SRECs: What are Solar Renewable Energy Credits?

Solar Renewable Energy Credits (SRECs) are an opportunity for homeowners and businesses in certain states to earn an income based on their solar electricity production. In some markets, the additional income can be sizable, helping reduce the upfront costs of solar installation or adding to the overall cost savings of going solar. Unfortunately, at the time of this writing, SRECs are not available in Arizona, but in the interest of education and since future policy could include such a program, we’ve opted to share this blog anyway. 

The way that SRECs work – and how much homeowners can potentially earn – varies depending on the state and market dynamics. In this blog, we’ll break down how SRECs work, where they’re available, how much you can earn with SRECs, and different ways homeowners can sell SRECs. 

Key takeaways: 

• SRECs are a solar incentive that allows homeowners and businesses to earn an additional income for contributing to renewable energy goals. These credits are purchased by utility companies to help them meet state regulations known as Renewable Portfolio Standards (RPS). 
• The value of SRECs is largely determined by supply and demand and can vary significantly depending on the state. Homeowners in Washington D.C., for example, can earn much more for their SRECs compared to those in Ohio. 
• Homeowners have three main options for selling SRECs. Pre-selling SRECs provides an upfront payment that can be used to reduce solar installation costs. Fixed-term contracts provide predictable earnings for a set number of years, while selling on the spot market requires active monitoring that can potentially maximize returns. 

What is an SREC?

Solar Renewable Energy Credits (SREC), sometimes called solar renewable energy certificates, are solar incentives that represent the renewable value of the electricity your solar panels produce. You can think of them as a ‘voucher’ that proves your system generates clean electricity. For every 1,000 kilowatt hours – or 1 megawatt-hour (MWh) – your solar system generates, you earn one SREC. You can then sell these SRECs to earn an additional income.

SRECs help utilities meet renewable energy goals set by state regulations known as Renewable Portfolio Standards (RPS). These regulations require utilities to produce a certain percentage of their electricity from renewable energy sources. To comply with RPS requirements, utilities need to either generate renewable energy themselves or purchase renewable energy certificates (RECs) from others. A solar renewable energy credit is a solar-specific version of a REC. SRECs are also sometimes purchased by companies wishing to offset their carbon emissions. 

In states where SRECs are allowed, homeowners can sell SRECs upfront, over a set number of years for a fixed price, or through an open market for prices dictated by supply and demand. While income from SRECs won’t necessarily exceed the savings from reduced electricity bills, it can be thought of as more like a cherry on top. In certain states, where SRECs are more valuable, that cherry can be quite substantial!

Why do SRECs exist?

SRECs exist to help utilities meet renewable energy goals set by state legislation known as Renewable Portfolio Standards (RPS). RPS laws require utilities and energy suppliers to generate or source a specific percentage of their electricity from renewable sources, like wind or solar. Utilities that fail to meet the standard are subject to penalties known as Alternative Compliance Payments (APC). 

RPS legislation can sometimes include a ‘solar carve-out’, which requires a certain portion of renewable energy to come specifically from solar power – sometimes generated in that specific state. To meet these requirements, utilities can either build their own solar projects or purchase SRECs from homeowners that generate solar power. 

While RPS laws are implemented in more than 30 states, only a handful of these states include solar carve-outs. In these states, SRECs not only incentivize adopting solar but also create a market-driven mechanism to expand the role of renewable energy in the power grid. This helps utilities slowly transition towards cleaner energy sources while giving solar owners a financial reward for contributing to sustainability. 

Learn More: Federal Solar Tax Credit: Everything You Need to Know

What states offer SRECs?

Not every state has RPS laws, and those that do might not include solar carve-outs. As of November 2024, states with a solar carve-out and SREC market include: 

• Illinois 
• Ohio
• Pennsylvania 
• Virginia 
• New Jersey 
• Massachusetts 
• Delaware 
• Maryland 
• Washington D.C. 

