What are they?
If you’ve spent any time researching the financial aspects of the solar market, you’ve no doubt run into conversation regarding RECs—Renewable Energy Credits, also known as Solar Renewable Energy Credits (SRECs) and Alternative Energy Credits (AECs). Although a lot of confusion can stem from the various names and resources, the important thing to understand, first off, is that these are all one and the same. They are credits (and we’ll refer to them hereafter as SRECs), monitored by a state-specific tracking system, that are generated by your PV system’s energy production—for every megawatt hour (mWh) your system produces, you receive one SREC from the tracking entity your system is registered with. A 15 kilowatt system in the Northeastern United States will produce, on average, about 18,000 kilowatt hours of production over the course of a year—or approximately 18 SRECs. As an added convenience for our clients, Smucker’s can act as your aggregator for the SRECS your system produces if you do not wish to do so yourself.
Why do they have value?
In an effort to encourage clean energy, many states have passed legislation requiring the power companies inside their borders to show proof that a certain percentage of their sold energy is coming from renewable or clean sources. This proof of clean energy can either be produced by the power company itself (with its own solar energy systems), or acquired from private solar energy producers with the purchase of their SRECs. Power companies are charged an Alternative Compliance Payment (ACP) for not meeting the minimum “clean” percentage, and SRECs continue to hold value in their market as long as they are cheaper for the power companies to purchase than the ACP imposed by the state for not meeting the minimum threshold. So when your system generates SRECs, they are generating a valuable commodity that can be sold on the SREC market—further aiding in expediting your system payback time. This is why large systems, such as commercial and agricultural installations, stand to benefit in such a big way from registering in the SREC market.
How much is an SREC worth?
Like the stock market, an SREC’s value is always changing, depending on many factors including supply and demand, the state’s clean energy minimum, the ACP charge, and more. All of these factors are specific to the state and its policies, so for example, an SREC in Pennsylvania may not be worth as much as an SREC in New Jersey (and, generally speaking, your system can only be registered within one state). At the time of this writing, a Pennsylvania SREC was worth approximately $40, and a New Jersey SREC was worth around $200. This means that for your 15 kilowatt system, you could expect to make between $700-$750 annually on the sale of your SRECs in Pennsylvania, and about $3,600 in New Jersey.
What states have an SREC market, and why is there so much value discrepancy between states?
As of this writing, Delaware, Massachusetts, Maryland, New Jersey, Ohio, Pennsylvania, and the District of Columbia have SREC markets (with some neighboring states allowing systems installed within their borders to register with select states that have markets—see SRECTrade.com for an in-depth breakdown). The reason for such wide gaps in value state-to-state is similar to the explanation for what gives an SREC its value in the first place: different states have varying degrees of demand for SRECs (some markets have been flooded), and different states have varying levels of strictness in their clean energy policies imposed on local power providers (affecting the SREC’s overall value). These factors and more all contribute to how much a state’s SREC is worth at a given time, and different states are simply at different points in the cycle of the SREC.
What has the value of the SREC done historically, and what is it projected to do?
Generally speaking, the establishment of an SREC market takes place near the beginning of a state’s solar surge—or rather, it creates the surge. Very high SREC prices increase the overall solar investment, meaning the SREC starts high and begins a very slow and gradual downward trend. However, as national and local governments continue to make the shift towards clean and renewable energy, more and more policies are established to encourage its growth—including raising the percentage of energy each state wants generated from renewable sources. As soon as that percentage increases, power companies are required to purchase more SRECs to satisfy the minimum, and the market value of the SREC spikes back up. The life of an SREC is cyclical, and states where the value is low are simply waiting for the minimum threshold to be raised by legislation.
The bottom line is that SRECs, whether high or low, hold value, and the return of their sale is money for the system owner that wouldn’t be had otherwise. Talk to a Smucker’s representative to find out more about how we can help set up your system to track SRECs and earn you money on your decision to power your home or business with clean energy.