Power factor is the ratio of real power (kW) to apparent power (KVA). This ratio can be a value from 0 to 1, and it indicates how efficiently an AC circuit is using electricity, with a value of 1 representing high efficiency. The third type of power, called reactive power (KVAr), causes electronics to be inefficient and draws the ratio closer to 0 by creating a difference between real power and apparent power.

As hardware installation costs drop and consumer confidence improves, solar installations are becoming more and more common. Small arrays (<10 kW) are becoming cost effective for business and even individual homeowners. A solar array can be used to avoid paying for energy produced by a utility company, and some utilities even compensate owners for the excess solar production that is fed back to the utility. However, this is not the only source of potential income for owners of PV arrays. Many states now allow individual solar producers (including homeowners) to generate additional income by creating and selling Solar Renewable Energy Credits (SRECs). Since SRECs are traded separately from the actual energy produced by these arrays, they represent a potentially untapped source of income with little to no additional effort on the part of the producer. There are a few important terms to understand when learning about SRECs.