Solar Renewable Energy Certificate (SREC) is a tradable compliance instrument that represents the environmental attributes from a specific quantity of electricity generated from solar energy systems. Each SREC certifies the production of one megawatt-hour (MWh) of electricity generated by solar power. These certificates can be sold or traded, serving as an additional revenue stream for solar energy producers. SRECs encourage the expansion of solar power by providing financial incentives for solar energy production, aligning with renewable portfolio standards (RPS) that mandate a certain percentage of electricity must come from renewable resources.
SRECs play a pivotal role in the economics of solar energy. Their market value is determined by supply and demand dynamics within SREC markets, which are influenced by RPS requirements and the availability of solar-generated electricity. Owners of solar photovoltaic (PV) systems earn SRECs for the electricity they produce and can sell these certificates to utility companies, which purchase them to meet their renewable energy obligations. The price of SRECs varies by state and is influenced by factors such as state-specific RPS goals and solar carve-outs, making the market for SRECs a critical element in the financial viability and expansion of solar energy projects.
