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What are SRECs? Everything You Need to Know about Solar Energy Credits

What are SRECs? Everything You Need to Know about Solar Energy Credits

Learn how Solar Energy Credits or "SRECs" work for your solar system.

Thad Warren
September 2022
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6 Minutes

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What are Solar Energy Credits (SRECs)?

Solar Energy Credits (SREC) are a performance-based incentive that allows you to earn credits for every megawatt-hour (MWh) of electricity your solar system generates.  SRECs should not be confused with the federal solar tax credit that gives a one-time tax credit on new solar panel systems.

SRECs help utilities meet state regulations that require a certain percentage of electricity produced be from renewable sources. These regulations are called renewable portfolio standards (RPS). To meet the requirements of these standards utilities must purchase renewable energy certificates/creds (RECs) to serve as proof that they generated the electricity from renewable sources or paid someone who did. 

Renewable Portfolio Standards

Renewable Portfolio Standards (RPS) are regulations that require utilities to generate a certain percentage of power from renewable sources. In some states, this is called Clean Energy Standard or CES. The difference between CET and RPS is that “clean” generally refers to energy sources that have zero carbon emissions. For example, nuclear energy is usually considered a clean energy source because it is carbon-free, but it is not widely considered “renewable”. 

There are 38 states that have RPS in place. Some RPS states have a solar carve-out that requires them to generate a certain percentage of renewable energy from solar. Solar carve-outs incentive SREC markets. 

States with Renewable Portfolio Standards


 

Why SRECs are Important for Your Home Solar System

SRECs create an additional financial incentive for your solar panels. Each SREC you are able to sell means more money in your pocket and increases the financial benefits of going solar. The value of SRECs varies depending on your state but they can be worth several thousand dollars each year or less than a few hundred dollars. 

SRECs vs Net Metering

SRECs are separate from net metering. This means if you are able to sell SRECs and also live in a state with net metering you are getting paid in two ways for your solar generation!

Which states have SRECs?

Not all states have an SREC market. Additionally, some states are eligible to sell their systems SRECs to other states. For example, solar generators in West Virginia are able to sell SRECs in Ohio. 

SREC Prices by State


*New Jersey is no longer accepting new applications to its SREC program.

How do you sell SRECs?

There are a few steps you must take before you can sell SRECs. In most cases, your solar panel installer will help you get started but, these are the steps to selling SRECs.

  1. Register your solar panels with the SREC program
  2. Your solar energy generation is monitored in the SREC system
  3. Aggregators purchases SRECs
  4. Aggregators sell them to utility companies
  5. You get paid

In rare cases, your solar installer may offer to purchase the SRECs for your system in advance. This means more money upfront and can drastically reduce the upfront cost of your system. The downside is that since you are selling your SRECs upfront you won’t be able to cash in on any price increases in the future. 

Selling SRECs can be complicated so we recommend using an aggregator like SRECTrade.com to navigate the SREC market.