What Is An SREC? Learn About Solar Renewable Energy Credits
(Please note SRECs are not available to organizations purchasing solar electricity via a Power Purchase Agreement (PPA). In those cases, the original investor owns and sells the SRECs.)
Every solar system produces actual electricity, as well as an environmental and energy security benefit to the region.
The concept of an SREC is a way to place a value on this benefit, so that someone other than the system owner can buy – just the benefit, and count it as its own contribution to the community. When an organization buys an SREC it is essentially buying the environmental benefits (leaving the system owner to use the electricity without claiming the environmental benefit).
Nationwide, the agreed upon standard is that one SREC equals the benefit afforded the community by the generation of 1000 kWhs (kilowatt-hours). And remember payment for a system’s SRECs are in addition to the direct savings the system owner reaps from actually using the electricity they produced.
Who wants to buy SRECs?
In Illinois (as well as a few other states) there is a dedicated marketplace for this. To protect Illinois’ long-term energy supply and its natural environment, the Illinois Power Agency (IPA), on behalf of Illinois utilities, is tasked with meeting a goal of 25% renewable-sourced energy by 2025. This % requirement is known as a state Renewable Portfolio Standard or RPS. Most states in the nation today have an RPS.
The State’s 3 investor-owned utilities (not energy cooperatives or municipal utilities) must pay into a dedicated fund. The IPA draw from this exclusively to purchase of SRECs (according to specified state RPS targets) from all ratepayers who go solar, including those in cooperative and municipal utility territories.
The process through which the IPA buys SRECs has changed under Illinois’s 2016 Future Energy Jobs Act. To make it more streamlined for the IPA, they buy the SRECs on behalf of the utilities, only in large quantities and mostly from middlemen known as aggregators.
These aggregators contract with IPA and package together all the SREC paperwork and bids for many small projects, thereby allowing the state to deal with far fewer parties. They have expertise in legal/technical aspects of contracting with the State of IL to buy individuals’ SRECs, which enables installers to do what they do best – build solar!
StraightUp Solar works with our aggregator, Carbon Solutions Group. The value of each SREC has been determined by the State on a set schedule, in blocks of decreasing value. The sooner the consumer has a signed purchase agreement the more likely they are to obtain a contract for the higher value SRECs.
At the end of 2020, the latest block of SRECs has been filled. Currently, systems applying for the SREC incentive are being added to an Illinois Power Agency waitlist with the goal that it will be replenished with the passage of legislation this spring. The higher on the waitlist you are, the better your chances of receiving SRECS from the latest block as projects drop out and the closer to the front of the line you will be when the new block is funded.
How does the SREC Program work from the consumer’s end?
In Illinois you as a solar owner contract with an aggregator (through your installer) to sell all the SRECs your system is expected to generate over the first 15 years. Then for systems under 10kW you receive a lump sum payment after your solar array has been installed in one lump sum. For systems larger than 10kW, the 15 year payment is spread out over 5 years. In both cases, you receive your payments from the aggregator.
So if your solar system generates 9000 kWh one year, you have 9 SRECs to sell for that year. And again, these payments are in addition to the direct savings you reap from actually using the electricity you produce.
As the solar system owner you will sign the actual contract for your SRECs with our chosen aggregator, who we have been successfully working with for several years. The contract will specify the maximum number of SRECs that the IPA is obligated to buy, and the exact price per SREC. The IPA pays the aggregator for the SREC delivery. The aggregator in turn distributes payments to their contracted solar owners.
A few other notable aspects of SREC programming: While the SREC sale is a purely paper transaction, there are safeguards in place to prevent individuals from selling the same SRECs to more than one party. Once a homeowner sells their SRECs, technically speaking the correct way to publicly describe their contribution to the larger community is that the homeowner is ‘producing green energy on behalf of the State of Illinois.’