Massachusetts SRECs

The state of Massachusetts wants to encourage you to go green. In addition to the tremendous Solar Rebate Program, they’ve decided to reward people generating solar energy by letting them sell their clean energy back to the utilities. So in addition to the significant savings you’ll receive by reducing your electric bill, a 5kW solar system should net you another $1,700 annually in SREC income.

Basically, the state has told the power companies that they must produce a certain amount of their electricity from renewable sources each year. Specifically, 5% of their energy was required to come from solar panels in 2010, increasing by 1% every year. But they are falling short of that goal. So what they can do is pay me for my solar power so that they can say that I’m generating solar energy for them and then add me to their 5% goal. Granted, I’m only a drop in the bucket, but with all the solar panel installations across the state it adds up.

This program is administered by the Massachusetts Department of Energy Resources (DOER) and they have stated that for each megawatt hour (1,000 kWh) that a system generates, one Solar Renewable Energy Certificates (SREC) will be created. It is estimated that a 5 kW solar system will generate a little less than 6 SRECs per year.

Each of those SRECS is worth between $300 and $600, minus a 5% auction fee. In the April 2012 quarterly auction, individual SRECS sold for $540 through SRecTrade. The SREC program has been guaranteed through 2022 although it is intended to continue beyond then. However, in 2012 the SREC market became oversupplied and for estimation purposes, they should be treated as if they’re worth $285 each.

SRECs become available to auction quarterly on the 15th day of the following quarter plus one month. The auctions take place the first week of the next month and payments typically will be received by the end of that month. To explain more clearly:

According to one SREC aggregator’s contact with the IRS, the proceeds of SRECs should be considered an offset to the purchase of the solar energy system, and are therefore, not taxable. The IRS also stated that the sale of SRECs does not fit within the transaction types that would initiate the generation of a 1099. If you are uncertain, please contact a tax professional.

Even though you’ll make more money annually from selling your SRECs, don’t forget your significant monthly savings by generating your own electricity. Or proceed right to the solar company ratings page to claim up to $500 in savings and get estimates from qualified solar installers.