One of the most potent drivers of the current solar boom in the DMV are Solar Renewable Energy Credits, or SRECs. Currently, only 8 states nationwide have SREC marketplaces, and our local markets are among the most robust. For those unfamiliar with SRECs, please scroll down to the bottom of this article for a description of the SREC system (SRECs 101).
While demand for SRECs are all driven by the Solar Alternative Compliance Penalty (SACP) in Maryland, DC, and Virginia, the markets function somewhat differently, as outlined below:
Maryland SREC Market:
Latest Bid Price – December 19th, 2023: $57
All figures below from SRECTrade.com
Fig. 1: Tracking MD SREC bid prices 2022-23
Fig. 2: MD Solar Carveout and SACP Schedule
Maryland’s SREC market has become oversaturated in recent years due to long standing solar goals and related legislation. In other words, the supply of solar electric systems has outpaced the demand for them, which is driven by both the SACP and the solar specific carveout. This is reflected in the current price of $57. By 2030, the SACP will be slashed by 63% to $22.50. In comparison, robust SREC markets such as Washington DC and New Jersey will have only decreased 28% and 31% respectively over the same time period.
Washington DC SREC Market
Latest Bid Price – December 19th, 2023: $430
Fig. 3: Tracking Washington DC SREC Prices 2022-23
Fig. 4: Washington DC Solar Carveout and SACP Schedule
The combination of aggressive energy goals, recent legislation and general solar undersupply combine to create the most valuable SRECs in the country. At $425 / SREC, DC’s credits are worth nearly 7.5x more than that of Maryland. Passed in December 2018, the Clean Energy Omnibus Act aimed to combat climate change through reducing greenhouse gasses, promoting solar and expanding energy efficiency initiatives. This legislation also increased the RPS to 100% by 2032. Additionally, the Renewable Portfolio Standard Expansion Amendment Act of 2016 has ensured enduring demand for DC SRECs marketplace through 2041.
As seen in Fig.4, the SACP was implemented at $500 in 2019 and will remain at this price until 2024. Beginning in 2024, the SACP will decrease by $20 / MWh annually until leveling at $300 in 2033 and maintaining this threshold until legislation is scheduled to end in 2041.
December 11th’s current SREC price of $425 reflects 85% of the 2023 SACP. It’s overwhelmingly probable that SREC prices will steadily decrease in DC in the next 18 years, barring a change in legislation. Although supply and demand factors will fluctuate as DC inches towards its energy efficiency goals and simultaneously raises the % solar requirement of the RPS, the gradual SACP decreases, cutting the ceiling off SREC valuations.
Virginia SREC Market
Virginia differs from DC and MD as its SREC market and solar initiatives are still in their infancy. 2020 Virginia Clean Economy Act established a RPS in Dominion and Appalachian Power Company service territories and a SACP of $75 in 2021, which increases annually by 1% thereafter.
Although SRECTrade did not have realtime SREC price tracking available for VA, Sun Tribe Trading had reported VA SRECs being sold between $45-$69 throughout 2023. Honeydew will keep you updated you on further news and happenings related to Virginia’s SREC market and related legislation.
Navigating the SACP-SREC Relationship for PV System Owners
It’s important for every PV system owner to understand the positive correlation between the SACP and SRECs and how their relationship affects the overall solar market. When considering solar for your building in either DC or MD, remember that the best time may have been in 2019 when the SACP was at its highest, but the second best time is right now. With both SACPs scheduled to gradually decrease, solar offers for Power Purchase Agreements and Roof Leases will be at their very best today and will only get worse as time passes. The same logic applies for owning a system: get your system up and running ASAP so you can take advantage of revenue generated by SRECs while they are at their most valuable. If you’re looking for expert advice for your specific needs, fill out the form below or give Honeydew a call at 202-670-9625 to schedule a free consultation.
SRECs 101
An SREC is a tradable certificate that represents one megawatt-hour (MWh) of electricity generated from solar energy. The goal of SRECs is to incentivize the production of solar power by providing a financial benefit to solar energy system owners. These credits are generated even if the owner of the system consumes 100% of the energy they consume.
Here’s a general explanation of how SRECs work:
- Solar Energy Production:
- Solar system owners generate electricity from their solar panels.
- For every MWh of electricity generated, an SREC is created.
- SREC Certification:
- The solar system owner applies for certification for the generated electricity.
- Upon verification, the associated SREC is issued.
- SREC Trading:
- SRECs are sold to electric suppliers (e.g. utilities like Pepco or private suppliers like Constellation Energy) who are mandated by state and local governments to produce a certain percentage of their energy from renewable sources. If they don’t directly own sufficient renewable energy systems, they must purchase certificates from third party PV system owners
- Many states, including Maryland, DC, and Virginia, have Renewable Portfolio Standards (RPS) that require a certain percentage of electricity to come from renewable sources.
- If utilities and other entities do not meet their obligations, they are required to either pay the Solar Alternative Compliance Penalty (SACP) or purchase SRECs to put towards their RPS goals. Since SRECs are always priced as a percentage of the SACP, SACP prices dictate SREC value.