Examining Solar Renewable Energy Credits

As the interest and commitment to renewable energy continues to grow across the country, many states are creating Renewable Portfolio Standards or RPS. These standards mandate that a certain portion of the electricity produced by utility companies must come from renewable sources. This has created the “solar carve out” in many states which has given birth to the SREC market.


SRECs or Solar Renewable Energy Credits are a quantitative unit that can be bought, sold and traded by owners of solar systems. This is one of the ways in which Solar is made affordable since selling SRECs allows the home or business owners to recoup some of their initial cost incurred installing a solar PV system. SRECs have no set price. They “float” like any traded stock or commodity and are subject to market forces – much like the Dow, Nasdaq or S&P 500. Currently seven jurisdictions have developed SREC markets (Massachusetts, Maryland, Ohio, Pennsylvania, New Jersey, Delaware, and the District of Columbia). Many more are in the process of developing Renewable Portfolio Standards or some form of Renewable Energy Credit. As interest in renewable technology expands, so will the markets.

Of the states with extant SREC markets, Massachusetts is unique. The state has set up a controlled marketplace that allows SREC prices to fluctuate between $300 and $600 per SREC. The state maintains this “floor” price by holding an auction at the end of the year to sell off unwanted SRECs. If the state cannot sell the remaining SRECS it will adjust the capacity requirement for the coming year and also extend the life of the SRECs. This managed approach prevents a glut and gives the Massachusetts SREC market a stability that is unseen in other states.

In the end, all SREC markets will fluctuate and no market is recession proof. However, the return on investment that solar provides can never be taken away. Regardless of SRECs, solar systems inevitably provide clean, efficient and free electricity from the sun. Their benefit to the environment by reducing our use of fossil fuels is also well established. Inevitably oil and natural gas are going to run out. We should not wait until that happens to make our decision on whether we want to live with our planet or against it.

By Richard Harrod


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