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Another post about New Jersey Solar and SRECs in general (and TRECs)


Solar TRECs

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?

Two options.

  • 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.

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4 thoughts on “Another post about New Jersey Solar and SRECs in general (and TRECs)

  1. Danny says:

    Are SREC’s guatanteed?
    I live in NJ and am considering installing a solar system and the vendor is stating the the SREC is guaranteed for 15 years. Is it possible that this can go away in 2 or 5 years? That will totally throw off the payback period and cost effectiveness.

  2. Brad Bowery says:

    Hello Dave,

    Well said! There are a few things that I can add to what you have written on SRECs. Before doing so, in the interest of full disclosure, our firm, SRECTrade, is building that elusive, transparent open-market you alluded to in your post – one state at time.

    First, WREGIS is one of several regional tracking platforms. Other platforms include NE-GIS in Massachusetts, NC-RETS in North Carolina and PJM GATS in the Mid-Atlantic. They are all similar since the technology behind them was built by the same company, APX out of San Jose, CA.

    Second, I’ll add that it is important that readers not only pay attention to their own state’s SREC markets, but also to state markets around them. Every state has different rules regarding out-of-state SRECs. For example, there’s a corner of Illinois, Michigan and Indiana that are eligible to sell SRECs into Pennsylvania where prices are well over $200 per MWh/SREC – I bet there aren’t too many people there who know that. You may get an Aggregator approaching you with what might seems like a great deal for your SRECs in Kentucky only to find out he’s making a 4X profit on them in Ohio.

    Finally, to comment on long-term contracts with Aggregators, not all Aggregators are speculating. The good ones will have contracts with buyers on the other side and that is an important distinction. You don’t want to get caught up in a contract with a speculating Aggregator who goes bankrupt when the market price drops below his or her expectations. While there is no doubt that spot transactions for SRECs are risky as prices will fluctuate, the reality is that there is also a lot of uncertainty on the upside. We often hear from solar owners who locked into 5+ year contracts at $150/SREC with Aggregators in the early years of the New Jersey SREC program only to watch the SREC values go up to $700. If you check the state’s trading statistics, there are still people getting only $150 an SREC in New Jersey! So the risk is on both sides of the equation. With that said, the Aggregators provide a valuable service to the solar community and there are plenty of great ones out there. I think it is important to find one you trust. In the meantime, feel free to give that “open market” a try!

    You have a great website! Thank you for your efforts.

  3. Nice one, Dave. Great, useful, info.

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