What is a Solar Renewable Energy Credit (SREC)?
Solar Renewable Energy Credits/Certificates (SRECs/ S-RECs) aka Renewable Energy Credits (RECs) aka “Green Tags” create an open market for individuals to sell the rights to the energy produced by their small-medium scale solar system.
Eight states in the country have SREC markets: Ohio, Pennsylvania, New Jersey, Delaware, Massachusetts, Maryland, Washington DC, and North Carolina. The largest and most watched market is that in New Jersey because of the aggressive energy standards set by the state.
In short, utilities in many states are required to produce a certain amount of energy through renewable sources such as wind and solar. Most, of course, are unable to meet those goals. In order to meet those goals, the utilities will purchase the rights to others' renewable energy.
The value of one 1 SREC will change from year to year, as it is traded on an open market and is subject to basic laws of supply-and-demand. A producer receives 1 Solar Renewable Energy Credit for every 1,000kWh (kilowatt hours) of solar energy produced. On average a 1kW panel will produce 1,000kWh of power per year, which will mean 1 SREC. The average home solar system is 2-4kW in size, which means 2-4 SRECs per year... confusing, I know. In 2010 the value of one SREC in the state of New Jersey was about $693. Other states average closer to $250 per SREC.
SRECs/ Green Tags are NOT the same as carbon credits. Let's save that conversation for another day...