At Solar Power Rocks, our dream is to turn your thoughts of solar power for your home into reality
Note: The numbers above are just estimates for a 5-kW solar system, and your home is unique. The best way to know exactly how much money solar power can save you is to connect with one of our partners nearby. A friendly solar expert we trust will give you a buzz and help you craft a personal plan to get the absolute most out of a solar power system for your home. It's 100% free (yes, that’s right, 100% free) and you aren't obligated to buy anything.
We've been singing the praises of New Jersey solar power for some time now. Go ahead, search for "New Jersey" on our site. You'll see plenty of our writings all about how states from all over the union could learn from what the The Garden State's legislature here has been able to accomplish.
Over the past several years, New Jersey has done such a good job promoting solar power that the Environment America Research & Policy Center hailed it as the fifth best state in the nation for solar. In fact, New Jersey residents have swarmed to solar so much that some of the performance-based solar incentives have become a little less juicy.
How much less? Well, even though your solar power system will still pay for itself quickly and return you handsome profits, it isn't quite at the fire-setting pace as it was before. Keep reading to find out how fast, and how much.
New Jersey has many different solar programs, and not all of the state's utility companies offer each one. The page you're on now is a good overview of policy and incentives in the state, but to get the clearest picture of the possibilities for solar in your area, check out our city-specific pages for the following areas:
Questions? Our network of solar experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page. You can get discounted on-grid pricing as low as $4,000/kW! This is paired with the New Jersey solar incentives you see below.
Your guide to going solar in New Jersey
We've designed this page to be a complete guide to the complicated and sometimes confusing process of installing solar panels on a home in New Jersey. Since there's a lot of important information to consider, we've separated the page into sections to help you find what you are looking for. If you find this page useful, please share it with someone who might also find it interesting!
The Solar Strategy section is all about the various financial options you have in New Jersey. We've created a tool that asks you a few questions about what you hope to get out of a solar purchase and recommends whether you should pursue a solar lease, loan, or outright purchase. Then, we give you a detailed picture of how each could work for you.
The Policy Information section contains all of our latest research on the rules set by the state legislature and public utilities commission that determines how easy it is to go solar in New Jersey. These policies and rules govern everything from renewable energy mandates to whether you get paid retail or wholesale rates for the extra energy your system produces, and can have a huge effect on the viability of solar.
Finally, the Solar Incentives section lists all of the available financial benefits available to homeowners who go solar. This section includes information about money-back rebates and grants, tax credits, and tax exemptions. If you're looking for what New Jersey is doing to make solar more affordable for its citizens, you'll find it here.
We hope you find our work useful. If so, please help us keep our research and advocacy as strong as possible by sharing it with someone who might also find it interesting, contributing any amount you can, and by getting yourself personalized savings estimates from our trusted partner network.
Click any of the boxes below to go to that section of the page, or scroll down to read the page in order.
|Your New Jersey Solar Strategy|
|Comparing Solar Investment Options|
|Solar PPAs in New Jersey|
|Solar Loans in New Jersey|
|Buying Solar in New Jersey|
|Solar Purchase Payback Time in New Jersey|
|New Jersey Solar Policy Information|
|Renewable Portfolio Standard (RPS)|
|RPS Solar Carve-Out|
Your Solar Strategy in New Jersey
Figuring out the best way to go solar in New Jersey can be a little daunting. From loans and leases to power-purchase agreements, there are a lot of options out there. To help you pick the one that might be best, we've created the handy decision tool below.
We'll ask you a few simple questions about you and your home. Once you're done, we'll recommend a good option. Further down this page, we provide cost estimates and example return-on-investment calculations for all the various options:
Compare the Return of Different Solar Investments in New Jersey
The chart above shows the 25-year returns for an investment in solar whether you choose to purchase a system with cash or pay over time with a loan or lease. One thing it's important to note is: solar makes you a lot of money in New Jersey. Yes, we said "makes!" You see, New Jersey has a special financial incentive for encouraging homeowners to go solar, and it means thousands of dollars in your pocket for the next 20 years.
The incentive is called the Solar Renewable Energy Credit, or SREC. One SREC represents one megawatt of electricity generated from solar, and in New Jersey, you get about 6 per year. Now, the Garden State requires its utility companies to produce certain amounts of electricity from solar, and buying SRECs from solar generators helps them meet those goals. On average, a homeowner makes about $170 from the sale of an SREC (though prices vary throughout the year), so those 6 SRECs you get equal about $1,000 in your pocket, every year until 2030.
