Solar Finance 101: What’s an SREC and How Much Is It Worth?

Solar_DG_RPS_map_optIf you live in one of the 16 states plus Washington DC with a Renewable Portfolio Standard, then going solar may generate more than just clean energy—it can also generate cash from your utility through “SRECs.”

What’s a Renewable Portfolio Standard (RPS)

A Renewable Portfolio Standard (RPS) is a law that mandates that a state’s utility produce a minimum amount of solar power every year. States with RPSs include New Jersey, Maryland, Delaware, Washington DC, Pennsylvania, Massachusetts, and 11 other areas. (See map).

How does the state know that the utilities are producing that minimum amount of solar, wind, etc? Because the utility is required to provide proof that comes in the form of a special certificate, and that’s where SRECs come in.

What’s an SREC? 

SREC stands for Solar Renewable Energy Certificate. Solar homeowners and commercial businesses in RPS states can earn one SREC for every 1000 kilowatt hours (kWhs) generated by their solar PV system. For a typical 5 kW home solar installation, you could earn about six SRECs per year.

How Much Is an SREC Worth?

So, you’ve checked your solar meter and seen that you’ve earned the equivalent of one SREC (1000 kWhs). Great! How much is it worth? The short answer is that it depends on your state and your SREC market.

The SREC price can range anywhere from $4/SREC to $480/SREC, depending on your state, the time the SREC was generated, and SREC market volatility. Like any commodity market, the SREC price is based on supply and demand, so the price can fluctuate. Right now in November 2013, a New Jersey SREC is selling between $120 and $137, depending on when the SREC was actually generated.

Timing is important. Not everyone turns in their SRECs immediately. Some solar homeowners and businesses keep their SRECs, waiting for the market price to go up. As a result, sometimes there aren’t enough SRECs available, and if the utility is short on its quota, then the SREC price will go up. However, there is a ceiling price—and sometimes a floor price, as well.

If the utility can’t collect enough SRECs to meet its quota, then they have to pay a high penalty to the state. Consequently, the price of an SREC is never as high as that penalty (ceiling) price, but it can get close.

But don’t hold on to your SRECs for too long. If you generated SRECs in 2011 and didn’t put them into the market, its value may have plummeted, since the utility has already made its quota for 2011. For example, a 2011 SREC in Pennsylvania is now going for around $4, whereas a “fresh” 2013 SREC trades for $13.

Other Things to Know About SRECs

  • You may or may not be able to trade directly with the utility. It depends on your state and the amount of SRECs you have on hand. Most homeowners sell their SRECs to SREC sellers, such as SRECTrade.com, who take a small fee and process your SRECs at the market price for your state.
  • Most SRECs can only be traded to state utilities where they live. However, Ohio allows SRECs to be traded to other state markets, but the price is usually lower when you sell out of state.
  • Current SRECTrade.com market prices for all SREC states can be seen here.

If you have more questions about solar for your home or business or about SRECs, contact your local REC Solar representative. They will know the SREC markets in your area, especially New Jersey, and be able to guide you through the SREC process.

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