Some states don’t have an SREC market but allow solar owners to participate in neighbouring states’ programs. States with no SREC market but have areas eligible for an outside SREC market are: 

• Michigan 
• Indiana 
• West Virginia
• Kentucky. 

Solar panel owners in these states can sell their credits in Ohio’s market. 

How many SRECs will my solar system produce?

Your solar system will produce one solar renewable energy certificate for every megawatt-hour (1,000 kWh) of electricity it generates. The total output of your solar system – and therefore the number of SRECs you earn – will vary depending on your system’s size, geographic location, panel orientation, and other factors. 

As a general rule, you can estimate  SREC production by multiplying system size (in kilowatts) by 1.2. For example: 

• A 5 kW system will produce approximately 6 SRECs each year (5 x 1.2 = 6)
• A 10 kW system generates around 12 SRECs each year (10 x 1.2 = 12). 

This calculation assumes you have optimal conditions for solar energy production. If you’re considering solar, understanding your potential SREC production and the RPS laws in your state can help you estimate the potential additional income you could earn by selling these credits. 

See: How to Lower Your Electricity Bill in Arizona

How much are SRECs worth?

The value of SRECs varies between states and depends on market dynamics like supply and demand. In markets with legislated RPS, utilities and energy suppliers purchase SRECs to meet their renewable energy targets. This creates a market where SRECs can be sold for additional income. 

Two main factors driving the price of SRECs are: 

• Alternative Compliance Payment (ACP): This penalty is charged to utilities that fail to meet their RPS obligations. The ACP sets a price ceiling for SRECs as utilities won’t pay more for an SREC if it’s cheaper to pay the fine. 

• Supply and demand: The amount of SRECs available on the market also affects their value. When supply is high (i.e. in states with many solar installations), the value of SRECs decreases. On the other hand, limited supply can increase the value of SRECs. Demand is determined by the amount of credits utilities need to buy in order to meet RPS laws. Each state sets a specific target for utility companies to fulfill through solar power.
• Solar carve-outs: SRECs also tend to be worth more in states with solar carve-outs, where a portion of renewable energy must come specifically from solar. 

As of November 2024, SRECs prices range from as low as $3 in Ohio to around $425 in Washington, DC. In New Jersey, an SREC could sell for around $240 while in Pennsylvania it’s closer to $35. As you can see, prices vary widely depending on local market conditions. 

To give you an idea of how widely prices can vary, let’s look at an example using a 10 kW residential solar system. Solar energy systems of this size could generate around 12 SRECs each year. In states with high SREC prices, like Washington D.C, that system could generate an additional $5,100 each year. In states with lower SREC prices – like Ohio – the yearly earnings would drop to $36. That’s a massive price difference!

The below table outlines current SRECs prices as of November 2024. For more up-to-date information and real-time data on market rates, check platforms like SRECTrade. 

Keep Reading: Selling Your Home With Solar Panels: Expert Guide 2025

How much can I earn per year with SRECs?

The below table shows potential annual earnings based on current SREC prices as of November 2024 and a yearly production of 12 SRECs. 

Can I earn SRECs in Arizona?

Unfortunately, Arizona does not currently have an active SREC market. While this sounds like bad news for homeowners, it’s actually a good thing. 

The reason Arizona doesn’t have an SREC market is that its utilities already meet the state’s RPS goals. This means they don’t need to buy SRECs from private solar owners to hit renewable energy targets. While this does mean homeowners miss out on the potential profits of SRECs, it also means our state has taken significant strides to adopt clean energy. 

Even without an SREC market, Arizona homeowners can still benefit from federal and state solar incentives and tax credits – as well as significant energy savings – that make solar a valuable investment. To discuss your eligibility for solar incentives, and estimated solar ROI, contact our team for a free, no-obligation solar consultation.

See More: Is Solar Worth it in Arizona? (2025 Homeowner's Guide)