Solar Energy Credits in Pennsylvania

In our extended series of articles on the credit market, this entry takes a look at one of the most relevant and accessible credits in Pennsylvania: the Solar Renewable Energy Credit, or "SREC."  

Solar photovoltaics are becoming a common sight in Pennsylvania—the black panels are popping up on roofs and in fields all around the state, where they absorb solar radiation and transform it into electrical energy. Among the many aspects of solar power, one of the most interesting phenomena is the Solar Renewable Energy Credit, or "SREC."  I recently chatted with Ed Johnstonbaugh of Exodus Renewables and Matt Beiler of Paradise Energy Solutions about SRECs. Matt and Ed both provide credit aggregation services for solar power system owners in the Keystone State, and they were kind enough to share some tips and information about how SRECs work.

The Basics

First off, what is an SREC? It is basically an electronic coupon (if you remember what coupons are) that can be created whenever you generate 1,000 kilowatt hours (kWh) of solar electricity. That coupon can then be sold to companies that are required by law to buy a certain number of SRECs each year. Essentially, an SREC is paperwork proof that 1,000 kWh of solar electricity has been created. The intent of the SREC is to create a way to provide monetary value for the attributes of renewability and low ecological impact that are associated with solar photovoltaic (PV) systems. "In Pennsylvania, investor-owned utility companies are required by law to purchase enough SRECs to show that half of one percent of all electricity that they sell can be credited as being solar," says Johnstonbaugh. Half of one percent may not seem like much, but in Pennsylvania, 138.7 million megawatt hours of electricity were produced in 2023 (according to the US Energy Information Administration), so half of one percent is equal to 693.6 million kilowatt hours of electricity, which corresponds to 693 thousand credits. If the credits were selling for $30 each, the total value of credits in Pennsylvania would be about $20.8 million per year.  

In Pennsylvania, SRECs are generated and sold by certified solar credit professionals; these are people who have been certified by the state's designated Alternative Energy Portfolio Administrator (for Pennsylvania, it's a company called Inclime). The SRECs are registered in an online system called "GATS," which stands for Generation and Attribute Tracking System. GATS is run by PJM (PJM is the organization that manages the high voltage power network that brings electricity to the utility companies in the mid-Atlantic states. The utility companies then deliver the power to individual homes and businesses).  

So, if you have a solar photovoltaic system that generates electricity, you could potentially get some extra income by creating and selling SRECs from your solar power system.  

Points to Ponder

While talking with Beiler and Johnstonbaugh, three important points arose that are important to understand when looking at SRECs.    

1. Each State Is Different

SRECs are subject to the laws of each state. "It's not a nationwide market," says Beiler.  Because of that, the location of the solar energy system affects how credits are created and sold.  "In New Jersey, only credits created in New Jersey can be sold in that state," says Beiler.  "Ohio, on the other hand, basically doesn't have a credit market, so credits created there have to be sold to programs that are not state specific."  Pennsylvania used to allow out-of-state SRECs to be bought in-state, but that changed in 2017 when the legislature passed a law limiting Pennsylvania SRECs to solar power systems located within the state.   

2. Prices Can Vary - A Bit

SREC prices used to be very unpredictable, but it seems that the market has settled down for the most part in Pennsylvania, with prices in the $35–40 range (this corresponds to 3.5 to 4 cents per kilowatt hour) being common in the last few years.  That's about one-quarter to one-third of the cost of the electricity itself (average 12.6 cents per kWh for all PA customers in 2023, higher for residential customers), so it's not the biggest part of the value of a solar power system, but it's nothing to sneeze at either.  The actual price depends on the number of people buying credits at a given time and their willingness to pay. So, the price does fluctuate as supply and demand varies. It may be possible to time the market to a certain degree, but this is not always easy to do. Credits are linked to the year in which they were created, and as they grow older, they often become less valuable. So, it can be a risky thing to hold credits for future sale.  

3. Size Matters

The buyers of credits are called "brokers," and because of the cost of setting up the paperwork for purchase, brokers prefer to buy credits in large batches. "Residential solar power systems often create only 5–15 credits per year. Most brokers will only buy credits in blocks of thousands," says Johnstonbaugh. If you have a smaller amount to sell, you might be able to find a buyer, but the price is likely to be lower.    

The Process

Is it possible to generate and sell your own solar energy credits? Yes, it certainly is. Here's how you can go about doing that:

• First, you need to be approved by the Alternative Energy Portfolio Administrator as an official credit generator.  
• Next, you need to register your solar power system. This requires a few things: 
  • a photo of your solar power system showing the number of panels in use
  • a photo of your metering system (the device that measures and records the amount of solar electricity that is produced)
  • a record of the meter's reading at the start of the period when you want to start generating credits
  • a copy of a form called "Schedule A," which provides authorization for you to register the solar power system on behalf of the owner (who, in this case, is you)
  • a copy of a "certificate of completion" from your utility company or electric co-op that certifies that your solar power system is installed and running in accordance with their standards
• Once all the above is submitted to the Alternative Energy Portfolio Administrator, you typically have to wait for two months or so and will then receive a Pennsylvania Certification Number for your solar power system
• At that point, you can register your solar power system with the online Generation Attribution Tracking System or "GATS."  The GATS system is part of the PJM Environmental Information System online portal.  
• PJM will probably take about a week to review your info and issue you with a "NON Number," which is the system identifier number for your solar power system.  
• Once that's done, you will be able to log into the GATS system every month to enter the amount of solar electricity your system has produced. The GATS system will issue you a credit certificate for every 1,000 kWh of solar electricity that is recorded.  
• Selling your credits is a matter of tracking down a broker and agreeing with them on a price. Check the internet; there are lots of energy credit brokers out there. The transfer of ownership of the credit occurs within GATS.

For many, the hassle of becoming certified, logging credits, and negotiating with brokers, plus the difficulty of finding brokers who will buy small bundles of credits, makes it preferable to find someone else to do the aggregation and selling of credits for them (for a percentage of the sales price). "It's not unusual for people to try to manage their own credits but then decide it's not worth the trouble," says Beiler. Signing up with a credit broker is often as easy as making a phone call, and if your system has an approved meter to measure power production, there shouldn't be any new costs involved. Some brokers insist on a long-term contract to sell your credits, whereas others are happy to have you work with them for whatever time period you prefer. 

Looking Forward

What will the future hold for SREC prices? "It really depends on what the state governments decide to mandate," says Beiler. If current trends hold, and future SREC prices remain stable while electricity prices continue to go up, then SRECs will continue to be an important but smaller part of the economics of solar energy production in Pennsylvania. However, if our society decides that we need to encourage more solar power production, future legislation could increase the required number of credits to be purchased, which would push prices upward.    

As a closing point, don't forget that the money you receive for SREC sales does count as income, so you need to make sure that you're treating it properly on your annual tax return.  

Note: Any mention of companies or products is illustrative only. Penn State Extension does not endorse any individual companies and encourages all to shop around and consider all options.  

Author: Daniel Ciolkosz, Penn State Extension. Reviewed by Tom Beresnyak and Joe Conklin, Penn State Extension