What Is an SREC (Solar Renewable Energy Certificate)?

A state-approved tracking system issues one certificate for each megawatt-hour a registered system produces, based on its metered output. The owner, or an aggregator working for the owner, lists the certificates for sale. Buyers are electricity suppliers that face a state solar requirement and must retire enough certificates to comply. Because that obligation comes from state law, the market rules differ everywhere, and some states have since closed or replaced their markets with fixed-incentive programs.

Certificates reach a sales conversation as a question or as an overpromise. Someone who read that panels also earn certificates asks whether the income is real; a rep hoping to sweeten a proposal raises it unprompted. The honest answer starts with three facts: whether the home’s state runs an active market, who registers the system, and who owns the certificates under the contract. A setter has no reason to mention them on a first call, since that call only has to establish ownership, territory, and a time.

SRECs get confused with two other things. They are not the federal tax credit, which reduces tax owed, and they are not net-metering bill credits, which reduce the utility bill. Nor are they a fixed income stream, because prices float with supply and demand wherever a market exists, and a legislature can rewrite the program. With a lease or PPA, the third-party owner usually keeps the certificates and prices the contract with them in mind, so the homeowner typically sees none of that value.