Solar Renewable Energy Certificates

In many U.S. states, Renewable Portfolio Standards (RPS) require electricity suppliers to source a portion of their power from solar. Solar Renewable Energy Certificates (SRECs) provide the mechanism to track, verify, and monetize this clean energy production.

SREC values fluctuate based on market supply and demand. When SREC supply is limited and demand from electricity suppliers increases, prices can rise. Conversely, when supply is abundant, prices tend to decline. Many states include a Solar Alternative Compliance Payment (SACP), which sets an upper limit on pricing by defining the penalty for non-compliance.

New Jersey’s SREC market is the largest in the nation. In July 2012, the state passed legislation to pull forward the RPS requirements from the 2014 energy year to account for the substantial amount of solar capacity installed in the state. In May 2018, the state increased the RPS requirements again.

For a period of time before January 2011, NJ systems were eligible to apply to the DC SREC market; today, NJ-sited systems are only eligible for participation in the NJ SREC market.

The NJ Office of Clean Energy issues clients a state certification after the system is officially interconnected with the utility. Once the state certification is provided, clients may complete their SRECTrade.com application, and SRECTrade can complete the registration of the facility in the PJM-GATS tracking registry. NJ is the only SREC state in which the client and/or installation company is responsible for obtaining the state SREC certification. In other states, SRECTrade can complete the certification process for its clients

A variety of federal and state incentives, including SRECs, led to a substantial build-out of solar in the state. And until 2017, Pennsylvania allowed systems located outside of the state to register for and participate in the PA SREC market, further impacting supply. However, in 2017, Pennsylvania passed Act No. 40, which restricted geographical eligibility for the PA SREC market to Pennsylvania-sited solar photovoltaic systems effective October 30, 2017. The law may also impact out-of-state systems which were certified prior to the rule change. The Pennsylvania Public Utilities Commission will be reviewing the Act and issuing an Order regarding eligibility in the program in the coming months.

For a period of time before January 2011, PA-sited systems were eligible to apply to the DC SREC market; today, PA-sited systems are only eligible for PA and OH.

A combination of aggressive solar goals, a restrictive infrastructure for development, and the District’s demographics has preserved the DC SREC market, where SREC prices remain high due to undersupply. The D.C. City Council passed a law in July 2011 preventing out-of-state systems registered after January 31, 2011 from participating in the DC SREC Market, further limiting supply.

Recently, efforts to promote greater access to solar, such as a 2013 community net metering law, initiatives to promote greater penetration of solar installations among low-income residents, and the 2015 RPS Expansion Act promise to increase solar installation build rates across the District.

In 2011, the Delaware legislature amended the solar portion of the state Renewable Portfolio Standard (RPS) to switch the burden of acquiring SRECs away from the state power providers to the electric distribution companies. This amendment drastically reduced the number of buyer-participants, effectively making Delmarva Power, the largest electric distribution utility in Delaware, the de-facto long-term buyer for the majority of the DE SREC requirement. In response, Delmarva Power proposed the implementation of an SREC procurement program, called SRECDelaware, which provides 20-year contracts to SREC sellers on a competitive basis. A pilot version of the program was conducted in the spring of 2012, and a revised solicitation was conducted in the spring of 2013. Delmarva plans to host at least one solicitation each spring in order to fulfill its long-term SREC needs. More information about the Procurement can be found on the SRECDelaware site.

In March 2010, the California Public Utilities Commission (CPUC) approved the use of tradable renewable energy credits (TRECs) in the California Renewable Portfolio Standard (RPS) program. This framework allows parties required to meet the RPS to purchase RECs “unbundled” or separate from the associated renewable energy. At the time, the announcement stated that the initial use of TRECs for RPS compliance would be limited to no more than 25% of a given investor owned utility’s (IOU) or Electric Service Provider’s (ESP) annual obligation. The initial price cap was set at $50. Both the 25% limitation and $50 price cap were to be lifted as of 12/31/13.

In April 2011, SBX1-2 was signed into place, which capped the use of TRECs at 25% for the compliance period ending December 31, 2013, which will further decrease to 10% of the utility’s RPS requirement by 2017.

In 2015, California extended the timeline and expanded the requirements of its RPS. The RPS now reaches to 2030, when 50% of each utility’s retail sales must come from renewable energy. More information about SB 350 is available here.
California’s REC market is tracked by the Western Renewable Energy Generation Information System (WREGIS), which tracks renewable energy generation and creates WREGIS certificates for every REC generated. The WREGIS certificates (or RECs) are used to demonstrate compliance with state RPS policies. WREGIS serves 14 states and two Canadian provinces.

On April 12, 2020, Governor Ralph Northam signed the Virginia Clean Economy Act (VCEA), establishing a mandatory Renewable Portfolio Standard (RPS) in Dominion and Appalachian Power Company (APCo) service territories. A primary component of the VCEA is that 1% of Dominion’s RPS compliance obligation must come from in-state distributed generation solar resources (DG) smaller than 1 MW in nameplate capacity. This requirement will represent approximately 90 MW in 2021 and increase to approximately 250 MW by 2030, thus supporting the development of about 160 MW of DG solar over the next nine years.