Solar Renewable Energy Credits, or SRECs, are an extra financial benefit to generating solar energy. In Maryland, and other states, electricity suppliers must produce a part of their electricity from solar generators. In order to meet this Renewable Portfolio Standard (RPS) – discussed in an earlier blog post, companies either produce enough solar energy themselves, or they must buy credits made by other systems.
This requirement is what benefits both commercial and residential consumers who install a solar system. For every 1,000kWh of electricity generated from solar systems, one credit is earned. These credits are sold on an open market to utility companies that fell short of meeting their RPS. The price of the SRECs is entirely based on the supply and demand of the SREC market, making the credits work almost like a stock.
So, what does this really mean for a homeowner who wants to install a solar system? Let’s say the a homeowner installs a 3 kW system, an average-sized solar array. This system, depending on factors such as peak sunlight time and shading, could easily generate over 5000 kWh per year. At that production, the homeowner would have 5 SRECs they could sell. At the going rate in August of 2011 of $199.99 per credit, this system would essentially generate $999.95 in passive income– in addition to energy savings.
SRECs provide incentives for energy companies to go solar. But they also add benefits for homeowners and business owners alike. The value of SRECs helps savvy investors see a return on their investment even quicker than through energy savings alone.