Solar Renewable Energy Credits (SRECs) are tradable environmental commodities, which each represent 1000 kilowatt-hours (kWh) of solar energy generated by an eligible solar renewable energy system. SRECs can be bought, sold, or traded on the open market. Per the Renewable Portfolio Standard (RPS), utility companies (the end buyer of SRECs) must purchase a certain quota of SRECs annually in order to be compliant with the law. If they do not meet this quota, they must pay a fine, known as the Alternative Compliance Penalty (ACP). The goal of SRECs is to increase the percentage of renewable energy produced in the state.
SREC Price Factors
The value of SRECs are quantified by three major factors:
- State RPS requirements
- Value of the state’s Solar Alternative Compliance Payment (ACP)
- Supply and demand of SRECs in that specific state
Because of these factors, SREC prices and values can vary dramatically from state to state.