If you are a homeowner and are considering having a solar energy system installed, you’ve probably seen the term “Solar Renewable Energy Credit” or “SREC”. Although not a widely known concept, if you choose to install a solar array, understanding SRECs is incredibly important.
Does Your Home Qualify for Solar Tax Credits?
Solar Renewable Energy Credit (SREC)
A Solar Renewable Energy Credit (SREC) is a certificate that confirms your solar array has produced a specific amount of renewable energy in a year. Because many state energy distributors are required to purchase or offset a percentage of renewable energy each year, the SREC is a certificate they can purchase in order to contribute to this requirement.
When you have a solar array installed, the contractor should register the system with the grid operator and file the details of your system. This is the start of the process.
Depending on the amount of energy that your system has produced each year, you will be given number of SREC certificates (1,000 kWh = 1 SREC). They are usually electronic records; so don’t expect an actual paper certificate. Each certificate has a value and can be traded as a commodity. The sale of SRECs takes place in SREC Auctions handled by SREC Traders (again, your solar install company should help register for this).
SREC Value
The value of the certificate is based on the penalty the distributor would otherwise have to pay and the market, or number of certificates available at a given time. As you would expect in any free–supply and demand market–the more certificates available, the lower the price you will obtain for that SREC.
Because of this rule, the more solar that is available in your state, lower the SREC price will be. The price will affect the solar payback period and you should speak with your installer or SREC broker about current a pricing before to making the decision to install solar panels.
What about Massachusetts (or your state)?
Massachusetts initiated their first SREC requirement in January, 2010. The initial goal was 400MW and then increased to 1,600 MW in 2013. (*For reference, the average home uses 12,000 kWh of electricity per year. 1 MW of solar typically equals the usage of 125 to 145 average American homes.)
The idea was that Massachusetts wanted to spur solar growth and by subscribing to a renewable portfolio standard the Massachusetts SREC market was born.
The Massachusetts SREC and solar market is widely viewed as one of the most stable and prominent SREC markets in the United States. When you have a Massachusetts SREC, that certificate is equal to 1,000 kWh of annual production. The average 6kW solar energy system in Massachusetts will produce roughly 7,000+ kWh per year and you therefore, have 7 SRECS which are currently valued at approximately $300 each or $2,100 annually (as of 12/14/17).
The amount is typically paid quarterly as the various auctions operate on that schedule.
By installing a system and “opting in” to the SREC program via your installer or broker, you may collect and sell SRECs for 10 years from the date of your first day of operation.
For up to date information on the Massachusetts SREC Market, please visit:https://www.mass.gov/service-details/solar-carve-out-current-status