In addition to the federal
investment tax credit, in which 30% of your solar investment can be
written off against your taxes no matter where you live, states like New Jersey have begun to offer tremendous local incentives for residents to adopt solar lifestyles. One of those incentives is known as a Solar Renewable
Energy Credit (SREC), which can appear confusing at first but is
actually quite straightforward.
Think of it this way: your rooftop photovoltaic
(PV) system is your own business enterprise. In
the world of business, as a company generates revenue, it issues stocks
and bonds, which are then sold in a financial market, bringing in even
more money for the firm. Your PV system isn’t
generating financial revenue, however; it’s generating clean energy
“revenue.” And as you generate a predetermined
amount of energy, you are issued a “share” in the form of an SREC,
occasionally known as a Green Tag, which you can then sell on the market
to the highest bidder.
Why would anybody want to buy an SREC from you? The answer is that many states have what’s known as a
renewable portfolio standard (RPS), in which the state has decided that
a certain percentage of its total electricity has to come from solar
power each year. Power utilities need to meet
that percentage, or pay huge fines. So they turn
to residential and commercial suppliers (i.e. you) to buy green power
In New Jersey, for example, once your installer
has connected your PV system to the grid, you’ll earn one SREC for
every 1000 Kilowatt hours (kWh) of generation, which is the
same as one Megawatt hour (mWh). Mid-Atlantic
states typically get 10,000-12,000 hours of usable sunlight per year, so
for every kilowatt in your PV system, you’ll get 1-1.2 SRECs annually. So if a typical home requires a 7 kilowatt system,
you can expect to earn at least 7 SRECs per year. Once
you install your system, you can earn SRECs for fifteen years, and they
last for two years once issued.
Now, onto the fun part—making money.
Once you register your system with the SREC
tracking system, you’ll create an online account that will log your
green power generation. You’ll be issued energy
credits, which you can then post onto a message board on the website and
negotiate the terms of your sale directly with utility buyers. For those who’d prefer to let someone else handle the
negotiations, you can arrange to have an agent or “aggregator” handle
the sales of SRECS.
So how much can you expect to make?
Well, in New Jersey the state has issued what’s known as a Solar
Alternative Compliance Payment. It’s the penalty
per mWh that utilities have to pay if they don’t have enough SRECs
relative to their target. This year it’s around
$690, which acts as ceiling price (i.e. they’ll never pay you more, but
they will pay up to it per SREC). So far this
year the average price has hovered around $550
per SREC in New Jersey. So if you’re
generating 7 SRECs per year, that’s $3850 in cash coming in to you every