Renewable Energy Certificates also known as “green tags” or “tradable renewable certificates”, are property rights to the environmental benefits of producing renewable energy. RECs provide a subsidy to producers of renewable energy promoting carbon-neutral energy production. REC producers are credited with one REC for every MWh of electricity that is produced. That energy is then fed back into the electrical grid. The REC can be sold on the open market by a company called an “aggregator”.
Solar Renewable Energy Credits are a form of the renewable energy certificate. Electricity suppliers are required to use the SREC program to show that they are compliant with the State’s Renewable Portfolio Standard. Instead of upfront subsidies from the state, solar power producers can recover their investments through selling these certificates to their utilities.
There is typically no price set on the SRECs. The price is determined by supply and demand as well as a State’s solar alternative compliance payment. With increase supply of solar technology and technological advances, solar development is forecasted to go up thereby decreasing SREC values. On the other hand, the recent credit crisis has slowed the development of large scale solar projects and as a result limited the supply of SRECs. In the near future, the price of SRECs is expected to be stable.
In order to qualify as a SREC producer, the producer must register with a state regulatory agency and a trading platform. Once they are registered, the producer is paid according to either an estimate table or actual meter readings. Meter readings are usually used in the case of large scale installations while estimates are used for smaller scale solar installations.