Solar Renewable Energy Credits (SRECs) are one incentive that allows solar homeowners to recover the costs of installing their systems. For every one-thousand kilowatt-hours generated by a solar energy system, its owner earns one SREC. These SRECs are then be sold to help electric utilities meet their requirements to procure certain amounts of renewable energy.
The value of an SREC depends on which state market it is sold into. Not all states have established the framework that allows homeowners to produce SRECs, and not every state in which SRECs can be generated have their own SREC markets into which these credits can be sold.
In Virginia, solar homeowners can generate SRECs but the state has no market of its own. Until recently, Virginians were able to sell their SRECs into the Pennsylvania market. But this has changed with the passing in Pennsylvania of Act 40 (H.B. 118), which closed Pennsylvania’s SREC market to out-of-state credits.
This is why many Virginia solar homeowners were alerted recently that their contracts with SREC brokers like Sol Systems and SRECTrade (two of Virginia’s most commonly-used SREC brokers) had been voided. Some Sol Systems customers were also given the option to sell their next 15 years-worth of SREC credits for a lump-sum payment of $20 per kilowatt of system capacity.
Is this the only option for affected homeowners going forward? Solar United Neighbors is here to answer the questions that solar owners might have.
First, who is affected by this policy change?
Virtually all solar energy system owners in Virginia are affected by this policy change, although not everyone will experience a contract cancellation. Anyone who was using a brokerage service, where their SRECs were being sold as they were generated, as opposed to a long-term service like a Sol Systems annuity service, will not have had a cancelled contract.
If I wasn’t offered a lump-sum payment for my SRECs, do I have any other options?
That is the good news: while Virginia solar owners can no longer sell fully-valued SRECs into the PA market, Pennsylvania’s new policy allows out-of-state SRECs to be sold into the state as a different type of credit. SRECs produced in Virginia have been reclassified to be sold in PA as Tier 1 Non-solar Renewable Energy Credits (RECs).
These Tier 1 RECs are selling for $5 to $6 each, according to SRECTrade and Sol Systems. While this is slightly lower than PA SRECs, which sold for $6.50 to $8 over the last two years, this means that Virginians will not completely lose their income from renewable energy credits.
How do I start generating and selling this new type of credit?
Pennsylvania has already converted all out-of-state systems that were registered in the Pennsylvania market to begin generating Tier 1 RECs. If you had not previously been self-reporting your solar generation to your SREC broker in order to claim your SRECs, your system has already been producing Tier 1 RECs. SREC customers who are unsure if they fall into this category should check with their brokerage firm.
SRECTrade is currently able to sell Tier 1 RECs into the PA market as they are generated. Sol Systems is also working to add Tier 1 REC services in addition to their lump-sum deal.
“At Sol Systems, we are working hard to finalize our product offerings for the new year,” said Bridget Callahan, Director of SREC Aggregation at Sol Systems. “We look forward to introducing new products in the coming months to serve the monetization needs of a wider array of customers, to include new and existing customers.”
As always, Solar United Neighbors recommends that homeowners get in touch with multiple brokerage firms to compare deals to find the balance of risk and income that best fits their needs.
The future of SREC’s in Virginia
While it appears Virginia homeowners are in the clear for now, the fact that the commonwealth does not have a mandatory renewable portfolio standard (RPS) means that Virginians will be subject to future out-of-state policy changes.
Renewable portfolio standards set requirements for in-state electric utilities to procure a certain amount of renewable energy or pay compliance fees for not meeting those requirements. Utilities can purchase SRECs to close the gap between the amount of renewable energy they are required to provide and what they actually procure. In general, higher renewable procurement requirements and higher compliance fees lead to greater SREC values, which better incentivize the adoption of solar energy.
“[Virginians’] focus should be on advocating for state policymakers to advance their own solar incentive programs and expand the state’s RPS,” said Yaniv Lewis with SRECTrade. “Aggressive in-state policy has proven to be the key ingredient to renewable energy adoption and growth.”
Join Solar United Neighbors of Virginia as we fight for your solar rights. We believe that Virginians should have more access to incentives like SREC’s. With your help, our growing solar movement can win a better solar future for all Virginians!