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Use It or Lose It: The Residential SREC

As hardware installation costs drop and consumer confidence improves, solar installations are becoming more and more common. Small arrays (<10 kW) are becoming cost effective for business and even individual homeowners. A solar array can be used to avoid paying for energy produced by a utility company, and some utilities even compensate owners for the excess solar production that is fed back to the utility. However, this is not the only source of potential income for owners of PV arrays. Many states now allow individual solar producers (including homeowners) to generate additional income by creating and selling Solar Renewable Energy Credits (SRECs). Since SRECs are traded separately from the actual energy produced by these arrays, they represent a potentially untapped source of income with little to no additional effort on the part of the producer. There are a few important terms to understand when learning about SRECs.

 

SREC = Solar Renewable Energy Credit. These are defined as a megawatt hour (MWh) of renewable energy production. An SREC is sold separately from the actual electricity produced; in essence they are a token or indicator that a quantity of energy was produced using PV arrays. There are other RECs that cover wind, geothermal, and other renewable sources of energy as well.

RPS = Renewable Portfolio Standard. This simply means that a utility company in a given state must have a production portfolio containing specific types and quantities of renewable production. This standard will vary from state to state.

ACP = Alternative Compliance Payment. If a utility fails to meet the RPS requirement for a given type of renewable energy production, they must pay a penalty for noncompliance. The amount of this fine sets the upper bound for the value of an SREC in a given state.

Solar carve-out = Portion of the RPS that is made up of solar. The size of this portion will vary between states, and can be adjusted by legislation.

 

Rather than building facilities to produce the energy as required by the state’s RPS, a utility can purchase an SREC from an individual or organization who already has the renewable production equipment in place. To track this production, dedicated meters are installed between the source of generation and the electrical grid. Meter requirements differ from state to state, but there are typically two important requirements. First, the meter must have the capability to upload data to an SREC tracking program (for example, NEPOOL-GIS, MassCEC, or PJM-EIS) so that the credits can be issued a unique identifying number and tracked appropriately. Second, the meter must have some form of measurement compliance (for example, ANSI 12.20) that guarantees the accuracy of the meter.

 

There are many eligibility factors to consider when deciding to register and sell SRECs. New and existing PV installations are typically eligible to sell SRECs, meaning that if you plan to install a PV array or already have one you can begin generating additional income with very little effort. Since SRECs cannot be registered in fractional quantities and registration requirements are somewhat convoluted, smaller generation sources (for example, homeowners with <10kW arrays) may benefit from selling to an aggregator. The RPS is set on a state level, so geographic location of both the utility and the PV array play a significant role in eligibility. There is some overlap; locations in states without solar carve-out that border states with solar carve-out may be eligible to sell SRECs to utilities in those states. Some research on your specific location can help determine what markets (if any) you are eligible to sell to.

 

SRECs represent a financial opportunity for those who already have or are considering installing PV arrays. The value of SRECs shifts continuously and is subject to changes in legislation. However, some solar installers incentivize smaller installs by taking the rights to sell SRECs in exchange for financing for the installation, so the array owner has a measure of protection from market fluctuation. Those considering new solar installs should take their location into account if interested in participating in an SREC program. Existing PV array owners should be able to start selling SRECs with minimal effort, depending on the resources available.

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