As I’ve posted before, the economics for solar in New Jersey are crazy. With relatively pricey power costs, a good state rebate, and the Federal tax credit, solar makes strong financial sense in New Jersey by itself, even without the SRECs. But the SRECs and TRECs take everything to a new level. They help get solar to where it should be by making the financial benefit so strong you can’t overlook it.
What’s an SREC?
SREC stands for “Solar Renewable Energy Credit”. Think of an SREC as a coupon. Every time your solar power system finishes generating one megawatt of power, it spits out one of these coupons. If you have a nicely oriented, non-shady roof and 5kW of solar panels up top, you’ll generate about 7 of these SRECs a year. You can then redeem each coupon for cash at whatever it happens to be worth at the time. Now, here’s the tricky part… what it’s worth at the time… is weird… and how you “redeem” it… is weird.
What’s a T-REC?
TRECs are simply SRECs with a different letter in the front to confuse you. All that’s different is that the ‘T’ stands for “tradable”. This potentially means money for homeowners who start trading the RECs their systems produce. Eventually, even California will have TRECs.
What’s an SREC worth?
Short answer: Depends what state you’re in but in NJ, about $700. If the New Jersey utilities don’t meet certain renewable standards, they are penalized. Therefore, they gladly buy SRECs at any rate under what they would be penalized for (surprise, the penalty is about 700 bucks). In 13 other states, the worth of SRECs are all over the map. The good news is, if you own a solar system outright, you are already generating SRECs (woot.). They may have a shelf life (and so you may not be able to monetize all the ones you’ve created), but once they are available to trade in your area, you can reap some cash.
How do I get money from my SRECs?
- Option 1: Trade them on the open market (which may or may not be possible).
- Option 2: Sell them to an aggregator.
Option 1: Register your solar system with WREGIS-Western Renewable Energy Generation Information System, and then trade them yourself on the open market. Online marketplaces will become more and more prevalent and there are a few that exist already. I hesitate to link to these because I am not sure which ones are the best to use. I’ve been getting into this more lately and will have better input to update this post. But for now it’s a considerable amount of work and option two is what most people opt for.
Option 2: There are companies that make a business trading these and there will be more coming. They will pay you cash for SRECs under a contract, where they basically purchase all the SRECs that your solar system will generate for a number of years. I’ve seen 1-year, 5-year, 7-year, and more contracts for this. SRECs only have a current day value, so the aggregator is making a guess as to what they will be worth. If it’s a 1-year contract, you can probably nail down the spread they are taking (difference between what you could get trading it yourself and what they will pay you for it) and… it’s probably worth it. In multi-year contracts there is more speculation about their future value, so it’s really impossible to say what’s a better deal, it’s just about risk. You’d be paying them for not having to take the risk on what they are worth in the future.