Solar Projects Provide Lucrative Financial Returns

Solar projects can provide business organizations with lucrative financial returns, but only if the environmental benefits are sold to meet state Renewable Portfolio Standard (RPS) requirements. What can companies do to invest in solar technologies while also remaining environmentally responsible?

For an investor-financed solar project installed in any of the Northeastern and Mid-Atlantic solar markets, more than 30% of the financial return comes from selling Solar Renewable Energy Credits (SRECs) to electric distribution companies (EDCs). EDCs in most Northeastern and Mid-Atlantic states must prove that a certain percentage of the power delivered in the state is produced by solar photovoltaic (PV) technologies. They meet this requirement by purchasing and “retiring” SRECs, which are created and monitored by a centralized tracking system called the Generation Attribute Tracking System (GATS).

These financial instruments (SRECs) represent the environmental benefits of one megawatt-hour (1MWH) of solar electricity generation. One megawatt-hour of electricity is the amount of energy it would take to power ten 100W light bulbs for 1,000 hours (or 100 bulbs for 100 hours). However, the SREC is only a financial byproduct of this clean and renewable generation. In greenhouse gas emissions terms, 1MWH of solar generation will reduce carbon emissions by approximately 1340 LBS, methane by ~18 LBS, and nitrous oxide by ~21 LBS. Thus, the SREC acts as “proof” that these emissions were eliminated. Retiring an SREC is essentially taking the credit for reducing these harmful greenhouse gases.

If you install a solar photovoltaic (PV) system at your facility, you will want to take full advantage of the marketing benefits of the system. By installing a PV system, you have made an incredible contribution to the environment and to the advancement of clean energy technology. Even if you sell the SRECs from the system, you are still advancing the industry and giving someone else the option to be more “green.” The best way to show your support for the environment is to have your customers see the actual installation. Your commitment to renewable energy is then apparent to all who view the system at your facility.

However, if you are selling the SRECs to pay for the PV system, some will argue that someone else is funding your solar installation and claiming all of the environmental credit. Often this is the local EDC, who then passes on the costs of the SRECs to all of their customers. Thus, if you sell the SRECs, your business cannot technically claim to be “solar powered” and you become the host provider for someone else’s clean, solar energy. If you truly want to be solar powered, you have the option to retire the SRECs generated by your system, or to not even report them. However, if you do choose this option, you are paying a hefty price premium for the environmental benefits of your system.

I need the SREC income to finance my system right now, but I want to be environmentally responsible. Can I have it both ways?

Yes! By selling the SRECs generated from your system, you can achieve the financial returns that you need to justify the project. In order to reclaim the environmental benefit you have sold, you can purchase and retire other Renewable Energy Credits (RECs) from other markets. RECs can be generated from numerous, more abundant sources such as wind, biofuels, hydro, and geothermal sources. Because these sources of renewable energy are more abundant right now, and because the RPS requirements for these sources are more flexible, the environmental benefits generated from these renewable energy sources are much less costly. Thus, you can take the $300+/Pennsylvania SREC or the $600+/New Jersey SREC and use those funds to buy other renewable energy credits at a fraction of the price. If you want to support the growth of the solar industry only, you can even purchase SRECs from neighboring states with lower SREC prices and achieve the same environmental benefits.

Ask UGI Performance Solutions about exchanging your SRECs for other renewable energy credits today!

Solar Projects Provide Lucrative Financial Returns