Solar Renewable Energy Certificates, commonly referred to as SRECs are an important factor when considering buying a solar photovoltaic system.
About 29 states in the United States have created mandates - that specify that a certain percentage of electricity is produced from renewable energy sources. These mandates are referred to as Renewable Portfolio Standards (RPS). Solar energy is a component of RPS and require utilities to source a part of their electricity produced by solar panels.
As an owner of a solar energy system, you will generate SRECs as your solar panels generate electricity. Each 1,000 kWh of electricity produced by your solar panels is considered to be 1 SREC. This SREC can be sold to the utility for anywhere between $100 & $600. It does not matter if you end up using all the electricity produced by your panels, only that you generated power using a solar photovoltaic system.
To give you an example, if you install a 5,000 watt (or 5kW) solar power system at your home in Massachusetts, you are likely to produce about 6,000 kWh of electricity in a year. It means you will have also earned 6 SRECs (1 SREC = 1,000 kWh) in a year. An SREC in Massachusetts is sold for $540 in 2011. That means you will generate an additional income of $3,240 (6 x $540), less any sales commission, in addition to enjoying $1,000 worth free electricity generated by your solar panels (assuming you would have paid 17 cents/kWh for electricity from the grid). As you can see, SRECs can be quite valuable and make installing a solar power system even more attractive investment.
If you own the system outright, you will be entitled to the SRECs and the revenues from selling them. It is not necessarily the case if you lease your solar panel system or sign a PPA. Most pre-paid leases allow you to retain the SRECs and the associated revenue, but its not the case if you sign a $0-down solar lease/PPA or make a small down-payment on your solar lease/PPA.
Selling SRECs is relatively easy. You can generally sell them online - via an auction process - or sign up with a SREC aggregator, who will sell the SRECs on your behalf and mail you the checks. The aggregators
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