Solar Renewable Energy Credit (SREC)
Performance Based Incentives
A substantial revenue stream for owners of photovoltaic systems
Massachusetts’ renewables portfolio standard (RPS) requires each regulated electricity supplier/ provider serving retail customers in the state to include 15% qualifying renewables in the electricity it sells by December 31, 2020. The Massachusetts Department of Energy Resources (DOER) regulates the RPS and has developed corresponding rules. In January 2011, the state’s Solar Carve-Out program final rules were implemented, which is the portion of the required renewable energy under the Class I Standard that must come from pre-qualified, in-state, interconnected solar facilities under 6 megawatts. Massachusetts’ Solar Carve-Out provides a means for solar renewable energy credits (SRECs) to be created and verified, and allows electricity suppliers to buy these certificates in order to meet their solar RPS requirements. All electric suppliers must use SRECs to demonstrate compliance with the RPS.
Solar Renewable Energy Credit (SREC)
An SREC is a tradable certificate that represents all the positive, renewable environmental attributes of electricity generated from a solar electric system. Each time a solar system generates 1,000 kilowatt hours (1 megawatt hour) of electricity, an SREC is issued by the DOER which can then be sold or traded.
The price of SRECs is established mainly by market availability, although the Department of Energy Resources (DOER) has created some market stability by creating a state Solar Credit Clearinghouse Auction.
SRECs Energy Credits and Aggregation Services
Clean Energy Design provides professional services for PV system owners who would like to participate in the Solar -Carve Out Program including the aggregation of SREC’s and sale of renewable energy credits (SREC’s) .
Eligibility for Massachusetts Solar Energy Trade Program
The Department of Energy Resources (DOER) is implementing the Massachusetts Solar Carve-Out Program, which allows you to sell Solar Renewable Energy Certificates (SRECs) generated by your solar photovoltaic (PV) facility. SRECs represent a significant potential revenue stream for PV owners, and we encourage all eligible system owners to take advantage of this program. All PV facilities in Massachusetts are eligible to participate in the program provided they meet the following criteria:
- Located in Massachusetts
- Use some of its generation on-site and be connected to the utility grid
- Operational Date of January 1, 2008 or later
- Capacity of less than 6 Megawatts (MW)
- Have not received incentive funding from prior sources deemed ineligible (rebates from the Commonwealth Solar II program are eligible)
Massachusetts Renewable Portfolio Standards
The Solar Carve-Out is specifically designed to facilitate the development of solar photovoltaic (PV) energy and mandates that a certain percentage of the state’s total supply of electricity be provided by solar PV. This percentage is designed to increase each year until 400 Megawatts (MW) of PV is installed, providing approximately 1% of the state’s total electricity supply.
The Carve-Out is a part of the larger Massachusetts Renewable Portfolio Standard (RPS) that was established in 2002. When first developed the RPS required that 1% of the state’s electricity supply come from new renewable sources by 2003. This percentage then increased by 0.5% each year until it reached 4% in 2009. Starting in 2010, it is set to increase by 1% each year, reaching 15% by 2020, and continuing until the DOER suspends the annual increase. To meet these goals, DOER places an obligation on Load Serving Entities (LSEs), or regulated utilities and competitive electric suppliers, to purchase Renewable Energy Certificates (RECs).
Implementing Solar Renewable Energy Credits (SREC’s)
The way to achieve this goal is by implementing a creative solar incentive funding mechanism called a “solar renewable energy credit” or SREC.
If you have a typical 5kw sized solar system in MA, you’ll generate roughly 5 SRECs per year for the renewable electricity you produce. If the utility companies do not hit their targets for purchase of solar electricity generation in a certain year, they now have to pay a fee of $600 per megaWatt hour for which they were short. Therefore utility companies may rather pay the homeowner with solar panels installed less than this fee for the SREC’s you generate.
For SREC market stability, the Massachusetts Department of Energy Resources (DOER) has also set a floor price for which utilities may purchase SREC’s from you, the homeowner. That’s set at $285 (this includes a 5% handling fee).
Utility companies have yearly goals they have to meet for solar electric production, so they’re quite motivated to buy up SREC’s from anywhere they can get them less than that $600 fee. In February 2011, SREC were valued on the open market at around $520.
SREC’s are guaranteed payments from the utility companies to you for at least 10 years. So, if you sell 5 of them each year and you are able to sell them for an average of $400 each over that timeframe, that’s about $2000 a year for 10 years – or $20,000. The state is confident that these incentives will foster the installation target of 400 MW by 2020.
To get more information about how this all works, please call or email our our experts at Clean Energy Design, LLC. who can help get you a customized quote. For more information on the Massachusetts solar carve out program please go to the DOER website.