Business Education Guide

Going Green Has Its Benefits:
SRECs - The New Solar Incentive

by Daniel T. Cifarelli

The potentially devastating long-term effects of global warming have been pondered since the 1960s. Many organizations, including the Environmental Protection Agency, have placed considerable importance on the role we each play in climate change.

The EPA’s position statement, “human activities such as oil refining, power plants and automobile emissions are important causes of global warming,” is leading public policy towards fostering industries such as solar photovoltaics, for safer, non-polluting forms of energy and transportation. In fact, we are fortunate New Jersey’s leading policy makers actively share our environmental concerns. When NJ officials were put to the test they came up with the New Jersey Clean Energy Program.

For the past year I have worked for one of the leading installers of solar power, Sky Sims, the owner of Ecological Systems. In this time I have become intimately familiar with the NJCEP SREC Program. SRECs, or Solar Renewable Energy Certificates are an incentive NJ uses to reward using alternative energy sources (the number one incentive currently in place is a grant program). A SREC is issued each time a solar electric system generates 1000 kilowatt hours (kWh) or 1 megawatt hour (MWh).

The green tag generated may then be sold to another party. It is important to note that I used the terms SREC and green tag synonymously. Green tag is a generic term which refers to renewable energy certificates (RECs) generated from any renewable energy source to include solar, wind, small hydro and biomass. Often green tags are used by electric suppliers to meet their Renewable Portfolio Standard (RPS) which in NJ requires that all electric suppliers provide a percentage of their electricity sales from solar generation.

Therefore, electric suppliers have two options. First they can opt to pay a fee, currently $300.00 per MWh, to the NJBPU fund. Secondly, they can choose to purchase a SREC produced by any solar system. In other words, the market for SRECs is determined by the fine to suppliers who do not meet their RPS. Thus, if the fine is increased as has been predicted, so would the value of each tag.

The transfer of tags can take place in different ways. One option is for the system owner to file paperwork with the Board of Public Utilities and try and find a buyer themselves online. Another option is to have a third party, an aggregator, file the paperwork (with your permission) and find the necessary brokers and buyers of tags.

If you are like me, your first thought might be to sell the tags yourself. However, the paperwork can be a hassle, whether it is a clerical error or posting in general. And, getting a higher price per tag can be time-consuming. There are benefits to going with aggregators who sell hundreds of tags at a time, because they often get you a higher value per tag.

As the importance of renewable energy becomes ever more apparent, greater penalties for non-compliance to the RPS may be in the near future. This supply and demand relationship has the potential to increase the value of the tags to the system owner.

For those of you who have not entered the realm of solar, consider these points: You can decrease or in some cases eliminate your electric bill. The state currently has a grant program coupled with an SREC program as incentives. For any questions about solar or NJ’s SREC program, call 1 866 SKY SOLAR.

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How We Can Use
Green Building to Save our Planet