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RECs & SRECs & Green Tags, Oh My!

green-tag

Today, I’m going to attempt to explain “REC” “SREC” aka “Green Tags.” I say try because these can be really, really…really complicated. They’re also worth money, so again, I’ll try, but the truth is that these things are variable in every State.

First the simple: What do all of those letters mean?

  • “REC” “SREC” and Green Tags are all different short handed names for the same thing.
  • REC stands for Renewable Energy Certificate. Sometimes the “C” stands for Credit.
  • SREC (Sometimes spelled S-REC) stands for Solar Renewable Energy “Certificates” or “Credits.” As for Green Tags, I have no idea where that nickname comes from, but it’s the same thing as the others.
  • RECs, SRECs Green Tags or whatever you want to call them can be derived from other kinds of renewable energy, such as wind. So they don’t just count for solar, but that depends on your state. For sake of simplicity, I’m going to call them SRECs, and the “C” will stand for “Credit.”

What kind of “credits” are we talking about, Solar Fred?

  • I’ll tell you one thing. It’s not a “carbon credit.” That’s something entirely different. Don’t get me started on carbon credits. Dogs will howl if I get started on those things. Let’s stick with SRECs.
  • It’s not a Feed-in-Tariff (FiT), either.
  • SRECs are in fact a “credit” for the amount of clean solar energy that your solar panels produce. Dirty utilities in some states need a certain amount of these credits in order to comply with the State’s Renewable Portfolio Standards (RPS).
  • How do utilities get these credits? Generally, two ways: They either build solar or wind farms and/or they pay you for the clean power your solar panels produce.
  • And how much cash is that credit worth?
  • That answer is complicated, but let me keep it simple: It depends.
  • Currently, it depends largely on your state, sometimes your utility, the laws that have been passed in regards to the RPS, and how much the SREC is worth on your local SREC market. The SREC market is similar to a stock market…in some states. Supply and demand determine the price.
  • This means that 1 SREC in Connecticut will not be the same price as an SREC in New Jersey, and visa versa. In fact, depending on the State and market, that SREC could be worth, say, $50 one month or $200 another month–in the same state. Again, think Wall Street.
  • Other things to keep in mind if you still have a mind and reading this:
  • Your solar or wind system must be tied to grid to get SRECs. This is not a program for off-grid homesteaders.
  • Now it gets really complicated, because every state is different. With some states, utilities have their own special SREC programs. Some states allow you to sell your SRECs directly to the market. Some utilities will give you a lower upfront State solar rebate if you decide to keep your SRECs instead of selling them to the utility at a set price for a certain time period. Entire states, like New Jersey, let you to keep your SRECs and let you sell them at a scheduled SREC auction…or to a middleman who does this for you. Some SRECs are guaranteed a steady per kilowatt rate that your panels produce for a certain amount of time, say a 3 year period. The exceptions and variables are numerous. But wait, it gets worse!

When you sell your SRECs, you are selling the “environmental benefit” of your solar panels to someone else, like the utility, who by law needs clean power. Think Vampire. You’re selling the “green soul” of your solar panels. Your panels become the Solar Undead.What does this mean in practical terms?

  • In effect, it means that you personally can no longer claim to have green power on your roof. Yes, I know that the panels are clearly on your roof, but as far as the law is concerned, you as a home owner (or a business owner) cannot advertise or claim to produce clean green solar power energy. You’ve sold that right when you sold your SRECs.
  • You think I’m lying or purposely trying to confuse you, but it’s all true! And because I’m writing generally across these 50 United States, I can’t be specific.
  • The good news is that I will eventually get to robust SREC States like New Jersey and Connecticut and try to break these programs down for you.
  • In the meantime, you can also check your utility’s website, your State’s website, or www.dsireusa.org/solar, a database of solar incentives across the 50 states.
  • Of course, you can also easily get this info from a local installer by getting a free quote.  They might even be able to explain it better than I can, ’cause, you know, they live in the state and should know.
  • That’s enough for now. Stick the fork in. Solar Fred is done.

Last modified: January 15, 2019

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Greg

I sold the rights of my SRECs to my installer. Do I need to reduce my cost basis by the SREC purchase price when calculating the %30 tax credit? Thanks in advance.

Jim

Good catch, Jim! The link has been updated, but since DSIRE changed their whole site last year, we’ve got our work cut out for us. we link to them so many times.

Medford NJ Resident

This is directed to those of you that are not solar panel experts and are thinking about making the investment. Before you invest in solar panels you really need to do your due diligence and research this thoroughly. I can’t express this enough as we were blindsided. We live in NJ and 2 years ago we were talked into a $50,000 solar panel investment with promises that through the S-recs we would recoup our investment within 4 years. The S-recs at the time were about $600. We did not understand S-recs or how they worked. We were told that “the… Read more »

Somerset County Resident

NJ SREC prices for 2012 energy year dropped substantially due to the oversupply in the state. I guess that is a good thing for those of us who love solar but did slow down my payoff of the system I installed last year. They are starting to bounce back this month. I noticed on the SREC Marketplace website that they are up to $300. Not the $600 of last year but better than the low of $150.

philaphonic

Regarding RECs, I need help with some legaleeze. I got a bid for a PV installation from the largest local installer here in Houston. Their contract has a clause that looks like it says THEY get all the RECs and carbon credits! Is this common practice??? What would you do in this case? Here’s the actual wording: L. Carbon Credits; Renewable Energy Credits. To the extent not otherwise assigned or sold to Customer’s electric utility provider, in consideration for the Equipment, and for other good consideration, the value of which is hereby acknowledged by Customer, Customer hereby assignes its rights,… Read more »

Rockhopper

Marty in MD and NJ Hamilton – I’m in MD, getting ready to make the dive into our SREC management, too. Our installer offered two SREC deals: a 15-year upfront buyout to reduce the cost of our intitial install, or to buy our SRECS as produced and aggegate/sell and give us our share. We chose to do it ourselves and I’m just getting started. Marty, you answered my question about whether I could enter the NJ market. Bummer. We have our interconnection paperwork from BG&E – but I think I need something else from the MD Public Service Commission. Our… Read more »

T

Nice post Solar Fred. You explain SRECs and RECs to the newbies well. I just have a few comments. There is a big difference between a megawatt and a megawatt-hour. 1 MWh = 1 SREC. Almost 2 years ago the Alternative Compliance Payment was changed to $711 dropping off about 2.5% every year for 8 years, etc. SRECs were double in value when you posted this, if you take the right sales approach. SRECs don’t just change in value from $300 to $400 randomly or because of an auction. It’s not a very volatile market. The value changes because of… Read more »

martyg

MD-Marty

I’m soooo jealous. I live in MD and i’m shut out of the NJ SREC market. The most I can get for my SREC’s is $400 which is equal to the state’s current compliance fee. I can sell in PA also but NJ has the highest SREC prices. Stay away from the brokers and use SREC Trade. 3% commission is way better than the 25% commission those crooks charge!

Ivan Zimmerman

I just got a 10KW solar system installed on my roof by a local contractor using Solar World panels. The installer is a broker for srecs but charges 15% commission on every sale. I think that is too high and want to register as a seller myself. My question is , I am in PA , can I sell to NJ , and where to I sign up? http://[email protected]

SRECtrade.com would be my recommendation. It’s an open market, very low fees.

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