Our definition and guide to Solar Renewable Energy Certificates (SRECs) will highlight everything you need to know about using these to generate more revenue from solar energy.
What are Solar Renewable Energy Certificates (SRECs)?
A Solar Renewable Energy Certificate (SERC) serves as a viable way to make money through solar power generation. Through this mechanism, it is possible to sell the unused energy of a grid-tied solar system to the utility.
The owners of a solar system obtain utility credits for sending electricity back to the utility. The energy produced and sent is measured through the utility meter. When the meter is fed with the energy produced by a solar system, it starts to run backward and minimize the number of units consumed by the owner.
In fact, the SRECs are the solar incentive, which permits the owners of a solar system to sell certificates for providing energy to their respective utility. By sending 1000 kWhs electricity back to the utility, a homeowner can earn one SREC.
The worth of SRECs by the state may reach up to $300 or more. Besides the fact that SRECs relate to the electricity generated through the solar power system, these certificates are identical to renewable energy certificates RECs.
This means that it is possible to buy, sell, and transfer the SRECs as it is allowed in the case of RECs. However, in order to take advantage of this system, the owner must obtain a certificate from the state. Although most of the states allow selling SRECs, some states prohibit such a sale.
Therefore, it is essential to know whether your state offers such an option. After obtaining the SERC, the owner should create an account with the tracking platform of his/her state. SRECs serve a pivotal role when it comes to tracking, accounting, and proof of ownership.
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Breaking down Solar Renewable Energy Certificates (SRECs)
Solar Renewable Energy Certificates allow organizations to track, utilize, and earn profits. As electricity production surges, the SRECs also increase in number. You can also buy and sell these certificates in the open market, which renders them as a renewable energy currency.
There is a wide range of organizations, which sell these credits or certificates to install and maintain solar power systems. Many organizations choose to sell these credits to help offset the cost of installing a new solar system or maintain the existing one.
This system helps the utilities to identify the surplus energy and sell it at lower rates.
Renewable energy credits were first introduced by the state of New Jersey in 2005. After that, the Department of Energy started to shift surplus renewable energy to the market-based program.
This made it possible to buy and sell the SRECs in the open market.
As a result, renewable energy credits took the shape of certificates. Each REC comes with an independent and unique identification, which helps to track a certificate in an accurate manner.
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Benefits of Solar Renewable Energy Certificates (SRECs)
No doubt, the solar system promises clear financial benefits. It not only helps you to generate your own energy and lower your energy bills but also allows you to sell the surplus amount of electricity back to the utility. Besides, SERC is a commodity that you can sell and earn reasonable passive income.
If you are living in a state that offers Solar Renewable Energy Certificates (SRECs), you can seek a substantial return on investment. Moreover, you can also reduce carbon footprints by promoting greener and cleaner living.
Especially when you are selling your home, you can get a top dollar deal by transferring the ownership of your SRECs to the new owner.
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How Solar Renewable Energy Certificates (SRECs) Work
The reason behind the creation of RECs relates to finding a way to track the capacity of renewable energy projects. These certificates became more popular in those states which used to acknowledge the Renewable Portfolio Standards (RPS)regulations.
These regulations made it binding over the utilities to certify that a particular percentage of their overall energy is generated through renewable sources like solar, biofuel, wind or geothermal.
Hence, RECs serve as valid proof that a specific utility company has either purchased renewable energy or generated it through its own resources.
This helped the utilities to gain the benefits of renewable energy by selling the energy at profitable rates. The owners of the SRECs can register these certificates and sell them.
Most of the SREC holders prefer to sell their certificates to a third-party aggregator.
These aggregators resell these certificates as package bundles. However, they do charge a minimal fee for their services. Even if you have to pay for such services, it is convenient to sell the SERC through these providers.
This is so, as you can earn a handsome amount of income without any hassle of paperwork. In addition, you can also avoid market risk.
If you want to find a reliable SREC aggregator, a reputable solar equipment provider may assist you in this regard.
At present, SREC Trade Auctions take place twice a month. These auctions even facilitate the sellers and buyers from other applicable states. The bidding process starts with the collection of SREC Auction bids from buyers and sellers.
After that, these bids are then matched against each other to identify the fair market price.
The fair market price or clearing price is the price at which the bids of the buyer matches with that of a seller. Later on, this price turns out to be the rate of an SREC at which one can buy or sell such commodity at the auction.
This mechanism offers more stability in the market, as buyers usually pay less than their offered price. Similarly, sellers get more price than they were actually asking for. In order to trace the ownership of a sold SREC, you can use the following methods.
- Contract-path tracking method
- Certificate-based tracking
Although the contract-path method is relatively older, it is still much in practice. It helps to trace the track of ownership for almost every item located in the portfolio of the buyer.
On the other hand, the certificate-based procedure relies on the electronic tracking system. It allows the holder to transfer the RECs to other account holders.
Conclusion on SRECs
Solar renewable energy certificates (SRECs) allow the holder to earn utility credits or even sell these certificates as a commodity. You can claim one SREC by generating 1000 kWh of energy through your own solar system.
Furthermore, SERCs also provide complete information about the ownership and it is quite simple to transfer these certificates.