Solar Renewable Energy Credits (SRECs) are a crucial component of solar energy incentive programs. They represent the environmental benefits of solar energy production. Once an installer has registered their solar energy system, they can begin earning solar credits, which can be used for significant cost savings and other financial advantages. The SRECs can also be sold in the marketplace, providing a potential revenue stream for solar energy system owners.
The SREC market is prone to change due to various factors, sometimes leading to fluctuations in its value. Hence, the question arises: Will the SRECs continue to decline over time? This blog will explore the various factors that may affect the value of SRECs and try to analyze how they will impact their value in the near future.
Factors impacting the SREC prices:
- Renewable Portfolio Standards (RPS): To ensure that residential and commercial renewable energy production increases, the RPS requires utility companies to source a specific percentage of their energy from renewable sources. To meet these requirements, utility companies buy SRECs from solar system energy owners. If the RPS target is high, demand increases, which in turn increases the value of SRECs.
- Solar Energy Production: Multiple states are currently moving to solar energy systems, and due to this rapid residential and commercial adoption of solar energy, the supply of SRECs are rising, which can lower its value in the market.
- SREC Expiry and Compliance Period: States have specific time durations within which system owners should register their system with the authorities, claim, and use their SRECs. If not used within the given time period the certificates will expire. Any changes to these timelines can play a major role in the increase or decrease in the value of SRECs. Its value will also be impacted if a state increases its RPS targets, which will lead to a higher demand for SRECs, in turn increasing its value, and vice-versa.
- ACP Levels: Alternative Compliance Payments (ACPs) are penalties that utilities must pay if they fail to meet their targets. If the ACP levels increase, so does the value of SRECs in the market.
- Market condition: If there are many buyers and sellers in the market, that is, if a particular location has more users of solar energy, it leads to a stable and predictable pricing structure. However, if the market is small, the pricing fluctuations may be sharp.
- Solar Aggregators: SREC aggregators enhance market liquidity by collecting SRECs from small producers and providing them to the utilities for a more consistent supply and stable SREC prices.
The Growing Demand For Renewable Energy
The shift to solar energy systems is increasing as governments and industries globally commit to reducing carbon emissions. Through RPS, corporate sustainability goals, public awareness, and environmental needs, the demand for SRECs should remain stable over time. The demand for a transition to renewable energy systems is rapidly increasing too, and therefore, the value of SRECs should not follow a downward trend.
Many SREC programs offer long-term contracts and a predictable revenue source, which is also responsible for maintaining the value of SRECs. On the other hand, technological advancements and government incentives are driving down the cost of solar installations, making solar energy systems more accessible to individuals and businesses. With an increase in solar system investments, the value of SRECs should maintain its stability.
While there are concerns about the potential decline in SRECs, there are several factors that suggest that SRECs will continue to hold their place in the market and maintain their value. For further questions on how you can attain your Solar Renewable Energy Credits in Virginia and how you can apply for them, contact us today at (720) 263-7364.
*All the information provided above is a personal view and should not be taken as advice or a fact.
