SREC

SREC stands for Solar Renewable Energy Certificate. It is a tradable environmental attribute representing the environmental benefits of 1 megawatt-hour of electricity generated by a solar energy facility and delivered to the grid. SRECs are used to demonstrate compliance with state Renewable Portfolio Standards or other solar-specific requirements, decoupling the environmental value of solar from the electricity itself.

SRECs are created for each eligible unit of solar generation and can be bought, sold, or retired. The certificates are tracked in state or regional registries, such as NEPOOL GIS or PJM-GATS, to prevent double counting. Utilities or other obligated entities typically must surrender a specified number of SRECs each compliance period; if short, penalties or alternative compliance payments may apply.

The price and availability of SRECs are driven by supply and demand within a given program, policy design, and the level of solar deployment. SREC markets can be volatile, influenced by shifts in policy, the pace of solar installations, and changes to the eligibility rules or compliance requirements. Developers and investors use SRECs to secure revenue streams alongside the sale of electricity, often through long-term contracts or market trades.

SREC programs exist in several states and regions, with terms varying by jurisdiction. Some states have phased in, modified, or replaced SREC structures with alternative mechanisms, while others continue to rely on SRECs as a key element of their solar support framework. In general, SRECs illustrate how environmental attributes of solar energy can be monetized to encourage renewable capacity while separating them from the electricity market.