Solar renewable energy certificates

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.

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.

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.

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