What Are Solar Renewable Energy Credits?

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What are SRECs?

Solar Renewable Energy Credits (SRECs) are a powerful financial incentive that can significantly boost the economic benefits of installing a solar energy system. Outside of lowering your utility bill and the environmental impact, getting rooftop solar can actually put money into your pocket. SREC credits are the vehicle to doing so.

These solar credits represent the environmental attributes of solar electricity generation and play a crucial role in promoting renewable energy adoption.

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SRECs are created for every megawatt-hour (MWh) of electricity generated by a solar photovoltaic system. 1 MWh is 1,000 kWh.‍

For a typical residential solar installation, this translates to approximately 10 to 13 SRECs produced annually.

Depending on where you live and the size of your system, you sell these solar credits through an aggregator for hundreds or thousands of dollars. Talk about a good return on investment.

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Why do SRECs exist in the first place?

The concept behind solar renewable energy credits is to provide a market-based solution to encourage solar energy production and help states meet their renewable energy goals.

SRECs are tied to state-level regulations known as Renewable Portfolio Standards (RPS).

More specifically, SRECs are part of the solar carve-out in these RPS. These standards require utilities to produce a certain percentage of their electricity from renewable sources. To comply with these requirements, utilities can either generate renewable energy themselves or purchase SRECs from solar system owners.

If an electricity supplier fails to meet their state’s RPS requirements by securing the necessary number of RECs, it must pay a penalty called an Alternative Compliance Payment (ACP). The ACP effectively sets a price ceiling on SRECs since an energy supplier would never purchase an SREC priced above the ACP.

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Am I selling my energy to a utility?

When a solar system generates electricity, it creates two products: the physical electricity and the associated SREC.

While the electricity is used on-site or fed into the grid (typically through Net Metering), the SREC can be sold separately as a commodity on an open market, like a stock.

This creates an additional revenue stream for solar system owners, effectively allowing them to be paid twice for their solar generation – once for the electricity itself and again for the environmental benefits it provides.

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How much can I sell my SRECs for?

The value of solar renewable energy credits can vary significantly depending on the state and market conditions.

For example, in Washington D.C., SRECs can be worth over $400 each, potentially generating thousands of dollars in annual income for system owners. Other states, like Pennsylvania or Ohio, have lower SREC values but still provide meaningful additional income for solar adopters.

Not all states in the United States offer solar renewable energy certificates. SREC prices are dictated by supply and demand, and the states that have SRECs are as follows, with each credit equaling the amount shown as of October 2024:

• Washington D.C.: $440

• Delaware: $4

• Illinois: $150

• Maryland: $58 (changing to 1.5x in 2025)

• Massachusetts: $40 (Class I RECs)

• New Jersey: $85 (new ADI program)

• Pennsylvania: $35

• Ohio: $35 (can sell into PA market)

• Virginia: $35 (can sell into PA market)

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How do I sell my SRECs?

To participate in the SREC market, solar system owners typically need to register their systems with the appropriate state authority and a tracking system like PJM-GATS.

However, this can be cumbersome and timely.

Aggregators like Currents make it simple to register your rooftop solar system and start earning fast.

We will register your system with the right authorities, automate the reporting of your solar generation data and pay you with modern payment options. All this for a small fee.

Once registered, the system's production is monitored, and SRECs are issued accordingly every month. It's "solar passive income".

You can also pre-sell your SRECs to solar installment companies and solar financing companies for a fixed price, called an annuity, of which contracts can last 3 to 15 years.

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What states can I sell SRECs?

It's important to note that not all states have SREC markets.

Currently, only seven states and Washington D.C. have active SREC programs: New Jersey, Massachusetts, Pennsylvania, Maryland, Delaware, Ohio, and Virginia. Some states, like New Jersey and Massachusetts, have transitioned to alternative programs but still compensate solar owners for their green energy production. Some states can sell RECs into these markets, but we'll leave that out for now.

The introduction of SRECs has had a significant impact on the solar industry

In states with robust SREC markets, the additional income can substantially reduce the payback period for solar installations, making solar energy more attractive to homeowners and businesses alike.

For instance, in Washington D.C., the high value of SRECs has helped reduce the average solar payback period to just under three years!

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SREC Price Example

Depending on your state, your payback period on the solar system will drastically reduce if the SREC credit price is high.

10 SRECs in Washington D.C. priced at $440 each would equate to $4,400.

This will sometimes take a payback period of 15 years down to just 5 years! Talk about a good ROI.

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Solar Renewable Energy Credits by State

Not all states in the United States offer solar renewable energy certificates.

SREC prices are dictated by supply and demand, and the states that have SRECs are as follows, with each credit equaling the amount shown as of October 2024:

• Washington D.C.: $435

• Delaware: $4

• Illinois: n/a

• Maryland: $58 (changing to 1.5x in 2025)

• Massachusetts: $40 (Class I RECs)

• New Jersey: $85 (ADI Program)

• Pennsylvania: $35

• Ohio: $4.00

• Virginia: $35

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Are SRECs considered taxable income?

Yes, solar renewable energy credits are taxable, on both your federal and state returns.

The form is issued if there has been $600 in income. Consult a tax professional for more information.

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Find Out More About Your Home Energy Savings

You can budget and pay down your solar loan by pre-selling or selling your SRECs. Find more info about your home energy savings here on Currents and explore our other articles. 

In conclusion, Solar Renewable Energy Credits represent a innovative approach to incentivizing renewable energy adoption. By creating a market for the environmental benefits of solar generation, SRECs provide a win-win situation: utilities can meet their regulatory requirements, while solar system owners can maximize the return on their investment.

As we continue to transition towards a cleaner energy future, mechanisms like SRECs will likely play an increasingly important role in driving solar adoption and supporting our renewable energy goals.

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Sources

SRECs: What are Solar Renewable Energy Credits? | EnergySage

SREC: What is a Solar Renewable Energy Credit? | Solar.com

Solved: SRECs generated from home solar system (intuit.com)