A homeowner buying a solar energy system installation should know as much as possible about how they’ll get a return on their investment. A solar energy system pays for itself in a few ways, first immediately in home value as an asset to the property, second with energy to offset grid electricity costs, and third through solar renewable energy credits, or SRECs. Let’s break down why customers receive this solar incentive, how it works, and choices you can make during your SREC journey to get an experience that fits best for you.
The significance of SRECs
The story starts with the state policies that govern electric providers’ energy sources. Governing bodies in Maryland, DC, Virginia and a few other states have approved different versions of legislation known as a Renewable Portfolio Standard, or RPS. This means there is a requirement for utilities and cooperatives operating in these states to use a minimum amount of renewable energy, or face a penalty payment in order to comply, which contributes to a fund that usually supports work such as low income weatherization. Sometimes the providers will choose to pay the payment into the RPS fund rather than meet the target, sometimes the providers build clean energy projects themself in an effort to satisfy the RPS, and sometimes they purchase SRECs representing customer-owned solar to meet the goal. It all depends on which costs less.
How is an SREC created?
A SREC stands for 1 megawatt-hour, or 1,000 kilowatt-hours, of renewable energy. To affirm that an SREC can exist, the energy it represents has to be verified. It can either be verified by taking readings from the customer’s net meter, or by allowing the SREC broker to access the system’s online monitoring. The SREC potential of a system can also be estimated the same way that you can project how much of the resident’s electric bill it will offset, using software that accounts for variables like number of panels and wattage of each, tilt and azimuth, solar irradiance at the location, and any unavoidable shading.
In fact, most of these characteristics must be entered into the SREC broker’s registration system and conveyed to PJM-GATS, the grid operator’s generation attribution and tracking system, which facilitates the buying and selling of RECs and tracks each sale securely through unique serial numbers.
SREC brokers: connecting you to the SREC market
How does a solar customer participate in this SREC market and have a chance to mint and sell SRECs? Typically the solar installer will arrange with the solar client for either the client or the installer to complete SREC registration via a broker firm after the installation. At the date of publishing this post, Ipsun Solar is pointing our new Virginia customers towards SREC registration with SolSystems.
How much are Virginia SRECs currently worth? SolSystems’ contract options for new Virginia customers are a Sol Brokerage contract at $40 per REC with variable market pricing, a Sol Annuity contract at $354 per SEC guaranteed for 3 years, or Sol Upfront a one-time, lump sum payment for 15 years of SREC production.
This rule means check your SREC registration before December
When does your SREC eligibility start? When your solar installation has received Permission to Operate (PTO) from your utility company or electric coop, and has been turned on according to the instructions we’ve given you, your system will produce both energy you can use and SRECs you can bank. Watch out: If a customer isn’t able to complete their registration and sign a contract with an SREC broker during the same calendar year when their solar PTO was granted, their SREC eligibility once they do sign a contract will only date back to the beginning of the calendar year when they sign their contract. Clients should be careful about this and installers should make every effort to encourage customers to check their registration for completeness well before the end of December after their system has come online to avoid missing up to a whole year’s eligible SREC production. The broker’s customer service department is often flooded with requests at the end of the year for help and support, so don’t risk losing out. Proactively check on your registration to finalize it during the first couple of months after your system is activated, or for an October or November project, be realistic and set up your SRECs early the following year – your solar panels will produce power and SRECs for over 25 years, compared to a couple of short winter months.
Outages in your wifi may cause gaps in your monitoring data that affect your SREC eligibility for a few weeks or months. Watch for messages from your solar inverter company, most likely for Ipsun Solar customers this is going to be Enphase, because that can alert you to a problem and instruct you how to re-establish your connection to the internet promptly.
Your net metering, tax credits and rebates are all separate from your SRECs
A common point of confusion is to conflate your SREC proceeds with your net energy metering credits. But those are actually separate benefits! Any time your solar system is producing energy to meet your home’s demand, it reduces your utility bill. Any time you have more solar energy than your home needs, your meter is set up to allow it to flow onto the grid to serve others and your electric provider tracks that to reduce your bill even further. Your solar inverter knows how much energy you have produced, whether you’ve consumed it or shared it, and your SREC total is based on that entire amount of solar energy.
Remember that an SREC certifies that clean energy was made, and your solar data backs that up. With access to your monitoring, your SREC broker has proof of exactly how fast you’re making SRECs and can sell them right away, sending the proceeds to you. Net metering compensates the customer for actual surplus electrons delivered over the line, while SRECs create an avenue for distributed generation to count toward the utility’s clean energy fleet. It’s not double dipping, merely accounting for and incentivizing your clean energy generation in different ways.
Subject to change: let’s stay flexible as Virginia’s market matures
Keep in mind that very few things about your SREC incentive are set in stone. Virginia’s market will pick up and it will slow down, depending on the pace of new systems coming online relative to how modest or aggressive state RPS goals are. In 2019 and 2020 Virginia’s SREC price reached nearly $70, however it’s about half that now and will be sure to fluctuate. If it makes us feel better, DC’s prices are likely to come down from their current level in the next few years.
Your broker can update their terms and conditions going forward so it’s important to take note of emails they send you regarding updates. Fees and processes may change as they try to better serve their clients and navigate through the ever-changing realm of clean energy markets. These factors are largely out of your control and your installer can’t always help either, but hopefully with the information here you are ready to take the wheel and manage your SREC future.
Your clean energy system and ones like it across our region help us all breathe easier and conserve our environment, and SREC payments are part of your reward for taking action.
