Renewable Energy Credits

Renewable Energy Credits/Alternative Energy Credits

Solar Renewable Energy Credits (SRECs)

Solar renewable energy credits (SRECs) are credits associated with the green attributes of producing clean, renewable solar energy. Each SREC is associated with a unit of energy production from your solar system called a megawatt-hour (MWh). A megawatt-hour is a unit of energy output, and equals the amount of electricity generated by a one megawatt electric generator producing electricity for one hour. On an electric bill electricity usage is commonly reported in kilowatt-hours. Why do energy companies need SRECS? Large-scale electricity suppliers are required to supply a certain percentage of their electricity from solar energy. They can accomplish this by building large-scale solar facilities to produce their own solar energy or by purchasing SRECs. SRECs are a critical component to making solar energy an affordable option for homeowners and businesses. SRECs compose up to thirty percent of a solar energy system's costs. We can give you the resources to capitalize on this opportunity and secure the maximum benefit of the SRECs from your planned solar energy system through our relationships with established
SREC aggregators.

SREC Background & Management Options

Background:

There are numerous ways to manage SRECs and various companies that will purchase them. Although the utility companies are the ultimate recipient in 99% of cases, there are various middlemen who facilitate the transfer of SRECs from the actual producers to utilities. This is common because the middleman, commonly referred to as "aggregators", will purchase small quantities from many generators and bundle them into large packages to sell to utilities, thus removing the burden that utilities deal with thousands of generators individually. ESI has a good working relationship with Sol Systems, a DC-based aggregator, whose information can be found at the end of this section.

1. Self-Management – There are two popular online trading platforms where individual generators can sell their SRECs as they're produced by listings, auctions, etc. The benefit of self-managing is that you maximize your return but are also required to perform the legwork of facilitating transactions.

2. 3rd Party Management – There are a handful of aggregator companies out there which will either forward contract your SRECs or manage them for you. The common methods of 3rd party management available are:

a) Annuity Contracts – You will enter into a term contract (typically 3-5 years) where the aggregator agrees to pay you a fixed price for every SREC you produce. This method helps avoid fluctuations in the marketplace and solidifies a projected cash flow.

b) Upfront Contracts – An aggregator will pay you a fixed price upfront, typically per kilowatt of installed capacity. For this large upfront payment, you will sign over all the SRECs you produce to them for a term (typically around 10 years). Unless a system owner is struggling to finance the upfront cost of a system, this is not a desirable management method. At the end ofthe day the system owner is typically only being compensated 40% - 50% of the spot market value.

c) Brokerage Agreements – An aggregator will manage your SRECs on the open market for you and relieve the system owner of the legwork of performing it themselves. There are typically no term contracts involved, but the aggregator will take a fee for managing them (normally around 5%).