Effective SREC Market Design

SREC Market Design

Since 2004, several U.S. states have designed and implemented markets for Solar Renewable Energy Certificates (SRECs). These markets are intended to serve several purposes in supporting the growth of solar energy within the state. This article focuses on the benefits of SREC markets, the conditions that must be present to implement an SREC market, some issues facing the market today and recommendations for successfully establishing a market. Each of these areas will be explored in more detail. The key benefits of an SREC market include: 1. Efficient Subsidy, 2. Minimal Taxpayer Impact and 3. Industry Stability. There are three conditions that must be present in order for a state to implement an effective SREC market: 1. RPS Solar Carve-Out, 2. Unbundled, Tradeable RECs, 3. Penalty for Non-Compliance. The SREC markets face some challenges that need to be considered: 1. Regulatory Risk, 2. Market Risk, 3. Long-Term Financing. Recommendations for a successful SREC market: 1. Solar Requirements, 2. Complying Entities, 3. Compliance Mechanism, 4. Facility Size Restraints, 5. Safety Nets, 6. Certification and Tracking, 7. Reporting of Generation.