Solar Renewable Energy Certificates (SRECs) 101

Feb 16, 2011

I’ve heard people say that the electricity generated by solar is worth more than any other electricity, how is that possible? It’s possible, because solar electricity also creates SRECs.

What is an SREC? And how are they generated?

A Solar Renewable Energy Certificate (SREC) is a certificate created to promote the growth of solar energy. As your My Generation Energy system generates electricity, it also creates these corresponding virtual certificates that are worth real money when sold on an open market. SRECs are generated for every megawatt hour a solar installation system produces. A typical home installation of 5 kW capacity produces about 6 SRECs per year. For example:

1 SREC = 1,000 kWh of solar electricity = 1 MWh of solar electricity

5 kW solar capacity generates ~ 6 MWh = 6 SRECs per year

Simply, as a solar energy system owner, you are not only able to use all of the clean energy you produce; but as an additional bonus, you are financially rewarded for each SREC generated. You are being paid just because you’re making solar electricity.

Who buys SRECs?

For Massachusetts, regulations have been implemented which require electricity suppliers–the companies selling “regular” electricity–to purchase a certain number of SRECs per year. These requisites, called Renewable Portfolio Standards (RPS), also penalize suppliers for not meeting the minimum yearly quota. Currently, this fee is $600 per SREC. This penalty, in effect, sets a ceiling price for SRECs. For comparison, this is more than three times the retail price of the electricity itself!

How do I sell SRECs?

With little work involved on the part of the seller and with the help of My Generation Energy, solar electricity generators can efficiently sell their SRECs to buyers on an open market called SRECTrade. My Generation Energy provides a hands-free enrollment service, eliminating any work on the seller’s end. We provide full service in:

 Submitting all state forms to certify your system.

 Setting up an SREC tracking account through the state.

 Creating and managing your SREC account through SRECTrade.

Once choosing to enroll with this convenient option, you the seller simply set your minimum price and wait for your check.

How does the auction work?

SRECTrade hosts auctions on a quarterly basis, which allow buyers and sellers to interact seamlessly. This public marketplace was created as a solution to manage and sell SRECs; it also acts as an incentive to promote solar energy. This intermediary agent differs from third-party brokers, because it allows sellers more control over their certificates as well as provides clients with current market information including prices and markups which are otherwise typically undisclosed.

How soon can I begin selling SRECs and when will I see the money?

As a seller, you simply submit your solar meter readings at the beginning of each month and wait for a sale. You can begin selling your SRECs as early as 6 months after the date of interconnection. After the initial 6 month waiting period, there is a delay from the end of each quarter before SRECs made in that quarter are available to be sold on the market (Refer to Figure 1. below). Upon an auction closing, buyers’ payments are collected, and sellers’ payments are distributed. As a new system owner for 2011, you will generate SRECs for 10 years thereafter; My Generation Energy can help make this a hassle-free transaction.

Figure 1. An example timeline for generating and selling SRECs.

How much are Massachusetts SRECs worth?

As all markets are driven by the forces of supply and demand, so is the SREC Program. In this case, the number of solar installations producing SRECs represent the supply; and the state requirements on the electricity suppliers set the demand. As this is a regulated market, the Massachusetts Department of Energy Resources (DOER) makes on-going adjustments to the program to drive the demand and keep the market hungering for more supply. In Massachusetts, the current penalty is at $600, which sets the ceiling price; in accordance, a floor price has been implemented at $300. Essentially, in any given auction, an SREC is sold at a price of between $300 and $600 (a range which isn’t expected to change). In the most recent auction, the clearing price was $500. For 2011, the state has set the requirement on suppliers to purchase approximately 63,000 SRECs. The installed solar capacity needed to produce those SRECs does not exist yet. So it is very likely that SRECs will continue to be in high demand and short supply–a “hot commodity” scenario for quite some time.