California homeowners and small-business owners who install solar-electric systems may soon start to receive an additional reward that could be worth hundreds of dollars a year.

The California Public Utilities Commission has authorized the use of tradable renewable-energy credits as an incentive for increased adoption of rooftop solar photovoltaic electricity.

Renewable-energy credits are certificates that represent the value of a specific amount of renewable electricity that has been generated, and are typically amassed in units that represent 1 megawatt-hour of electricity, equivalent to 1,000 kilowatt-hours.

Electric utilities purchase such credits to help meet requirements that they produce a certain percentage of electricity from renewable sources. The commission's decision allows RECs to be bought and sold "unbundled," meaning the solar owner gets the electricity, but can sell the certificate that represents its environmental attributes.

In New Jersey and other states, such certificates have been traded on the market for hundreds of dollars per unit and have produced significant revenues for owners of small solar arrays. Prices for Solar Renewable Energy Certificates in the Garden State have at times exceeded $600 for 1 megawatt-hour of production. The money generated helps to offset the cost of solar equipment.

The California program will be much more modest initially than New Jersey's, with a $50 interim price cap for certificates or credits bought by the state's three large investor-owned utilities to meet their renewable-purchase requirements. The price cap will be in place through 2011. The decision says the temporary cap does not mean that $50 should be regarded as a "reasonable price" for RECs. Other companies or organizations that may buy RECs would not be subject to the cap.

An average residential solar-electric system with a capacity of 5 kilowatts in much of California might be expected to generate about 7,000 kilowatt-hours a year, potentially worth about seven credits under the tradable REC mechanism.

At $50 each, their sale could amount to $350 annually for an average system. That would be much less than New Jersey solar owners typically receive, but at present California homeowners and small-business owners get nothing for RECs. Over the decades-long life of a PV system, such an amount could cover much of a small array's cost.

One drawback of renewable-energy credits is that they add another layer of complexity for mom-and-pop consumers seeking to determine whether solar electricity is right for them. In a news release, the CPUC did not say when REC trading would begin, and did not specifically say that homeowners and small-business owners would be eligible.

However, the commission's written decision says that owners of distributed generation installations, such as solar PV systems, would own the RECs associated with their energy production, "and can therefore sell them, regardless of whether the DG owners participate in net metering."

Another part of the decision notes that to participate in the market, owners would have to file with and meet requirements of an organization called the Western Renewable Energy Generation Information System. That system excludes solar PV arrays under 1 kilowatt of production capacity, meaning "some owners of very small DG systems may not be able to participate," the decision says.

The utilities commission's news release said that "the ability to sell RECs associated with distributed generation will provide incentives for greater rooftop solar and other distributed generation."

Michael R. Peevey, the commission's president, said in the news release: "The essential elements of this framework are intended to support this market well into the future. Although the tradable REC market may be modest in the next two or three years, the market rules put in place in this decision will both allow this new market to develop and provide robust rules as the tradable REC market matures."