Solar renewable energy credits (SRECs) are tradable credits that represent all the clean energy benefits of electricity generated from a solar energy system. Each time a solar energy system generates 1,000 kWh (1MWh) of electricity, an SREC is issued which can then be sold or traded separately from the power.
The value of SRECs in a given state is quantified by three major factors:
RPS Compliance Fee Schedules
Compliance fee schedules dictate how much energy suppliers must pay for each SREC they fail to produce or acquire. As a result, SREC prices usually trade at or below the dollar amount of these compliance fees. In some states the fee remains the same dollar amount year over year while in other states, like New Jersey and Ohio, the fee decreases over time which will result in a decrease of the price for SRECs over time.
SREC Supply
SREC supply will increase in the coming years. As solar panel prices fall, solar will become more affordable and more popular. As more solar systems are installed, more SRECs will be available on the market. Additionally, as credit markets continue to improve, more large projects will become financeable and built, resulting in more SRECs. Both of these trends will put downward pressure on SREC prices.
SREC Demand
SREC demand will also increase in the coming years. The demand for SRECs in a given state is set by RPS legislation that determines the overall number of SRECs energy suppliers are required to acquire each year, and this number quickly increases year over year in every state with an RPS. Because SRECs are a compliance commodity, if there are more SRECs supplied than demanded in a given state market, the pricing for excess SRECs will likely be equivalent to pricing seen on voluntary SREC markets, which today trade at $15-$30 per credit.
Because of these factors, SREC values can vary dramatically from state to state. To find out more information about the requirements in your state, please visit www.dsireusa.org.