SMART-SREC: A stochastic model of the New Jersey solar renewable energy certificate market

Michael Coulon, Javad Khazaei, Warren B. Powell

Research output: Contribution to journalArticlepeer-review

30 Scopus citations


Markets for solar renewable energy certificates (SRECs) are gaining in prominence in many states, stimulating growth of the US solar industry. However, SREC market prices have been extremely volatile, causing high risk to participants and potentially less investment in solar power generation. Such concerns necessitate the development of realistic, flexible and tractable models of SREC prices that capture the behavior of participants given the rules that govern the market. We propose an original stochastic model called SMART-SREC to fill this role, building on established ideas from the carbon pricing literature, and including a feedback mechanism for generation response to prices. We calibrate the model to the New Jersey market and backtest it, analyzing parameter sensitivity and demonstrating its ability to reproduce historical dynamics. Finally, we run simulations to investigate the role and impact of regulatory parameters, thus providing insight into the crucial role played by market design.

Original languageEnglish (US)
Pages (from-to)13-31
Number of pages19
JournalJournal of Environmental Economics and Management
StatePublished - Sep 1 2015

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics
  • Management, Monitoring, Policy and Law


  • Environmental markets
  • Feedback effect
  • Green certificates
  • New jersey
  • Regulatory policy
  • Renewable energy certificates
  • Solar generation
  • Structural price model


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