Solar Renewable Energy Credits

The Virginia Clean Energy Act established a mandatory renewable portfolio standard (RPS) program whereby Virginia utilities are required to have a certain amount of renewable electricity on their grid. The program reports that Dominion Energy is to deliver electricity from 100% renewable sources by 2045 and Appalachian Power is to deliver 100% renewable sources by 2050 (1). A utility that does not meet the required target must pay a penalty or purchase RECs to make up the shortfall.

A renewable energy certificate “is a market-based instrument that represents the property rights to the environmental, social, and other non-power attributes of renewable electricity generation” (2). They are issued when one megawatt-hour (MWh) is generated and delivered to the grid. Due to electricity being generated from many places and mixing together in the grid, it is difficult to distinguish the exact source that your electricity came from. This is when the REC comes in- each REC represents an amount of electricity produced and delivered to the power grid by a renewable resource. Renewable energy credits can apply to any form of renewable energy generation including wind, geothermal and solar. RECs allow you to track the electricity you use with low or zero emissions. RECs can be uniquely numbered and tracked.

SRECs are solar renewable energy credits. SRECS are not electrical energy, but rather certificates that you get for producing green energy. The financial benefit of the first item is savings on your electrical bill from the creation of energy. The financial benefit of the second item is certificates from producing environmentally friendly energy that you can sell. According to the Environmental Protection Agency (EPA) a “SREC represents the property rights to the environmental, social, and other nonpower attributes of renewable electricity” (3­).

SRECs are sold separately from the physical electricity that your solar panels produce. You can earn one SREC for every 1000 kWh of electricity produced by your system. For utility companies to meet the sustainability requirements set by the RPS, a certain amount of SRECS is bought each year. The price of SRECs is determined by the supply and demand of renewable electricity generation. The rising RPS creates demand that must be met by renewable generation from the utility itself, or from the purchase of SRECs from others.

SRECs often require a third-party broker like SRECtrade.com to buy and trade. As previously stated, the value of the credits varies based on the amount of energy the utility sells and the number of credits available in the market. Nova Solar handles SREC registration on behalf of our customers. We register your system with a broker who registers it with your locality’s public service commission and then submits the registered system to the Generation Attribute Tracking System (GATS) administered by PJM, the regional transmission organization in our area. (4)  Once registered, you can sell your SRECs using several different options:

  1. Sell the rights to all of your system SRECs for an upfront payment.
  2. Sell your SRECs at a locked-in price via a contract for a set period of time.
  3. Sell your SRES on the spot market as you produce them.
 

We recommend selling the SRECs on the spot market as they are produced. Providers will take a cut of the expected value of SRECs for locking in the price and/or for paying for them upfront. The easiest solution is to have a broker manage that process for you. They will monitor the energy production of your solar system, collect the credits, monitor the market, and sell when the value is high. Once they have sold credits on your behalf, they will deduct their fee and direct deposit the remaining proceeds to your bank account. They will sometimes hold credits if the market value is low and expected to rise. This means the payments may not come in regular intervals or in consistent amounts.

SRECs are fundamentally different than your offset. Solar offset measures the amount of energy you produce compared to the amount of energy you consume. Solar offset is the percentage of a building’s consumption that is produced by a solar system. (5) For example, a building that uses 15,000kWh/year with a solar system that produces 12,000kWh/year would have an 80% offset. Solar offset can be calculated by dividing the amount of yearly solar electricity generated by the amount of yearly electricity consumed. The amount of SRECs generated is determined solely by how much electricity the system produces regardless of whether that electricity goes to your home or to the grid. Below is an example of the difference:

  • Your solar system produced 9,420 kWh in a year
  • Your home used 8,640kWh in that same year
  • Your solar offset would be 109% (9420/8640)
  • You would have created 9 SRECs (9420/1000) and be 42% complete towards a 10th.
 

SRECs must be sold within the first three years in Maryland, and the first five years in DC or Virginia. The SRECs generated by your system belong to you and you can manage them however you prefer. Whether that is selling all the rights to your system upfront, selling them via a contract for a set period of time, or selling them on the spot market as you produce them. If you are looking for further information or want someone to walk you through the process, don’t hesitate to contact anyone on the Nova Solar team.

References:

  1. The Virginia Clean Economy Act
  2. United States Energy Protection Agency
  3. Rocket Solar
  4. Solar United Neighbors
  5. Palmetto

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