A Solar Renewable Energy Certificate (SREC) is a tradable financial instrument representing the environmental and energy benefits of generating one megawatt-hour of electricity from a solar system. SRECs separate the energy credits from the physical electricity, allowing solar owners to monetize environmental benefits independently. These certificates help utilities comply with state renewable portfolio standards and create additional revenue for solar system owners.
Creation and Trading
SRECs are created when solar systems generate electricity and are typically tracked through electronic registries like PJM-GATS and M-RETS. One SREC represents 1 megawatt-hour of generation. System owners or their agents can sell SRECs on secondary markets, with prices determined by supply, demand, state mandates, and compliance mechanisms. Market participants include utilities, brokers, and aggregators who facilitate transactions.
Financial Impact on Solar ROI
SREC revenue improves solar system return on investment significantly. A homeowner in New Jersey might earn $100 to $150 per year from SREC sales on a 6-kilowatt system. Over a 25-year system lifetime, SREC income can total $2,500 to $3,000 depending on market prices and generation levels. Not all states offer SREC programs, so regional verification is essential during project evaluation.