What is an SREC and what are SREC prices in each state
Written by Andrew Sendy
Updated April 01, 2020
2 minutes read
An SREC is an artificial instrument created by a statute called a Renewable Portfolio Standard as a way to give financial value to those that generate solar energy.
The way the legislation works is that it gives owners of solar power systems one SREC for every MWh (megawatt hour) of electricity their system generates. 1 MWh is 1,000 kWh.
A standard-sized 7kW home solar system in the North East, where SREC's are most common, would produce about 8,000 kWh per year, which is 8 MWh.
8MWh of generation will give the solar system owner 8 SRECS per year.
SREC's only exist where a state's Renewable Portfolio Standard legislation has what is called a "solar carve-out".
This means that the legislation mandates that a certain percentage of the renewable energy that a utility uses must come from solar power.
Some states go further with their solar carve out and require that part of the solar carve out must come from small scale rooftop solar rather than large solar farms. It is usually only these states where SRECs have any significant value.
How many SREC's will your home get?
From just your address and the dollar value of your last monthly power bill the solar panel calculator above can tell you what size solar system your home would need to cover 100% of your electric usage and also how much electricity the system will generate.
This will tell you how many SREC's your home will get.
How do SREC's become valuable?
SREC's become valuable because of the legislation includes a provision which requires the utility to pay a fine if they do not buy enough SREC's. This fine is known as an Alternative Compliance Payment and the amount of the Alternative Compliance Payment in each state sets the theoretical maximum price for SREC's in that state. Utilities will pay up to this price until they have the amount of SREC's the legislation requires them to buy.
What are the current SREC prices in each state in 2020?
NJ SREC program prices
The current price of NJ SREC's is $222 and it has fluctuated between $220 and $235 over the last year.
New Jersey is a state that has maintained the integrity of its SREC system by updating targets and limits over the years to ensure their certificates remain valuable.
PA SREC Prices
As of April 2020 PA SREC prices were $25 and have traded over the last 12 months between current levels and $45. They were trading around $37 just before the COVID crisis.
MD SREC prices
MD SREC prices are currently trading at $70 per SREC but have fluctuated over the last year between $50 and $85.
Poor SREC program design in some states have made their SRECs worthless
Unfortunately, there is no set price that utilities have to pay for your SRECs, and so homeowners are at the mercy of what the market will bear. Well-designed SREC markets can serve solar homeowners well and are effective at encouraging solar development. On the other hand, poorly designed programs can virtually destroy markets.
Take Pennsylvania, for example. Under their old program (fixed only in mid-November) native SREC producers were restricted to selling their SRECs within the state, but producers outside of Pennsylvania could sell their SRECs in Pennsylvania.
As a result, the value of the state's SREC market plummeted from multiple hundreds of dollars to as little as $3.50/MWh this summer, leaving potential new solar customers who were depending on SREC prices to offset the cost of installing their systems out of luck.
So while SRECs can represent a valuable financing option for your solar installation, it would behoove you to do your homework to figure out what your state's SREC market looks like currently, as well as what it looked like in the past. Only armed with that information will you be able to decide whether SRECs are an appropriate option for you.
Does your state have an SREC program for you? Click here to find out: www.solar-estimate.org/solar-incentives/srec-and-solar-carve-out