How Do SRECs Work In Washington, DC?

If you’ve been researching going solar in DC, you may have come across the acronym SREC. But what is an SREC, and why should you care? Put simply, SRECs are one of the most profitable financial incentives for solar in the District — which has the best SREC market in the United States.

What are SRECs?

SREC stands for Solar Renewable Energy Credit, and one SREC is equal to one megawatt-hour of electricity generated by the solar panels on your roof. In fun terms, a megawatt-hour is 2,400 brewed pots of coffee, or keeping a refrigerator cold for three months. The average residential solar system (eight kilowatts, for example) will generate around 10 SRECs in a year.

In DC, one SREC is worth around $400. To put that figure in perspective, the recent SREC price in New Jersey was $208, and in Pennsylvania it was $33. You can quickly see how lucrative DC’s SREC market is — 10 SRECs at $400 apiece would be $4,000 a year, just for having solar on your roof.

Okay, that’s a lot of numbers. At this point, you may be wondering why the SREC market exists, and why DC’s is so lucrative.

Why is DC’s SREC market so good?

As the country moves toward more renewable energy generation in an effort to mitigate climate change, many states (and the District) have enacted renewable portfolio standards (RPS), which require utilities to use a certain amount of renewable energy by certain dates. We’re not just talking solar here, but also wind power, geothermal power, biomass, methane from wastewater or landfills, and other renewables. DC’s RPS says 100% of our electricity must come from renewable sources by 2032. To reach RPS targets, utilities purchase renewable energy certificates, or RECs. SRECs are simply solar RECs.

But not every state with an RPS has an SREC market — in fact, less than 10 do. DC’s RPS includes what’s called a solar carve-out, which means a certain amount of our renewable sources must be solar — and that includes residential rooftop solar. Per the CleanEnergy DC Omnibus Amendment Act of 2018, the solar carve-out was 10% by 2041, but as of January 2023, it’s now 15%.

Okay, that’s a lot of acronyms. All that to say, D.C.’s awesome SREC market comes from the combination of progressive climate change policies, a high solar carve-out, and — something we haven’t mentioned yet — a small market. Currently, only projects within the 68-square-mile District (and the few on the DC Pepco feeder lines) can participate in the DC SREC market. Supply is low and demand is high — if utilities don’t purchase SRECs, they have to pay solar alternative compliance payments. (Think of those like a fine or a penalty.)

How do SRECs work in practice?

So your solar panels have generated one megawatt-hour. What next? Here’s where we’ll get really technical: residential solar systems in the DMV register for the Generation Attribute Tracking System (GATS), which tracks data and turns it into an SREC. GATS is the trading platform used by utilities and brokers to buy and sell SRECs.

Luckily, you won’t need to worry about getting set up to sell your SRECs; Uprise works with a few major SREC brokers. You pick which one you’d like to work with, and we’ll get you set up. Your SREC broker will register your solar panels for GATS using documentation and permits from us, and then sell your SRECs to utility companies. With local broker Sol Systems, for example, you can opt for one of a few different pricing options. For example, you can choose a fixed SREC rate guaranteed for three years, or you can play the market and sell as prices go up and down.

SRECs have a life of five years, so if you generate an SREC in 2024, you can sell it in 2026, for example. One thing to note is that the money you make from SRECs does count as taxable income.

SREC prices fluctuate; for example, after the COVID-19 pandemic, prices went down. They can dip in the summer too, since solar panels around the District are producing more power with more hours of sunlight, resulting in more megawatt-hours generated and therefore more SRECs.

I have a PPA. Can I sell SRECs?

The owner of a solar system sells the SRECs. If you went solar with a PPA, Uprise counts as the system owner, and we benefit from the SRECs. (They help us make no-cost solar possible!) If you pay for your panels in cash or through a solar loan, you’re the system owner and will be able to sell SRECs.

SRECs are great now, but will those high DC prices plummet someday?

You’re probably wondering if policies will change in the future, and if DC prices will eventually go down. The answer is yes, prices will go down, but will likely still be higher than elsewhere in the country. Here’s why: the compliance payments mentioned above act as a ceiling or a cap for SRECs. If compliance payments were cheaper than SRECs, utilities would be incentivized to just pay those fines. The compliance payment rate was $500 per megawatt-hour for 2016-2023, and will be $400 for 2024-2028. It’ll go down to $300 for 2029-2041, and in 2042 will be $100. So SREC prices will be good for almost another two decades. Plus, with a high solar carve-out and a relatively small amount of solar projects generating SRECs in DC, the market will likely remain strong.

What happens if I move?

If you own your panels, they’ll be part of the sale to the new homeowner, who will then earn the SREC income. If you have a PPA, that agreement will transfer over to the new homeowner and they’ll be able to power their home with solar, although Uprise will be the system owner and receive the SRECs until the panels have been operating for 20 years. (At that point, whoever owns the home becomes the system owner.)

What if I still have questions?

We love to nerd out over solar and would be happy to talk SRECs with you. Call us at (202) 280-2285 or schedule a consultation via the form directly below. We look forward to hearing from you!