That's huge! We hope your interest is piqued, so now let's discuss that chart above. We've examined three scenarios for going solar in New Jersey, including a solar Power-Purchase Agreement (PPA), buying solar with a home loan, or paying for solar with cash. As you can see, the cash purchase option leads to the highest dollar-amount returns over time, but look a little closer. Taking a solar loan or Home Equity Loan or Line of Credit (HELOC—the orange bars) and paying for the system over time means you'll actually spend zero dollars of your own money over time, while reaping a big financial benefit in year 1.
That's because you'll be paying over time for the system, but you still get all the benefits of paying up front. In New Jersey, that means a 30% federal tax credit, energy savings, and SREC sales. With those huge incentives, you'll actually make money in the first year. And even though you'll be making loan payments for 15 years, the cost will be obliterated by the money from SRECs and electricity savings, making this investment essentially free money for having a roof and some home equity.
Lastly, take a look at the blue bars. They represent a solar Power-Purchase Agreement (PPA), which are also called third-party ownership. With a PPA, the solar installation company puts panels on your roof at no cost to you, and you make monthly payments for the energy they produce. It saves you you only about $12 per month to start, but it gets bigger over time, because the PPA payments will rise by less than the electric company's annual rate hikes. Third-party ownership is an excellent option if you don't have any equity or cash to put down, and it still saves you money!
Read more below about each of three very good options for solar in New Jersey.
Net Present Value of Solar in New Jersey
“Net Present What?!” Don’t panic, this isn’t an economics test. NPV is just a tool used to compare investments. Basically, it asks, “if you had X dollars to invest, which investment would get you the best return?” It relies on the idea that getting a return on your investment sooner is better than later, because you can reinvest your early profits and keep the gain train going.
We compare an investment in solar to a “what-if” investment in a Standard & Poor’s (S&P) 500 stock index fund, which has seen growth of about 7% per year over the past 25 years. We use the cost of solar in New Jersey and ask “how much better or worse (in 2017 dollars) is an investment in solar than stocks?” Here's what we found for the three different ways of going solar in New Jersey:
Look at all that green! When they tell you solar is a good deal in New Jersey, this is what they're talking about. A solar investment in New Jersey should provide a better return than the stock market whether you choose a PPA, a loan, or pay up front. Here's some more about how we got these numbers:
Solar PPA NPV: $2,239
Saving money without having to put anything down is always going to have a positive NPV. In New Jersey, A PPA will save you a little bit each month, adding up to $4,707 over 20 years. That's like having an extra $2,239 to invest today, but it can't even come close to the return of a solar loan. Read more about PPAs in New Jersey below.
Solar Loan NPV: $14,478
As we’re fond of saying, taking a loan for solar is a no-brainer, because it’s like agreeing to pay over time for something that is also making you money. In New Jersey, the money you make comes from electricity savings, SREC sales, and a huge federal tax credit equal to 30% of the cost of your solar installation at tax time next year. All that helps push the NPV of a solar loan to $14,478 better than a similar investment in the stock market. That's a mind-boggling return for any investment, and it's insane for something that requires no money down. Read more about solar loans below
Solar Purchase NPV: $11,365
If you're paying for solar up front, you're gonna need a few thousand dollars to do it. But when all is said and done, the NPV of an outright solar purchase in New Jersey is outrageous. The two biggest reasons a solar purchase in New Jersey has a positive NPV are the 30% federal tax credit and SREC sales. On top of that, the money you save on electricity is also available for future investment. But you can see above what happens to NPV if you choose a solar loan instead. Unless you need to put cash into an asset, a loan is a much smarter way to pay for solar panels. Read more about solar purchases below.
Solar Power-Purchase Agreements in New Jersey
A PPA is a great way to go solar if you haven't got stacks of cash or oodles of equity in your home. It's possible to get solar panels for $0-down and see big savings over 20 years!
As for leases in New Jersey: the electricity costs here are pretty high— 20% higher than the national average. That means a PPA saves you money starting on day 1! For now, the payments on the energy produced by a 5-kW solar system should be around $796 per year, but the energy you're not buying from the utility company would have cost $936—a savings of $140, just for saying yes to solar!
That might not sound like a huge amount of money right now, but as the utility company raises rates, you will start to see greater annual savings. Over 20 years, our estimate shows a total savings of $4,707. And the best part is the panels will be owned and maintained by the installation company, so all you have to do is brag to the Joneses down the street about your green habits!
