RECs are valuable in states that have passed legislation requiring energy suppliers to provide a certain percentage of their electricity from renewable energy sources. This type of legislation is called a Renewable Portfolio Standard (RPS). Energy suppliers can comply with an RPS with RECs from their own renewable assets or with RECs purchased from someone else.
If an energy supplier falls short of their state's renewable requirement, they will be charged a penalty called the Alternative Compliance Payment (ACP). The ACP effectively sets a price ceiling on RECs because an energy supplier would never purchase a REC priced above the ACP.
Under certain types of renewable portfolio standard (RPS) legislation, energy suppliers must provide a certain percentage of their renewable electricity from solar. This solar-specific requirement is called a solar carve-out.
If an energy supplier falls short of their state's solar carve-out, they will be charged a penalty called the Solar Alternative Compliance Payment (SACP). Just as the ACP sets a price ceiling on RECs, the SACP effectively sets a price ceiling on SRECs since an energy supplier would never purchase an SREC priced above the SACP.