SREC Financing Options
There are a number of financial incentives available to help reduce the cost of your solar installation and improve the return on your investment. In addition to federal and state incentives, the sale of the SRECs or Solar Renewable Energy Certificates (Credits) that your system earns can be a substantial source of cash flow to offset the cost of the system or service loan payments.
Overview - What are Solar Renewable Energy Credits or SRECs?
Solar renewable energy certificates (credits) are tradable certificates that represent all the clean energy benefits of electricity generated from a solar energy system. Each time a solar energy system generates 1,000 kWhs (1 Megawatt hour) of electricity, an SREC is issued that can then be sold or traded separately from the actual power generated.
The terminology certificate or credit is often used interchangably when discussing SRECs or in the case of non solar generation, "RECs". In New Jersey SREC's are issued and traded online using the PJM-EIS GATS platform. PJM is the grid coordination entity for New Jersey and other surrounding States and regions. The GATS or "Generation Attribute Tracking System" was created to track the environmental attributes of generaton and supports reporting, compliance, and verification requirements related to environmental compliance. It is used to track all generation of electricity in the PJM territory including non renewable sources. On the GATS platform an SREC is termed a "Certificate".
SREC Value Determination
The value of an SREC in New Jersey is quantified by three major factors:
- RPS Compliance Fee Schedule: New Jersey maintains a Renewable Portfolio Standard or RPS that requires utilities to generate a certain amount of power using renewable sources including solar. The requirement increases from year to year. One of the ways a utility can evidence its compliance with the standard is by purchasing SRECs. In the event there are not enough SRECs generated to purchase or the utility is unwilling to purchase SRECs, it has the option in New Jersey to pay a Solar Alternative Compliance Payment or SACP. For energy year 2013 (which ends May 2013) the SACP is $641 and will decline to $339 for energy year 2014. Since the SACP represents the maximum the utility would have to pay to evidence compliance, SRECs prices trade at or below the SACP. New Jersey has established a SACP through energy year 2028. This is important to solar system owners as a system in New Jersey only generates SRECs in the first 15 years of its operation although it will continue to generate RECs thereafter.
- SREC Supply: The number of SRECs available for purchase will increase in the coming years. As solar module prices fall, solar will become more affordable and more popular. As more solar systems are installed, more SRECs will be available on the market. Additionally, as credit markets continue to improve, more large projects will become financeable and built, resulting in more SRECs.
- SREC Demand: The demand for SRECs will also increase in the coming years. The RPS in New Jersey increases dramatically from year to year. Because the SREC is a compliance commodity, if there are more SRECs supplied in New Jersey then demanded by the market in New Jersey, the pricing for excess SRECs will likely be equivalent to pricing seen on voluntary SREC markets that today trade at $15 to $30 each.
How to monetize your SRECs
Most residential and commercial system owners have limited options for selling their SRECs. Energy suppliers are typically not willing to engage directly with small system owners and most system owners have little price leverage.
We've partnered with Sol Systems (www.solsystemscompany.com), the largest aggregator in the country, to provide you with reliable financing solutions that are tailored to fit your needs. Sol Systems brings the following benefits:
- Utility-Backed Contracts: Sol Systems backs its customer long-term contracts with utility contracts. This ensures that Sol Systems is able to pay guaranteed SREC rates in the long-term unlike brokers who do not have secured counterparty agreements.
- Competitive Pricing: Sol Systems utilizes its market expertise to secure the best pricing and secure products. Whether a customer selects one of Sol Systems' long-term SREC purchase agreements or a brokerage solution, they can rest assured that they are getting a quality return for their SRECs.
- Quarterly Payments: Sol Systems makes quarterly payments for customers that choose production based payments or the brokerage option.
- Streamlined Registration Process: When you sign up with Sol Systems, they will manage the registration and certification process with all required regulatory agencies so your system begins producing SRECs promptly.
- Best-in-Class Customer Service: Sol Systems has knowledgeable, hardworking, and friendly staff dedicated to serving its customers. Their goal is to de-mystify the SREC market and offer you a seamless SREC transaction process.
Sol Systems has three primary products:
- Sol Annuity: This is a long-term solution that provides guaranteed prices for your SRECs even when spot market prices fall. You recieve a fixed, quarterly payment for each SREC produced over a 3 or 5 year term. You receive your first payment 4 to 6 months after signing up and after that receive a quarterly payment in Feb, May, Aug, and Nov based on the number of full SRECs your system produces.
- Sol Upfront: An option that reduces the out of pocket costs by providing a lump-sum payment that is based on the size of your system. Sol Systems typically retains the rights to your SRECs for a 10 year term. Once you sign up, Sol Systems will lock in the amount of your upfront payment. After your system is registered, you receive a check, providing you with immediate financing for your solar energy system and eliminating all risk associated with the fluctuation SREC market prices.
- Sol Brokerage: With this option you can benefit from the risk-reward of spot-market rates with no effort required. Sol Systems monitors the SREC trading platform and legislative changes and uses their market expertise to establish a floor price and a target price for your SRECs. Each quarter you receive a payment for each SREC produced by your system based on the weighted average of SREC sales for that quarter less their commission.
To learn more about your financing options, speak to your OnPeak representative who can provide you with the detail of each of these programs and also provide you with a detailed analysis of the economic impact of each of these option on your proposed installation.