Why SRECs Are Important To Schools

Eshone Energy delves into the benefits of schools owning their Solar Power System and keeping their SRECs as a source of ongoing revenue.

“One of the cornerstones of President Barack Obama's energy plan is developing more domestic renewable energy like wind, solar and geothermal,” writes Arthur O'Donnell,  Executive Director of the Center for Resource Solutions in an article for the Mercury News.  “Renewable energy holds the answer to not only eliminating the 40% of our overall greenhouse gases, but creating a clean source of energy for the coming revolution in electric vehicles. With its immense opportunities in innovation and job creation, it's a rare bright spot in an otherwise dark economy.”

One of the recent ways to get involved in clean energy is to buy Solar Renewable Energy Certificates (SRECs).  These are tradable certificates that represent all the clean energy benefits of electricity generated from a solar power system. Each time a solar electric system generates one megawatt hour (MWh) of electricity, an SREC is issued, which can then be sold or traded separately from the power. This makes it easy for individuals and businesses to finance and invest in clean solar power. 

Renewable Energy Credits (RECs) were developed to help meet compliance goals for renewable portfolio standards (RPS) or for voluntary renewable energy purchases.  RPS policies differ greatly from state to state with 26 states and the District of Columbia already adopting RPS policies.  California’s will be aggressive with goals of 10% by 2010 and 33% by 2025 if the current bill is passed.  

SRECs are a win-win situation for both the buyer and the seller.  When someone buys an SREC, even if they don’t own their own solar power system, they can still benefit from the environmental benefits of that renewable-energy generation. For the seller (the system owner), SRECs provide another revenue source, which can significantly offset the system costs.  The retail price of a REC ranges from 1c/KWh to 2.5c/KWh for residential and small commercial customers.

Utility companies will be big buyers of SRECs since states have specified percentage targets for the amount of renewable energy a utility company must provide for their consumers.  SRECs are a major means to help utility companies meet these RPS compliance goals.  SRECs are normally traded between parties through purchase and sale agreements that are negotiated between the buyer and the seller. Aggregators and brokers also actively participate in the SREC market.  For a detailed report on how SRECs work in detail, please read, “A Comprehensive Guide for Managing Complex Solar REC Activities”, by attorneys Tauna Szymanski, Scott Stone, and Carter Chandler Clements.

Schools will benefit from owning – and selling – their SRECs more than with most other types of RECs (wind, landfill gas, biomass, etc.).  Why?  Because utilities will get penalized if they don’t meet their Solar percentage targets. They could opt for an alternative compliance payment (ACP) but the cost is much higher for the Solar ACP than for a standard ACP (i.e., New Jersey’s current Solar ACP is $711, while the standard ACP is $50 per REC.)  This makes SRECs that much more attractive in the market (buyers would not buy SRECs to satisfy their compliance obligations if they could pay less for the ACP).  

SREC’s can provide a significant revenue stream.  For example, 3 Phases Energy Services report that SRECs can contribute 42% to the Net Present Value (NPV) of a solar project in Colorado.  Even though this same report shows California (currently not trading RECs for compliance) is at 2%, this is poised to change shortly and significantly.

Global Warming has become a real and present threat to the world’s environmental balance.  Change is coming, borne out of necessity. President Barack Obama's energy plan is evidence of the Nation’s call to action and setting RPS standards to regulate compliance is one result of that call. Because of that, even though schools operate on tight budgets, monetary incentives specifically set aside for schools to implement Renewable Energy Sources is more readily available than other types of funds.  And by installing Solar Power Systems, the opportunity is there to generate revenue (SRECs are one source), which can then be applied to other pressing educational needs.