SRECs Explained: Solar Renewable Energy Credits

What Are SRECs?

Solar Renewable Energy Credits, or SRECs, are tradable certificates that represent the environmental benefits of generating one megawatt-hour (MWh), or 1,000 kilowatt-hours (kWh), of electricity from solar energy. When your solar panels produce 1 MWh of electricity, you earn one SREC, which you can then sell on the open market.

SRECs exist because many states have Renewable Portfolio Standards (RPS) that require utilities to source a certain percentage of their electricity from solar energy. Utilities that do not generate enough solar power themselves must purchase SRECs from solar system owners to meet these requirements.

How SRECs Work

Earning SRECs

Your solar system is registered with your state's SREC tracking system (such as PJM-GATS, NEPOOL GIS, or state-specific registries). A production meter tracks your solar electricity generation, and you earn one SREC for every 1,000 kWh produced.

A typical 7 kW residential system produces about 9,000 to 10,000 kWh per year, earning 9 to 10 SRECs annually.

Selling SRECs

You can sell your SRECs through several channels:

SREC brokers: Companies like SRECTrade and Flett Exchange facilitate SREC transactions and handle the paperwork.

SREC aggregators: Some companies purchase SRECs in bulk from residential solar owners at a set price.

Spot market: You can sell SRECs on open exchanges at current market prices.

Long-term contracts: Lock in a fixed price per SREC for multiple years, providing income predictability.

SREC Pricing

SREC values fluctuate based on supply and demand in each state's market. Key pricing factors include:

Solar carve-out percentage: The higher the state's solar requirement, the more demand for SRECs.

Solar adoption rate: As more solar is installed, the supply of SRECs increases, potentially lowering prices.

Alternative compliance payment (ACP): The penalty utilities pay if they cannot purchase enough SRECs. This sets the ceiling for SREC prices.

Market activity: Trading volume and market sentiment affect short-term prices.

States with Active SREC Markets

Not all states have SREC programs. As of 2026, the following states have active, liquid SREC markets:

New Jersey

New Jersey's SREC program has been one of the most lucrative in the country. Under the current Successor Solar Incentive (SuSI) program, residential systems receive a fixed incentive per kWh through Tranche-based pricing.

Typical value: $90 to $100 per SREC-equivalent annually

Annual income for 7 kW system: $800 to $1,000

Massachusetts

Massachusetts SMART (Solar Massachusetts Renewable Target) program provides declining block incentives based on capacity.

Typical value: $50 to $90 per SREC-equivalent

Annual income for 7 kW system: $450 to $900

Maryland

Maryland has a growing SREC market with strong demand.

Typical value: $60 to $80 per SREC

Annual income for 7 kW system: $540 to $800

Pennsylvania

Pennsylvania's Alternative Energy Portfolio Standard supports an active SREC market.

Typical value: $30 to $50 per SREC

Annual income for 7 kW system: $270 to $500

Washington, D.C.

D.C. has some of the highest SREC values in the country due to aggressive solar targets and limited roof space.

Typical value: $250 to $350 per SREC

Annual income for 7 kW system: $2,250 to $3,500

Ohio

Ohio's RPS creates moderate demand for SRECs.

Typical value: $20 to $40 per SREC

Annual income for 7 kW system: $180 to $400

Illinois

Illinois' Adjustable Block Program provides SREC-like incentives through a structured approach.

Typical value: $70 to $90 per REC

Annual income for 7 kW system: $630 to $900

How SRECs Affect Your Solar ROI

SRECs can significantly improve your solar return on investment. Here is an example:

Without SRECs (Georgia):

System cost after ITC: $11,760

Annual electricity savings: $1,300

Payback period: 9 years

With SRECs (New Jersey):

System cost after ITC: $12,390

Annual electricity savings: $1,400

Annual SREC income: $900

Total annual benefit: $2,300

Payback period: 5.4 years

SRECs can shorten your payback period by 2 to 4 years and add $10,000 to $30,000 or more in total value over the life of the system.

Tax Implications of SREC Income

SREC income is generally considered taxable income by the IRS. You should receive a 1099 form if your SREC earnings exceed $600 in a calendar year. Consult with a tax professional to understand how SREC income affects your specific tax situation.

Some homeowners structure their SREC sales strategically to manage tax implications, spreading sales across tax years or timing them to align with years of lower income.

Tips for Maximizing SREC Value

Register your system promptly: Start earning SRECs as soon as your system is operational. Delays in registration mean lost credits.

Monitor SREC prices: Track market prices and sell when values are favorable rather than automatically selling at the current spot price.

Consider long-term contracts: If current SREC prices are attractive, locking in a multi-year contract provides income certainty.

Choose the right aggregator: Compare fees and contract terms from multiple SREC aggregators before committing.

Maximize system production: Keep your panels clean and your system well-maintained to produce the most SRECs possible.

The Bottom Line

If you live in a state with an active SREC market, these credits represent a substantial additional income stream from your solar investment. They can cut your payback period nearly in half and significantly boost your lifetime return.

SmartEnergyUSA can connect you with installers in your area who are experienced in navigating your state's SREC program. Get a free quote and find out how much you could earn from SRECs on top of your electricity savings.