What is a Solar Renewable Energy Credit?
A solar renewable energy credit is a certificate that represents one megawatt-hour of electricity that has been generated by solar means.
Key Takeaways:
- Solar renewable energy credits represent the clean energy attributes of electricity.
- Credits can be bought and sold on the open market like any commodity.
- One solar renewable energy credit represents one megawatt-hour of electricity.
Understanding Solar Renewable Energy Credits
Solar Renewable Energy Credits are a form of certificate (or Renewable Energy Credit) that represent one megawatt hour-worth of electricity in the power grid that has been generated by a solar energy source. A solar renewable energy credit doesn’t represent the electricity itself, per se, but the clean energy attributes of the power.
In general, solar renewable energy credits are found in states that have a set of legislated standards for clean energy production and have decided to incentivise the use of clean energy over fossil fuel-generated electricity.
Solar renewable energy credits can be bought and sold on the open market just like any other asset. The income received by the owner of a solar array from selling solar renewable energy credits increases the economic value of an investment in solar technology and assists with the financing of solar arrays. In many instances, polluting corporations will purchase solar renewable energy credits as a form of carbon offsetting.
How a Solar Renewable Energy Credit Works
For most people, it’s impossible to know where your electricity comes from. Power is generated from a variety of sources and transported across continents to their consumers. To solve that problem, a consumer can purchase a solar renewable energy credit to ensure that they are paying for electricity generated by a solar installation. While the solar renewable energy credit itself just represents the ‘green’ aspects of the energy, when paired with paying for electricity from the grid a consumer can be confident that they are directly funding renewable energy to be generated and added to the grid on their behalf.
In addition to purchasing solar renewable energy credits for consumption, residential or business owners of solar energy systems can also sell their solar renewable energy credits that they generate to earn additional income for the production of electricity.
How Solar Renewable Energy Credits are Generated
A solar renewable energy credit is generated for every one megawatt-hour of electricity that is produced and delivered to the power grid. For instance, if a solar energy plant generates ten megawatt hours of electricity and adds that to the grid, they would have ten solar renewable energy credits to sell on the open market. If an individual were to purchase one of those solar renewable energy credits, they would then be able to say that one megawatt hour of their electricity came from renewable energy sources.
Once a solar renewable energy credit has been sold, it cannot be purchased again. Each credit is numbered and registered with additional information, such as where it was generated and what its source was. This information is recorded and tracked to ensure that each solar renewable energy credit is unique and unable to be duplicated.
Benefit of Solar Renewable Energy Credits
The biggest benefit of solar renewable energy credits is the ability to show certified proof that you are using renewable energy in your home or business without having to install solar panels yourself. This is particularly important if a consumer is unable to purchase and install a solar array (for instance, if they are renting their home), or in a climate/geography that doesn’t make sense to install a solar array.
For businesses that may be in many locations, or are particularly polluting, solar renewable energy credits would allow them to offset their emissions with clean and renewable energy purchases without having to install solar panels on their facilities.
Purchasing solar renewable energy credits as either an individual or as a business also supports the overall renewable energy market because it tells the market that there is a demand for more clean energy sources. This encourages more and more investment in renewable energy infrastructure as well as helps businesses and individuals reduce their carbon footprint.
Related Terms
Annual Solar Savings – Annual solar savings is defined as the total amount that a homeowner can save per year in utilities expenses by installing solar panels, as well as any additional savings gained by the Federal Solar Tax Credit and local or state incentives.
Solar Installer – A solar installer is someone who installs solar panels on structures for the purpose of converting sunlight into photovoltaic energy.
Solar Dealer – A solar dealer is a company that sells solar equipment and infrastructure for installation on homes and businesses.