Making Your Solar Electric System Pay You Back with Maryland Solar Renewable Energy Credits (SRECs)

One of the many benefits of investing in a solar electric system is the right to sell a credit for every 1,000 kilowatt hours of electricity generated by your panels each year. These are called Solar Renewable Energy Credits, or "SRECs."
 
A typical home solar electric system of, say, 5 kilowatts (kW) generates about 6,000 kilowatt hours -- which is equal to 6 megawatt hours -- of electricity per year in the Mid-Atlantic region. Those 6 megawatt hours earn 6 SRECs which currently can be sold for about $1,600 each year in Maryland!

Talking About Electricity? Know Your: watts, kilowatts & megawatts

1,000 watts               = 1 kilowatt 1,000 kilowatts          = 1 megawatt   1,000 hours               = 1 kilowatt hour 1,000 kilowatt hours  = 1 megawatt hour   1 megawatt hour        = 1 Solar Renewable Energy Credit

  
Here is how the value of SRECs are calculated in Maryland based on a solar electric system with 5 kilowatts of electric generating capacity, and earning 6 SRECs:

1. Drawing on the amount of sunshine available, on average, throughout the year at this latitude and in the region's climate (accounting for rain, snow and overcast days), as well as the orientation of your solar panels and any shading, the formula is determined by an algorithm known as PVWatts and developed by the National Renewable Energy Laboratory in Golden, Colorado. It is used by the Maryland Public Service Commission (PSC), which regulates the state's utilities, and multiplies the size of the solar system to calculate the megawatt hours of electricity generated per year. For most homes and businesses, that multiple is 1.2 for each kilowatt.

    

2. A 5 kilowatt system annually earns 6 Solar Renewable Energy Credits:
    
      5 kilowatt system x PVWatts multiple of 1.2 = 6 megawatt hours = 6 SRECs 

    

3. The value of an SREC is based on the "Alternative Compliance Payment," or ACP, set by Maryland PSC. Utilities must pay this Alternative Compliance Payment as a penalty for not generating the electricity they need to meet the state's renewable electricity requirement (aka Renewable Portfolio Standard, or RPS). Their penalty is your reward for generating renewable electricity.  In Maryland, the ACP in 2008 was $450. 

    

4. Utilities are permitted to make their Alternative Compliance Payment by purchasing SRECs in bulk. So, as you might guess, a cottage industry is materializing to aggregate SRECs for small system owners. Beware, some of the aggregators are very new to the business and only think about their bottom lines -- today. 
   

   Standard Solar Aggregates SRECs For Its Customers and Represents Their Long-Term Interests, Year-In and Year-Out

    

5. The ACP in 2009 is $400. The market for SRECs for 2009 is expected to fall between 60% and 70% of that, or $240 to $280.
    
      6 SRECs x market price of $280 = $1,680
   

When figuring the payback period on a solar electric system, you should include this income stream in your calculations (and remember to declare this income in your tax filings).
 
SRECs are highest in value in the early years of a state's renewable electricity requirement. The ACP requirement was set for 15 years by the law that created Maryland's RPS. It is designed to motivate homeowners sooner, rather than later, to invest in solar electric systems. As the solar industry matures, costs are expected to decline and so too will the market price for SRECs, especially approaching the 15th year.

Wait a minute. There is more you need to know -- and do!

For your SRECs to be counted and sold in Maryland, you need to register your solar electric system with the: 

 

• Maryland Public Service Commission, and
  
• Generation Attribute Tracking System, or GATS, at PJM Interconnection, which coordinates the transmission of power throughout the Mid-Atlantic region.

Each of these steps can be time-consuming. Standard Solar can provide whatever help you need in filling out the required forms by the deadlines.
 
We recommend you do not wait to sell your SRECs beyond February for the previous year. If you miss this window or forgo selling them until the next year, you may receive less money in return.
 
When you buy a solar electric system from Standard Solar, you're buying a solar relationship with a company founded in Maryland in 2005 that will benefit you the entire life of your investment.
 
If you have questions about SRECs, or have SRECs to sell, please contact us at 301-944-1200 or info@standardsolar.com.