Solar Renewable Energy Certificates (SRECs) in Massachusetts: History, Status, and Alternatives

Massachusetts pioneered Solar Renewable Energy Certificate (SREC) markets as a compliance mechanism under the state's Renewable Portfolio Standard, but the program has undergone significant structural changes since its launch. This page covers how SRECs were defined and traded, why the original SREC and SREC II programs closed to new applicants, and what incentive structures replaced them. Understanding this history is essential for property owners, solar developers, and policy researchers evaluating Massachusetts solar economics — a broader framework described at Massachusetts Solar Energy Systems: Conceptual Overview.

Definition and scope

A Solar Renewable Energy Certificate is a market-based instrument representing 1 megawatt-hour (MWh) of electricity generated by a qualified solar photovoltaic system. Under the Massachusetts Renewable Portfolio Standard (RPS), administered by the Massachusetts Department of Energy Resources (DOER), electricity suppliers are required to source a defined percentage of retail electricity sales from eligible renewable generators. Solar-specific carve-outs within the RPS — known as the Solar Carve-Out and Solar Carve-Out II — created a separate compliance obligation that could only be satisfied with SRECs, not with other renewable energy certificates.

The regulatory authority for Massachusetts SRECs derives from Massachusetts General Laws Chapter 25A, Section 11F, which empowers DOER to establish and administer the RPS. The Massachusetts Clean Energy Center (MassCEC) served as a co-administrator for program registration and qualification, while the New England Power Pool Generation Information System (NEPOOL-GIS) tracked certificate issuance and retirement.

Scope and geographic limitations: This page applies exclusively to Massachusetts-sited solar systems participating in Massachusetts RPS compliance markets. It does not address SREC markets in other New England states (Connecticut, Rhode Island, New Hampshire, Maine, Vermont), which maintain separate and distinct RPS frameworks. Federal Renewable Energy Certificate (REC) markets, voluntary green power programs, and out-of-state solar assets are not covered here. For the broader regulatory framework governing Massachusetts solar, see Regulatory Context for Massachusetts Solar Energy Systems.

How it works

Under the original Solar Carve-Out program (SREC I), qualifying solar systems registered with DOER generated one SREC for every 1 MWh of production. Electricity suppliers with a Massachusetts retail load obligation were required to either retire sufficient SRECs to meet their solar carve-out percentage or pay an Alternative Compliance Payment (ACP). The ACP functioned as a price ceiling — if SREC market prices rose above the ACP rate, suppliers would simply pay the ACP rather than purchase certificates.

DOER set ACP rates by regulation. Under SREC I, the ACP was set at $550 per MWh, establishing the theoretical price ceiling for that market. Under SREC II, the ACP was reduced to $400 per MWh (DOER Solar Carve-Out II Regulations, 225 CMR 14.00). The market clearing price for SRECs typically traded below these ceilings, driven by supply and demand dynamics within the compliance pool.

The process for a system owner followed these discrete steps:

1. System installation and interconnection — The solar PV system receives utility approval and begins generating electricity.
2. DOER qualification — The system owner submits documentation to DOER for RPS Solar Carve-Out eligibility, including equipment specifications and an independent energy production estimate.
3. NEPOOL-GIS registration — The system registers on the NEPOOL Generation Information System to enable MWh tracking and certificate issuance.
4. Meter data submission — Production data from a revenue-grade meter is reported periodically (typically quarterly for small systems, monthly for larger ones).
5. SREC issuance — NEPOOL-GIS issues SRECs into the owner's account at a 1:1 ratio with verified MWh output.
6. SREC sale or aggregation — System owners sell SRECs directly to compliance buyers, through brokers, or via aggregators who bundle small-system certificates.
7. Compliance retirement — Electricity suppliers retire SRECs against their annual RPS Solar Carve-Out obligation, demonstrating compliance to DOER.

Common scenarios

Small residential systems under SREC I (closed program): Residential systems installed before the SREC I capacity cap was reached — approximately 400 MW of qualified capacity — could generate SRECs for a 10-year eligibility window. Owners either sold certificates quarterly through brokers or signed multi-year fixed-price SREC contracts to reduce price volatility.

Commercial and industrial systems under SREC II: SREC II extended the market to a second capacity block, with eligibility requirements adjusted for different system size tiers. Systems above 25 kilowatts (kW) faced additional documentation requirements, including a more rigorous independent energy production estimate (IEPE) prepared by a qualified professional.

Transition-era systems: Systems that entered the pipeline as SREC II was reaching its capacity ceiling faced uncertainty. DOER closed SREC II to new applications in 2018 and launched the SMART (Solar Massachusetts Renewable Target) program as the successor incentive structure. Systems that had received SREC II qualification before the closure continued to earn certificates for their remaining eligibility term.

SREC I vs. SREC II — key distinctions:

For systems installed after SREC II closure, the SMART program replaced the certificate-trading model with a fixed capacity-based incentive. The Massachusetts SMART Program page covers that successor structure in detail.

Decision boundaries

Who still receives SRECs? Only systems that received a valid DOER qualification letter under SREC I or SREC II before program closure remain eligible to generate SRECs. No new system qualifications are accepted under either program. Existing qualified systems continue generating SRECs until their 10-year eligibility window expires, after which production is uncompensated through the SREC mechanism.

What replaces SRECs for new systems? New Massachusetts solar installations qualify for the SMART program rather than SREC markets. SMART pays a fixed incentive rate per kWh (not per MWh block) determined by utility territory, system size, and capacity block, eliminating the price volatility inherent in a certificate market. The Massachusetts Clean Energy Center maintains current SMART capacity block status and incentive rates.

Federal incentives run parallel: SREC and SMART participation does not affect eligibility for the federal Investment Tax Credit (ITC) under 26 U.S.C. § 48(a), which applies to qualifying solar property regardless of state incentive program enrollment. The Federal Investment Tax Credit for Massachusetts solar installations page addresses ITC mechanics separately.

Net metering interaction: SREC generation and net metering credits are distinct instruments. A system can simultaneously generate SRECs (or receive SMART incentive payments) and receive net metering credits for excess electricity sent to the grid. These mechanisms operate under separate statutory authorities — SRECs under MGL Chapter 25A and net metering under MGL Chapter 164, Section 138. The Net Metering in Massachusetts page explains that interaction.

Property owners evaluating solar economics should note that the SREC-era financial models, which projected revenue streams from certificate sales, do not apply to systems installed under SMART. Analysis of current installation costs, incentive stacking, and payback periods should use SMART-era assumptions. A starting reference for the broader Massachusetts solar landscape is available at massachusettssolarauthority.com.