People often think SRECs and net-metering are the same thing, but really, the comparison is like apples to oranges. It’s true that they are both important to getting the best financial results from your solar PV system, but SRECs and net-metering actually have very different, distinct functions.
SRECs are a way to put cash in your pockets while net-metering is an efficient way to manage the finances related to your utility bill. Both can have positive financial effects and understanding the difference between the two can help you, as the owner of a solar PV system, to maximize the benefits of both. Here’s how it all works:
What is an SREC?
SRECs (Solar Renewable Energy Credits) are credits you get for producing solar energy that can be sold to your utility. A homeowner earns one SREC for every 1000 kilowatt hours (kWhs) that their solar panels produce. An average PV system could create between 2 and 6 SRECs per year.
You might think: why would a utility want to pay me to produce clean energy? Because the energy utilities produce often comes from “dirty” sources, state and federal governments set rules that say how much clean energy they must produce. Rather than go through the trouble of adding renewable energy to their plant, it makes more sense for them to pay you to produce clean energy for them!
Here’s where people get confused about SRECs: Many people think SRECs are “selling energy back to the grid.” They are not. The utility is not paying you for the excess energy you produce—you can use every bit of it. What they are paying you for is the ability to take credit for the clean energy produced by your system. These credits have nothing to do with how much energy your home uses but depend solely on the overall production of your solar panels. Not all states have SREC programs. Also, it’s important to note that generally, only the owner of the solar panel system is eligible to receive SRECs so, if you choose to lease your solar panels, you most likely will not benefit from SRECs. The value of SRECs can vary widely depending on where you live, but they have the potential to significantly increase the return you receive from your investment in solar panels.
What is net-metering? How does it work with solar power?
So what is net-metering? Let’s start with what it isn’t. Unlike SRECs, net metering is not a way to generate income from your solar panel system. Net-metering is a system of debits and credits that help your utility to even out your bills. Based on the difference between how much energy your solar panels produce and how much energy you are consuming, your utility bill either will be debited or credited. Credits build when your system produces too much power.
At times when your system is not producing as much as you need (usually in the winter), your bill will debited, i.e. you’ll use up the credits you received when you were over-producing. Rather than pass small amounts of money back and forth between you and the utility each month, net metering allows the utility to keep track of those ups and downs for you over the course of the year and, if necessary, settle up once a year.
Under the net-metering system, you hardly have to think about paying electric bills at all! In the end, most homeowners pay a small bill at the end of the year because their solar panels did not produce exactly as much as they needed overall.
Unlike SRECs, net-metering is not a revenue generating opportunity. Even if you do have a credit at the end of the year, you won’t get cash for producing extra electricity. You can, however, apply the credit to another bill of your choice, whether it’s for another property you own, a family member’s, a school’s, or any other utility customer you choose to help out.
Together, SRECs and net-metering work to make sure you get the best possible financial benefits from your solar PV installation. Like apples and oranges, they are quite different but they both can be great additions to the buffet of benefits your solar PV system can deliver.
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