What is an SREC?

SRECBlog

If you spend enough time in the solar field, you start to hear a lot of acronyms thrown around; PPA, ACA, NEM, and more. Today we are going to look into one of the most common solar acronyms; the SREC.

The acronym SREC stands for Solar Renewable Energy Certificate; a tradable, non-tangible energy commodity that represents one megawatt-hour of electricity produced by a renewable source – specifically through solar energy. In the United States, SRECs hold value, as they can be purchased by utilities to meet Renewable Portfolio Standard (RPS) requirements that dictate what percent of their total electric output must be produced by renewable energy sources.

Understanding the Value of an SREC

In order to incentivize the construction and adoption of renewable energy, states began enacting RPS requirements as defined above. Generally, an RPS goal will aim to produce a certain percentage of overall state electricity from renewable sources by a specific year (for instance, Massachusetts’ RPS goal is 1600 MW by 2020).

Because electricity producers are required by law to adopt a certain percentage of their power from renewable sources, they must either build renewable energy power plants, or purchase the rights to pre-generated renewable power. This is where SRECs get their value. It is often more cost effective for a utility company to purchase SRECs than it is to build the requisite renewable sources themselves.

The Lifecycle of an SREC

One SREC is generated for each megawatt hour (mWh) of solar electricity generated. Once an array has generated that much electricity, the SREC is minted electronically and deposited quarterly in the generator’s account, managed in Massachusetts by the Massachusetts Center for Clean Energy‘s production tracking system. Once the SRECs are created in the MassCEC system, the array owner can choose to sell or to keep their SRECs.

Selling SRECs is an excellent way for an array owner to recoup their initial investment quickly, especially in a state like Massachusetts where SRECs are highly valued. However, once an SREC is sold, the array owner sacrifices the right to the “renewable” status of the electricity generated by his or her system. The array owner still benefits from offset electricity costs but the “renewable” label is transferred to the purchaser of the SREC in question. Depending on what matters most to the solar array owner, he or she can choose to keep or sell his or her SRECs.

The History of SREC in Massachusetts

Massachusetts has benefitted from several SREC programs. The first major program, SREC-I, was implemented in 2010, designed to get the state to a solar capacity of 400 MW. This program was wildly successful, and was oversubscribed before its end date. In light of the program’s success and in order to meet new renewable energy goals, SREC-I was replaced by SREC-II in 2014, to help the state build 1,600 MW of solar capacity. The second iteration of the program differed from its predecessor mainly through market sector values, which encouraged more diverse construction in the solar industry, favoring low-income and community projects over massive utility arrays to best distribute the benefits of the program throughout the state.

SREC-II continued through February of 2016, when the program followed its predecessor in oversubscription. The program had incentivized so many property owners to go solar, the sudden end of SREC-II resulted in significant instability in the market. As a result, in April of 2016, the Department of Energy Resources declared an emergency extension of the incentive allowing any solar project completed by January 8, 2017 to qualify for the SREC-II program. We anticipate the DOER to finalize an SREC-III program before this emergency extension runs out, which will enable the solar industry to stay strong in the commonwealth providing continued savings for consumers and stable jobs for residents.

Each solar array will generate SRECs at a different pace, as the rate of generation is directly related to system production and thus system size and location. An experienced solar developer can best advise you on SREC management, and can help you receive the best price for the SRECs your system generates.

 

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