Massachusetts Moves to Open an SREC Market

The Massachusetts RPS Solar Carve-Out program is one of the most innovative performance-based incentives in the country, and might one day serve as a model for similar programs in other states.

In late 2009, the Massachusetts Department of Energy Resources (DOER) approved a Solar Renewable Energy Certificate (SREC) market to begin in 2010. The state’s solar carve-out program establishes a requirement for the purchase of SRECs in Massachusetts. The Carve-Out program has a minimum requirement of 25 MW (Megawatts) of solar electricity for 2010 and a solar alternative compliance payment (SACP) of $600.

SRECs are a tradable, non-tangible energy commodity in the United States that represent proof that one thousand (1,000) kilowatt hours (kWh’s) of electricity was generated from an eligible renewable energy resource. SRECS are sold separately from electricity and the solar power generated does not need to be used on site for the SREC to be created.

The Renewable Portfolio Standard (RPS) – created in 1997 via the State’s restructuring legislation and formally adopted by the Massachusetts Department of Energy Resources (DOER) in 2002– provides a means for SRECs to be created on behalf of solar energy system owners and sold to Massachusetts electric suppliers to meet the solar RPS requirement. Electricity suppliers must either buy SRECs to meet the Massachusetts RPS requirement or pay a Solar Alternative Compliance Payment (SACP) of $600 per 1,000 kWh’s if they do not comply. Guided by “free market” forces these companies will pay up to the current SACP for each SREC.

The RPS Solar Carve-Out program, couple with the Federal 30% Investment Tax Credit/Grant Program provides additional incentives for Massachusetts-based organizations and residences to invest in solar solutions.