Solar Renewable Energy Certificates (SRECs) represent the environmental attributes from a solar facility; in order for a solar facility to be credited with that SREC, the system must be certified and registered; and for every one thousand Kilowatt-hours (KWh) of production by a solar system, one SREC is awarded.

Solar Renewable Portfolio Standard (RPS) requirements demand that energy suppliers or utilities procure a certain percentage of electricity from qualified solar renewable energy resources in a state. These Energy suppliers and/or utilities can meet solar RPS requirements by purchasing SRECs from homeowners and businesses that own solar systems and produce SRECs.

Homeowners and businesses can then utilize the sale of the SRECs they generate to help finance their solar systems. SRECs can be sold in a variety of ways, such as on the spot market, at auction, or by negotiating long-term contracts. The additional income received from selling SRECs increases the economic value of a solar investment and assists with the financing of solar technology.

The Solar Alternative Compliance Payment (SACP) is the fee that energy suppliers must pay if they fail to secure SRECs as required by state RPS regulations. A state's SACP  generally sets a cap on the value of SRECs because energy suppliers and utilities may simply pay the fee if SREC prices approach the fee level.

In rare cases SREC prices have approached and even surpassed SACP levels because SRECs can sometimes be recovered by charging more to electricity customers (rate basing), while SACP payments are usually precluded. In many states, the SACP is scheduled to decline over time with the intention of eventually phasing out the solar industry's reliance on SREC sales as an incentive for installing solar.

Typically, there is no assigned monetary value to an SREC. SREC prices are ultimately determined by market forces within the parameters set forth by the state. If there is a shortage in SREC supply, pricing likely will rise, resulting in an increase in the value of the incentive for solar systems and an intended acceleration in solar installations. As SREC supply catches up to SREC demand, pricing likely will decrease, resulting in an intended deceleration in solar installations. Over time, SREC markets are designed to find the equilibrium price that encourages enough installation to meet the growing demand set forth by the RPS.

You can find more information on actual SREC Market Prices at SRECtrade.com.