What Are SRECs?
The SREC market is one of the most misunderstood parts of going solar. I have talked to homeowners who thought SRECs were a scam, and others who expected to make $10,000 a year from them. The truth is somewhere in between—and it depends heavily on which state you live in. Let me break this down in plain English.
A Solar Renewable Energy Certificate (SREC) is a tradable certificate that represents the "clean energy" attributes of electricity generated by your solar panels. When your system produces 1,000 kilowatt-hours (1 MWh) of electricity, you earn one SREC.
An average 8 kW system produces 10-14 SRECs per year, depending on your location. (Source: SRECTrade and state program data)
SRECs exist because many states have Renewable Portfolio Standards (RPS) that require utilities to get a percentage of their electricity from renewable sources. Utilities can either build their own solar or buy SRECs from homeowners like you to meet these requirements.
Why Do SRECs Have Value?
- State mandates: Utilities MUST meet renewable energy quotas
- Limited supply: Only registered solar systems generate SRECs
- Penalties: Utilities face fines if they don't meet requirements
- Market dynamics: Prices fluctuate based on supply and demand
How SRECs Work
The Basic Process
- Install solar and register with your state's SREC program
- Generate electricity—your system produces power
- Earn SRECs—tracked via your production meter
- Sell SRECs—to utilities, brokers, or aggregators
- Receive payment—separate from your electricity savings
SREC vs. Net Metering
| Factor | Net Metering | SRECs |
|---|---|---|
| What it pays for | Electricity value | Clean energy attribute |
| How you're paid | Bill credit | Cash payment |
| Available where | Most states | ~10 states with SREC markets |
| Value | $0.08-$0.30/kWh typically | Varies widely by state |
States with SREC Markets
Not all states have SREC programs. SREC markets exist in states with mandatory solar carve-outs in their Renewable Portfolio Standards:
Active SREC Markets
| State | Market Status | Notes |
|---|---|---|
| New Jersey | Strong market | One of the oldest, most established |
| Massachusetts | SMART program | Transitioned from traditional SRECs |
| Illinois | Adjustable Block Program | State-run program with set prices |
| Maryland | Active market | Moderate SREC values |
| Pennsylvania | Active market | Lower values but available |
| Washington D.C. | Strong market | High values due to limited supply |
| Ohio | Active market | Lower values |
| Delaware | Small market | Limited but available |
States Without SREC Markets
Most states—including California, Texas, Florida, Arizona, and New York—do not have traditional SREC markets. Some have alternative incentive programs:
- New York: NY-Sun incentive program (upfront rebate)
- California: Net metering (no separate SREC)
- Texas: No state-level program (some utility rebates)
How to Earn SRECs
Registration Requirements
- Install an eligible system: Must meet state requirements
- Register with the state: Through their tracking system
- Install production meter: To verify generation
- Receive certification: System approved for SREC generation
Common Tracking Systems
- GATS: PJM Generation Attribute Tracking System (mid-Atlantic)
- NEPOOL GIS: New England region
- MIRECS: Midwest region
- State-specific: Some states have their own systems
How SRECs Are Credited
Your solar production is monitored (usually via your inverter's data connection), and SRECs are credited to your account as you generate electricity. When you accumulate enough production (1 MWh = 1 SREC), the certificate is minted and ready to sell.
Selling Your SRECs
You have several options for selling your SRECs:
Option 1: SREC Aggregators
Companies that collect SRECs from many homeowners and sell them in bulk. This is the most common option for residential solar owners.
- Pros: Easy, hands-off, guaranteed buyers
- Cons: Take a commission (typically 3-10%)
- Examples: SRECTrade, Sol Systems, Flett Exchange
Option 2: Direct to Utility
Some utilities buy SRECs directly from homeowners.
- Pros: No middleman fees
- Cons: May offer lower prices, more paperwork
Option 3: Long-Term Contracts
Lock in a fixed price for your SRECs over multiple years.
- Pros: Predictable income, protection from price drops
- Cons: Miss out if prices rise, may require commitment
Option 4: Spot Market
Sell SRECs at current market prices as they're generated.
- Pros: Benefit from high prices, flexibility
- Cons: Price volatility, more active management
What Affects SREC Value
Supply and Demand Factors
| Factor | Effect on Prices |
|---|---|
| More solar installations | Increases supply → lower prices |
| Higher RPS requirements | Increases demand → higher prices |
| Utility non-compliance fines | Higher fines → higher SREC value |
| Policy changes | Can dramatically shift markets |
| SREC carve-out targets | Higher targets → more demand |
Historical Price Trends
SREC prices have generally declined over time as more solar has been installed. Markets that once paid several hundred dollars per SREC may now pay much less. However, some markets (like D.C.) maintain higher values due to limited supply and aggressive targets.
SRECs with PPA or Lease
Who Owns the SRECs?
If you purchase your solar system, you own the SRECs. But with a PPA or lease, the solar company typically owns the system—and the SRECs.
| Ownership Type | Who Owns SRECs | Your Benefit |
|---|---|---|
| Purchased system | You | Sell SRECs for cash |
| Solar loan | You | Sell SRECs for cash |
| PPA | Solar company | Lower electricity rate |
| Lease | Solar company | Lower lease payment |
Negotiating SREC Terms
In some cases, you may be able to negotiate SREC ownership or a share of SREC revenue in your PPA/lease agreement. This is more common in high-value SREC states. Always ask about SREC terms before signing.
Tax Implications of SRECs
Are SREC Payments Taxable?
Generally, yes. SREC income is typically considered taxable income by the IRS. However, the specific tax treatment can be complex:
- Ordinary income: Most common treatment—taxed at your regular rate
- Reduces basis: Some argue SRECs reduce your system's cost basis
- State variations: Some states may treat SRECs differently
Record Keeping
Keep detailed records of all SREC sales:
- Sale dates and amounts
- Buyer information
- Broker fees paid
- 1099 forms received
Questions About SRECs in Your State?
SREC markets are complex and vary by state. Our AI can help explain how SRECs work in your area and whether they're worth considering.
Learn About SRECs