The state of Illinois has launched a campaign to be greener. To protect Illinois’ long-term energy supply and its natural environment, the state plans to have 25% of it’s energy be sourced by renewable energy by 2025 – a requirement known as a state Renewable Portfolio Standard or RPS.
That’s where the Solar Renewable Energy Credit (SREC) comes into play. SRECs are one of the methods Illinois is using to encourage its population to go solar.
What is an SREC?
SRECs are designed to recognize the value that individuals, businesses, and organizations contribute to the community with the energy they produce. They are the monetary measurement of that benefit. By selling your SRECs and participating in the Illinois Adjustable Block Program you can offset the installation costs of a solar system. Combine your profit from selling SRECs with a federal tax credit and you can offset as much as 60% of your installation!
How is an SREC calculated?
Every solar system produces actual electricity, as well as an environmental and energy security benefit to the region.
SRECs are a way to place a value on this benefit, so that someone other than the system owner can buy just the benefit, and count it as its own contribution to the community. When an organization buys an SREC it is essentially buying just the environmental benefits (leaving the system owner to use the electricity).
Nationwide, the agreed upon standard is that one SREC equals the benefit afforded the community by the generation of 1000 kWhs. And remember payment for a system’s SRECs are in addition to the direct savings the system owner reaps from actually using the electricity they produced.
Mathematically, an SREC is equal to the environmental benefits of producing one megawatt-hour (MWh) of electricity by using solar power.
1,000 kilowatt-hour (kWh) of solar electricity = 1 MWh of solar electricity = 1 SREC
Meaning for each MWh produced by a system installed on your home, you can earn one SREC. This is the nationwide standard for an SREC.
Where is Illinois getting the money for SRECs?
The state’s 3 investor-owned utilities (not energy cooperatives or municipal utilities) are required to pay into the Renewable Energy Resources fund. The Illinois Power Agency (IPA) exclusively draws from this fund to purchase SRECs for all those who go solar, including those in cooperative and municipal utility territories.
The plan is to buy SRECs in 4 rounds. In each round, SRECs are purchased beginning with the lowest price first until the state-designated pot of money is emptied.
How can I sell my SRECs?
For the majority of homeowners and small businesses, SRECs will be sold utilizing a middleman. This middleman is called an “aggregator.” The value of your SREC is based on your projected energy generations over the first 15 years. After you sale to the aggregator, the state purchases SRECS in larger, aggregated blocks.
SunSource Homes will mitigate this process. However, you, the solar system owner, will sign the contract for the SREC yourself with the aggregator. The contract will outline the maximum number of SRECs IPA is required to purchase and the exact price per SREC. The IPA will then pay the aggregator for the SREC delivery. The aggregator then distributes the payments to you.
If your system is under 10kW you will receive a lump sum payment in the first year. If it’s larger 10kW the payment is spread out over 5 years. This payment is partially determined by how much electricity you actually generate.
So, using the equation outlined earlier, if your solar system generates 10,000 kWh in a year, you have earned 10 SRECs that year.
Who is eligible to receive SRECs?
In order to qualify for an SREC, your area must be participating in the program and you must own the system yourself. if you are purchasing solar electricity through a Power Purchase Agreement (PPA) you are not eligible. In those cases, the original investor owns and sells the SRECs. In other words, you cannot rent a solar system from an electric company and claim the SRECs.