Roughly half of all growth in U.S. renewable electricity generation and capacity since 2000 is associated with state RPS requirements." - Lawrence Berkeley National Laboratory

This shows how state policies drive SREC demand and prices.

Ways to sell SRECs

You've got two main options for selling SRECs: the spot market and fixed price deals.

Spot market vs. fixed price deals

The spot market is like a stock exchange for SRECs. You sell as you go, riding the market's ups and downs.

Fixed price deals? They're long-term contracts. You lock in a set SREC price for a specific period.

Here's a quick comparison:

AspectSpot MarketFixed Price DealsPriceMarket-drivenLocked inRiskHigherLowerProfit PotentialHigherLowerCommitmentNone3-15 years typically

SRECTrade and Sol Systems offer both options. Sol Systems has four contract types:

1. Upfront: One-time payment for expected production

2. Annuity: Fixed payments over 3-5 years

3. Profit Share: Base price plus market improvements

4. Brokerage: Quarterly sales at market rate

Working with aggregators

Aggregators are SREC middlemen. They bundle SRECs from small producers and sell to big buyers.

Why use an aggregator?

But they take a cut of your profits.

"Partner with a trustworthy aggregator to optimize SREC values and navigate the fluctuating market", says Sol Systems, a leading SREC aggregator.

To start selling:

Remember: SREC prices vary by state. In March 2023, prices ranged from $3.50 in Ohio to $370 in Washington D.C.

Choose a selling method that fits your goals and risk tolerance. And always keep an eye on your local SREC market.

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Getting the most from SREC sales

Want to make more money from your SRECs? Here's how.

When to sell SRECs

Timing is everything. SREC prices can go up and down like a rollercoaster.

Check this out:

Big difference, right? So, what should you do?

Sol Systems, a big SREC player, says: "Team up with a solid aggregator to get the best SREC prices in this crazy market."

Using Currents for SREC sales

Currents is like your SREC assistant. It can:

Using Currents? You might make more money and save time.

But here's the kicker: Don't forget about your account. One water company lost almost $180,000 because they didn't sell their SRECs for years. Ouch.

What to doWhy it's goodSell regularlySteady cash flowTime it rightMore money per SRECUse tools like CurrentsLess hassle, more profit

Taxes on SREC income

Selling SRECs can boost your bank account, but the taxman might come knocking. Here's the scoop on SRECs and taxes.

How to report SREC income

The IRS hasn't given us a clear playbook for SREC income. It's a bit of a gray area. But here's what you can do:

Keep in mind: The IRS can look back 7 years. Better to be on the safe side!

Possible tax costs

Let's break it down:

ScenarioTax ImplicationsRecouping investmentMight not be taxableMaking a profitLikely taxable

In 2010, the IRS said in a private letter that SREC sales are taxable. But that's not set in stone for everyone.

Mark Bolinger from Lawrence Berkeley National Laboratory says:

"If the SREC payments did actually fall under the Section 136 exclusion and were therefore not taxable, then the basis for the 30% ITC or cash grant would (by law) need to be reduced by the amount of the non-taxable SREC payments."

In other words? It's tricky. Your best move? Talk to a tax pro who knows solar.

Don't ignore your SREC income at tax time, but don't lose sleep over it either. With good advice, you can handle these tax challenges.

Common SREC selling mistakes

Selling SRECs can boost your solar panel income. But watch out for these pitfalls:

Missing signup deadlines

Time's money with SRECs. Miss a deadline, lose cash.

Take New Jersey's SREC Registration Program. It closed on April 30, 2020. Late? No SRECs for you.

To stay on track:

Skimming contract details

SREC contracts are no joke. Skim the fine print, pay the price.

What to check:

ElementWhy It's KeyLengthPrice lock-in timePricingYour SREC earningsExit feesPotential profit-eaters

Take your time. Confused? Ask. Better now than sorry later.

Slacking on SREC records

Bad records = lost SRECs = lost money.

Track this:

Try SREC tracking apps. Some aggregators offer these tools.

Here's the kicker: SRECs can expire. Good records help you sell before they're worthless.

What's next for SREC markets

The SREC world is changing fast. Here's what's coming:

New state SREC programs

More states are jumping on the SREC train. New Jersey's leading the pack with its Successor Solar Incentive (SuSI) Program. It's aiming to double the state's solar capacity by 2026.

How? By offering New Jersey Solar Renewable Energy Certificate-II (NJ SREC-II) for every megawatt-hour of solar power. The goal? Add 3,750 megawatts of new solar by 2026.

But there's a twist. The incentives are lower than before:

Market SegmentOld SREC ValueNew SREC-II ValueVarious types~$220$70-$120

This shift shows a trend: states want more solar, but they're tightening the purse strings.

Possible federal changes

The feds are mixing things up too. The Inflation Reduction Act extended the federal solar tax credit to 2032. Here's the breakdown:

YearTax Credit2022-203230%203326%203422%20350%

This could give solar installations a boost and shake up the SREC supply.

Shifts in market structure

SREC markets are on the move. Take Maryland:

What's this mean? SREC prices are like a rollercoaster. They're at the mercy of state policies and market supply.

The bottom line? Keep your eyes peeled on your state's SREC program. Changes can hit you like a ton of bricks, affecting your wallet.

Conclusion

SRECs can boost your solar system's income. Here's what to keep in mind:

Staying Current with SREC Changes

The SREC market never stands still. Here's how to keep up:

1. Watch state updates

States often shift their renewable energy goals, affecting SREC prices:

StateChangeEffectNew JerseySuSI ProgramAims to double solar by 2026MarylandClean Energy Jobs BillSlight RPS increase from 2017

2. Track market trends

SREC prices can swing wildly. In Maryland, they dropped from $120 to $5 between 2016-2018, then shot up in 2019.

3. Monitor federal policies

The Inflation Reduction Act extended the federal solar tax credit to 2032, potentially impacting solar installations and SREC supply.

4. Join industry groups

These often provide updates on SREC markets and policy shifts.

FAQs

How do solar renewable energy credits work?

SRECs are proof that your solar panels generate clean electricity. You earn 1 SREC for every 1,000 kWh your system produces. These credits are sold separately from your actual electricity.

What's the downside of SRECs?

The main issue? You have to sell SRECs at current market prices. This means you can't cash in on future price hikes. As SRECTrade puts it:

"The catch is you will have to sell the SRECs for their current price, meaning you can't take advantage of any SREC market price increases in the future."

What's the best way to sell SRECs?

Got an SREC market in your state? Team up with an SREC aggregator or broker. Companies like SRECTrade and SolSystems make selling SRECs a breeze compared to dealing directly with utilities.

How much can you sell an SREC for?

SREC prices are all over the map. Here's a quick look:

LocationSREC PriceU.S. Average$30 - $60Ohio$3.50Washington D.C.$370

What affects SREC value? State renewable goals, supply and demand, and utility fines for missing renewable targets all play a role.

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