Massachusetts SRECs Explained – Part I

SolarPanelsBeingInstalled 300x225 Massachusetts SRECs Explained – Part I

Massachusetts joins other stateslike New Jersey , Pennsylvania, and Maryland in creating an SREC marketin 2010.  However, what sets the Massachusetts SREC system apart is that it is a market driven system that allows flexibility to react to market conditions.   In addition, most of the other states have an SREC system that is based on  requiring a certain portion of electricity to comefrom solar generation, where Massachusetts imposes a “minimum standard”.

What are SRECs?

SRECs, or Solar Renewable Energy Credits, are tradeable certificatesthat represent all the positive environmental attributes of electricitygenerated from a solar electric system.  Each time a solar systemgenerates 1,000 kilowatt hours (1 megawatt hour) of electricity, an SREC is issued which can then be sold or traded separately.

What projects qualify for SRECs?

In order to qualify for SRECs, projects must be in Massachusetts(with some exemptions to previous contracts) and must be grid-tiedsystems under 2 megawatts (DC).  For 2010, the Solar Carve-Outrequirement is 30 megawatts DC, with a soft target of  70 megawatts DCin 2011, and the maximum is to estimated be reached in 2016 at 400megawatts.

What is an SREC worth in Massachusetts?

There is not definitive answer.  The price of SRECs is created bymarket availability and can range anywhere from $285/MWh  to $600/MWh. The Solar Credit Clearinghouse Auction essentially creates the pricefloor because they will purchase any SRECS that can not be sold on theopen market for $300/MWh minus a 5% administrative charge, or $285/MWh. .  If electricity suppliers fall short of their SREC requirement fortheir RPS obligation, they will have to pay a penalty of $600/MWh.  This is how we get to the price ceiling because the market value of SRECswill never be greater than that penalty.

How can I participate in the  SREC program?

Homes or business with solar electricity-generating systems canparticipate in this program via an “opt-in” agreement, which guaranteesparticipation for a set number of years.  In 2010, the “opt-in”arrangement is for 10 years and can be adjusted downward by 2 yearsannually.

Example of SREC potential benefit in Massachusetts.

Let’s take a look at a 10 kW DC system for a residential customer.  A system of this size would produce about 12 MWh so it could qualify for12 SRECs annually.

Minimum SREC Payment: 12 MWh  x $285/MWh =  $3,420 annually

Minimum SREC Payment over 10 years =  $34,420

The above is a very conservative estimate.  If SRECs are priced atthe ceiling, the SREC payment would be significantly more generous.

Maximum SREC Payment over 10 years = $72,000  – That’s a pretty goodincentive to go solar!!

Why should I install a solar electric system now?  Will SRECs expire?

As stated above, the opt-in agreement is for 10 years and can beadjusted downward by 2 years annually.  You have the opportunity toreceive the most benefit this year since you can sign on to a 10 yearterm.  In addition, the Solar Carve-Out will only support 400 MW of newsolar capacity in Massachusetts. Once the  goal is reached,  the opt-interm for all solar generators has expired, and SRECs will no longer begenerated. At that time, solar facilities can generate renewable energycredits (RECs) and can sell those for compliance under the Class Istandard.