What the heck is an SREC?

What the heck is an SREC?

Solar Renewable Energy Credits, or SRECs, are a type of solar incentive that help speed up the return on your solar investment. SRECs aren’t available in every state, but where they are, they’re a valuable source of extra income in addition to your monthly savings on your utility bill.

The way they work is pretty simple. For each 1,000 kilowatt-hours (kWh) of electricity your solar energy system produces, a renewable energy certificate is created. An average residential solar installation at Ipsun is about 10kW, so with a system of that size, you could generate roughly 1,200 kWh/year and create on average one SREC per month.

Selling your SRECs is easy and profitable

When your system becomes operational, it will start generating SRECs if you live in MD or DC, and hopefully soon in VA as well. At that point, we’ll set you up on SREC Trade. This is a marketplace where you can sell your SRECs for cash. SRECs are traded on an open market like commodities, so the values can fluctuate and will also differ from state to state.

According to SREC Trade, when your system generates a full SREC, that becomes available to trade the following month. If your system generates one credit per month, you will receive a monthly payment. Smaller, sub-10kW systems will probably generate fewer SRECs, so payments may not be as frequent. Newly issued SRECs become available for transacting on the 1st of each month.

Most customers choose "managed sales," which means when you sign up with SRECTrade they will manage your transactions for you. Whenever an SREC becomes available they'll trade it for you and direct deposit the money in your bank account.

You can also choose "spot sales," which is a process that you control on your own. Spot sales depend on whatever the current market price is, so like any market-based trading, it is inherently risky and requires more hands-on management. SRECTrade emphasizes that sales price and payment timing are not guaranteed for any clients selling on the spot market.

Why are SRECs made available?

Many states have a Renewable Portfolio Standard (RPS) as part of their effort to mitigate climate change. An RPS requires the state to add a certain amount of renewable energy to the current “brown power” (usually a mix of coal, natural gas and nuclear) that’s available to utility customers on the electric grid.

If the RPS also has a "solar-carveout," then a certain amount of the mandatory renewable energy must come from residential and small commercial solar owners. If the utility does not meet the standard set for renewable energy at a given time, they will have to pay a fine. To avoid this, utilities will instead purchase credits toward their requirement from individual solar owners in the form of SRECs. It’s a pretty clever way to incentivize individuals and small businesses to go solar and creates a win-win situation that helps renewable energy grow.

State payment amounts vary based on solar energy supply and RPS standards

Payment amounts vary in each state. Right now in DC, SRECs are trading for a whopping $435 each. This is due to the District’s aggressive renewable energy goals coupled with low solar supply. This creates a great incentive to go solar in DC.

In Maryland, SRECs are trading at a much more moderate, and typical, level. Current SREC prices are around $78, which is still a great payout especially when coupled with the savings realized on your utility bill. 

Virginia’s SREC market is still in the works. On July 1st, the Virginia Clean Economy Act created the potential for a market, but the actual result will not be seen until after January 1st. We’ll keep all Virginia customers updated as details become available.

Set it and Forget it: Transaction timing with Managed Sales 

The benefit of choosing Managed Sales is the ability to "set it and forget it," but you'll still want to be able to predict when that SREC money will hit your account. Thankfully the timing for managed accounts is fairly predictable.

Typically in DC and MD, due to the market's relatively high liquidity, transactions are done within the first few business days of the month and then the payment terms are about 10 business days. On average, clients should see a transaction booked around the 5th of the month and payment near the 20th. 

More specifically, the timing should follow these steps:

  1. New SRECs become available for sale on the 1st of each month, assuming one or more SRECs was generated by the prior month's reported production. Clients can view the newly issued SRECs in their SRECTrade accounts on this date, under the "Summary" tab for their facility.
  2. SRECTrade works to transact the SRECs based on customers' sales preferences, typically completed within a few business days. 
  3. SRECTrade books the details of finalized transactions in client accounts and sends a notification email to clients.
  4. Payment will be initiated to the clients via ACH/direct deposit within about 10 business days from the transaction date. This includes SRECTrade receiving payment from buyers and remitting to clients. 

Have questions? Please reach out to us to talk about SRECs or any other incentives that may be available in your state or locality. We’d love to help you get an understanding of the various incentives that can help you go solar! Give us a call at (866) 484-7786 or click below to get in touch!

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