What are SRECs?
The term SREC stands for Solar Renewable Energy Credit and is a tradable credit that represents all the clean energy benefits of electricity generated from a solar electric system. Each time a solar electric system generates 1,000kWh (1MWh) of electricity, an SREC is issued which can then be sold or traded separately from the power.
SRECs are purchased by electrical utilities or energy suppliers who need to meet a Renewable Portfolio Standard (RPS). The value of an SREC is quantified by three major factors:
- State RPS requirements
- Value of the state’s Solar Alternative Compliance Payment (ACP)
- Supply and demand of SRECs in that specific state
Because of these factors, SREC values can vary dramatically from state to state.
A solar energy system will create a solar renewable energy credit (SREC) each time it produces one megawatt-hour (MWh) of energy. Depending on the state in which the system is located and the size of the system, these solar systems can create SRECs using estimates from an online system called PV Watts, or the owner may have to provide actual meter readings. Generally, systems less than 10kw can use estimates from PV Watts, but solar systems larger than 10kw, and also those located in Ohio or Delaware, require the system owner to provide actual meter output information in order to produce SRECs. When used in conjunction with state and federal solar energy tax credits, SRECs can drastically reduce the cost of a solar energy system.
RPS and SACP Defined
A Renewable Portfolio Standard (RPS is a state or federal policy that requires electricity suppliers to provide a certain percentage of their electricity from renewable energy resources. More than 30 states have RPS programs, and many of these states have solar RPS requirements that specifically mandate a minimum percentage of energy be produced from solar energy sources. Energy suppliers meet RPS requirements by creating or purchasing SRECs, or by paying a non-compliance fine to state regulatory authorities.
A Solar Alternative Compliance Penalty (SACP) represents the future value of a penalty paid by the electric supplier if they fail to meet state RPS requirements. The following schedule has been published in accordance with Maryland requirements:
2022+ is projected at ~$50
Our SREC partner Sol Systems offers three unique SREC options for financing your existing or planned solar energy system.
- Sol Annuity: A fixed payment per SREC for a multi year term
a. Sol Annuity provides a fixed, quarterly payment for each full SREC produced. This option removes SREC price volatility, and provides you with a steady income stream over a 3 or 5 year contract term. As spot market prices change (and decrease) over time, Sol Annuity gives you consistent, guaranteed income. You can match this cash flow against a solar financing payment, such as a loan or PPA.
b. Once you lock into a Sol Annuity-3 year or 5 year solar renewable energy credit (SREC) contract and install your system, you will receive the guaranteed rate for each SREC produced each quarter year-after-year for the contract term.
c. There are no hidden fees. Currently, you can lock into a Sol Annuity-5 year contract for 15% of SACP value or a Annuity-3 year contract for 20% of SACP. Please note that SREC prices for new contracts are subject to change on the 1st business day of each month. Ask your Aurora Energy representative for the most current offerings. *See above for MD SACP schedule*
- Sol Upfront: An upfront, lump-sum payment for your SRECs
a. This option provides immediate financing for your system and eliminates all market risk of fluctuating SREC prices.
b. You will receive the lump-sum payment within ten business days of your system being installed, registered, and certified as a renewable energy generator. You may opt to assign the upfront payment directly to your installer so the installer can reduce the initial cost of your installation. Assignment of your SREC payment could be used to purchase a larger system.
c. The upfront payment is paid based on the DC system size. A 10 year payment is currently valued at $300 per DC kW and the 20 year is $325 per DC kW.
- Sol Brokerage: A variable payment for each SREC produced
a. This option allows you to benefit from the risk-reward of the SREC spot market with no effort required.
b. Requires a 1 year commitment term, or customers may opt to convert into a Sol Upfront or Sol Annuity contract at any time.
c. The most recent SREC sale price in Maryland was at $133 (~33% of published ACP).
d. Paid quarterly and as generated.
e. A 5% brokerage fee is applies
For more information about the SREC and available payment offerings, please visit: www.solsystemscompany.com or speak with you Aurora Energy representative.