One of the ways that New Jersey encourages people to go solar is through Solar Renewable Energy Credits (SRECs). The New Jersey Board of Public Utilities runs a Clean Energy Program, which lets people earn SRECs for producing solar energy.
The SREC attempts to place a monetary value on the green value of your electricity. Your solar system produces electricity, which you can sell back to your electricity provider. To prove that electricity comes from a renewable resource, they can purchase SRECs from you. The SRECs do not come automatically; the electric company must purchase them separately. You earn one SREC for every 1MWh (1,000 kWh) of electricity that you produce. Utility companies want to purchase SRECs because they have to purchase a certain number each year to show that they are meeting their green energy guidelines.
In New Jersey, utility companies must have a percentage of their electricity from renewable resources. They must be able to prove that. If they cannot, then they have to pay a fine. These fines are called Alternative Compliance Payments (ACPs). The SRECs can help companies meet their renewable energy requirements.
One of the complicated things is trying to decide how much the SRECs are worth. Because companies can generate or purchase solar energy, the value of the SRECs can vary. In addition, the more people with solar who are selling SRECs, the lower the value of the SRECs. So, the market determines the value of the SRECs, at least to a point. In addition, the value of the SRECs is capped by the penalty because we want to encourage the purchase of the SRECs instead of the payment of the penalty.
The SREC prices are fluid. They are always changing. Fortunately, you do not have to determine how to sell them. When we install your solar system, we will handle SREC registration for you. If you already have solar and have not installed an SREC system, then you can hire an SREC company.
Once you are registered, you can sell your SRECs in three different ways. You can sell them upfront; you can sell them for a contract period of a certain number of years, or you can sell them on a spot market. The simplest solution is to sell them upfront, but you run the risk of undervaluing your SRECs. The spot market is more complex but may give you the best value. The contract method gives you the benefits and risks of both systems.