SRECs 101 – All You Need To Know

Bob: “Hey. What’s happening?”

Chris: “You know. Same ol’, same ol’.  Kids just finished up with school, busy with work. And oh yeah, we own a power plant now.”

Bob: “A power plant?”

Chris: “Yeah, we just put solar panels on our house.”

Bob: “So how does that work, you get paid for any excess solar you don’t use?”

Chris: “Nope, we get paid for all the power we produce?”

Bob: “So does the electric company pay you for the extra power.”

Chris: “No, it doesn’t work like that.  You see, the State of Massachusetts doesn’t have enough power in the grid, so for every kWh of power our solar panels produce, we get paid. Not just the extra. Think of it like this, whether we use all the power or send it all back into the grid, we are still offsetting the burden of the utility company by producing that power. Does that make sense?

Bob: “So essentially, if I’m getting this right, you are getting paid as a power plant for the power you produce, and it doesn’t matter if you use it or not?”

Chris: “Correct!  It’s called the SREC program. Pretty cool huh?”

——-

In 2007 Governor Deval Patrick announced a new goal for Massachusetts – install 250 MW of solar in the State. At the time there were only 3 MW of solar installed. Needless to say, the State would need some help meeting these lofty goals. This help came in the form of incentives, rebates, and in 2010 the Massachusetts Solar Carve-Out or SREC-I program. The program hit its goal in 2014 and was replaced by the SREC-II program, designed to support the solar market until the State had reached 1,600 MW as well as address the financial barriers to solar ownership.

So what exactly are SRECs? Solar Renewable Energy Certificates, more commonly known as SRECs, is a program administered by the Massachusetts (there are SRECs in other states, but each one is unique and independent) Department of Energy and Resources (DOER).  SRECs were designed to incentivize solar adoptions by homeowners, business owner, and non-profits.  Originally, for every 1 megawatt-hour (1,000 kWh) a solar system produces, the owner received 1 SREC. These SRECs were then sold by two common methods; in the DOER’s Annual Clearinghouse Auction or on the open market, sometimes referred to as the “Spot Market.”  For Massachusetts residents, there are two big advantages of SRECs:

  1. While the open market price of SRECs can fluctuate, the State has helped alleviate this concern by setting a minimum value per SREC in the DOER’s Annual Clearinghouse Auction.  This helps current and potential solar customers more accurately calculate return on their investment.  
  2. MA also guarantees a minimum of forty quarters (10 years) of SREC’s.  So if you were to average $1,500 in SRECs per year, that would equate to about $15,000 over tens years!

Is there a difference between the original SREC-I Program and the Current SREC program? Yes.  While the essence of the program is the same, there are some important differences. To start, the current program, which in effect, is an interim program between SREC II and the pending SMART program, has reduced SREC factors. What does that mean?  Simple put, instead of getting 1 SREC per 1,000 kWh, there is now a 20% reduction in that factor… so you will make 20% less than you would have if you were installed last year.  There are other differences in the current program, most notably lower factors for commerical project, solar on greenfields (farm lands, unconstructed open space), and incentives to build parking lot solar canopies.

SRECs vs Net Metering: SRECs and net metering are similar in that both are dependent on your solar system’s production. However, there are a few major differences. While SRECs are a State sponsored incentive that works with the energy market, net metering is a credit provided by the utility company for returning power to the grid. Also, with net metering the utilities’ credit applies only to the power the system produced above and beyond what you have consumed. These savings show up in the form of a credit on your electric bill. On the other hand SRECs are allotted based on the amount of power your system produces, regardless of how much you use. This incentive comes in the form of a check instead of a credit. Sweet- money!

SRECs are one of the first considerations when assessing the return on investment of a solar system, and have been integral in helping Massachusetts reach its solar goals. However, with those goals in sight the Massachusetts DOER, which is in charge of the solar goals and incentives for Massachusetts, has decided to phase out the SREC program. Over the years, the DOER has reduced SREC values to coincide with falling solar panel pricing, essentially trying to maintain a similar ROI between system costs and incentives.  However, at the end of 2017 the SREC program will come to an end. Although plans and steps have been taken for a follow-up program, called the SMART Program, currently, there are no guarantees of exactly what this program will look like. All we do know is that it will not be as fiscally advantageous as the current program, perhaps as low as 48% lower than the current program. What does this mean for you? Basically, that although going solar will continue to be great decision for a myriad of reasons, the years to payback and return on investment will not look quite as irresistible as it does today.

Am I too late? No, you are not too late. Although the window is closing quickly, there is still time to take advantage of the current MA SREC program. The State requires that your system be installed, turned on and connected to the grid by the deadline.

Is solar still on the table for you? Take a moment to give us a call at 617-564-3159. Best case scenario – we help you go solar and take advantage of all the incentives while they’re available.

 

 

Article Written by Selah – Inside Sales Manager – Rayah Solar

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