Feed-in Tariffs (FITs) have been a major buzz phrase in solar policy circles in recent years. While dozens of countries and provinces have implemented FITs outside the U.S., they have yet to make major headway in America. Instead, a number of states have crafted markets based around the trading of Solar Renewable Energy Credits, known as SRECs.

SRECs are tradable credits that represent one megawatt-hour of solar electricity. In states like Delaware, Massachusetts, Maryland, New Jersey, Ohio and Pennsylvania, energy suppliers are required to accumulate a certain number of SRECs to meet a mandated generation target. Power providers can generate the credits themselves by investing directly in projects, or purchase the credits from project owners, brokers or aggregators.

The value of credits is based upon supply and demand: If there's a shortage of solar electricity in a given state, SREC prices will be high, thus stimulating more development. If there's an oversupply of solar, SREC prices will drop. Prices are capped by a penalty that power providers pay if they can't meet their targets.

http://solarfusioncorp.posterous.com/are-srecs-the-future-of-us-solar-policy