Here's a little more about how a New Jersey solar PPA works:
Example savings in New Jersey
Annual Electric Bill Before Solar
Annual Electric Bill After Solar
Est. Annual Solar Payments
Average Annual Savings
Annual Electric Bill Before Solar
Annual Electric Bill After Solar
Est. Annual Solar Payments
Average Annual Savings
Power-Purchase Agreements (PPAs) are the most popular form of what's called "third-party solar." A PPA just means your solar company owns the panels on your roof, and you pay for the electricity they produce. The numbers above show the savings with a solar PPA for an average home in New Jersey. The typical electric bill before solar power is super expensive, but with a PPA, your monthly expenses will be lower. You'll be saving money and saving the planet all at the same time!
Here's an estimate of the monthly savings for a solar PPA in New Jersey:
With a PPA, your solar company essentially becomes a second utility provider, only the solar electricity is sold to you at a lower rate than the fossil fuel electricity you've been buying from the electric company! Note: your PPA won't eliminate your power bill from your regular electric provider, because you'll still need energy from the grid when the sun isn't shining. But it will save you money!
The less-popular cousin of the third-party solar family is the solar lease. It's basically like renting your panels for a set monthly payment, and getting all the energy they produce—however much it is. Don't get spooked by that language, though. A typical solar lease comes with energy production guarantees that will make sure you're getting what you paid for. In fact, if you're not offered a production guarantee with a solar lease, walk away.
Here's the best part of third-party solar: whether you end up with a lease or a PPA, the installation company owns the panels and will do all the maintenance for you. Usually that means just a good cleaning every year, but if any part of that system fails, you're off the hook! That can be a great benefit to homeowners who are risk averse.
Keep in mind, the numbers above are based on an average home in New Jersey. If you're ready for a custom quote for a solar lease or PPA, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Home Solar Power: PPA vs. Purchasing
To PPA, or not to PPA? Willsolar Shakespanels would be proud we're discussing this. Here's the basic deal. If you choose to lease your panels, you benefit from no out of pocket costs and an immediately reduced total electricity payment. Because of this, many regard this option as a no-brainer, since there isn't any downside to think of. The only hiccup you'll start to experience is when you consider the long term financial benefit of owning the solar panel system yourself.
In many situations, if you can afford the outlay or can easily secure financing, the cost of the install becomes an investment with a return outpacing even the strongest performing mutual funds. In addition, there's significantly less principal risk, since the energy credits you will be producing are tied to the sun coming up in the morning instead of our financial markets!
Additionally, if you go the PPA route, you must forfeit all the credits and performance payments you would receive by owning the system yourself to the solar PPA company (after all, that's how they can afford to give you such a no-brainer proposition in the first place).
Solar Loans in New Jersey
You don't need $16,000 sitting around to pay for solar. As long as you have equity in your home, you can still own solar panels and reap all the benefits. Heck, even if you do have the cash, getting a loan to pay for solar is by far the best option when it comes to percentage return on investment.
That’s because, in New Jersey, using a loan to pay for solar is like investing in a business that's sure to succeed, and also earns you a tax break. You'll come out thousands ahead this year, and you'll still see a spectacular profit over the 25-year life of your system. The reason this works so well is that you're paying over time, but reaping all the benefits now. You'll get tax breaks, SRECs, and energy savings to offset the loan payments, which sounds a lot like it's too good to be true... so let's take a look at the numbers.
A solar purchase like this will make sense for you if the following is true about you and your current situation:
- You can qulaify for a solar loan or home-equity line of credit (HELOC) for $16,250, with a fixed rate of 4% or lower and a 15-year repayment period. Don't be put off if you're offered a higher rate. It just means a tiny bit less of the thousands of dollars you'll make with solar.
- You love making money without much risk.
Here’s how the numbers pencil out for a New Jersey homeowner who makes a solar purchase with a loan:
- Installing a typical 5-kW solar system should start at about $16,250. That's how big your loan will need to be to cover it.
- The electricity you'll save in the first year of operation would have cost $936, but your annual loan payments will be $1,442, meaning you would spend $506 on solar this year, but...
- You'll also get to sell your SRECs for about $1,164, putting you $1,670 ahead for the year! But then...
- You'll also see a huge Federal tax breaks! Uncle Sam will give you 30% of the cost of your system back as an income tax credit, which in this case means $4,875 you won't be paying the government this year.
- All those incentives mean you'll come out $5,532 ahead after year 1, and it's clear skies from them on out. You'll continue to net over $600 per year after your loan payments, making home solar in the Garden State a $0 investment that pays from day 1.
- By the time you've paid off your loan in 2031, you'll see yearly savings of over $1,200. After 25 years, your total profit will be $29,367!
- On top of the green that will stay in your pocket, your system will mean green for the environment, too—97 trees-worth, every year!
Keep in mind, the numbers above are based on an average home in New Jersey. If you're ready for a custom quote for a solar loan, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Buying Solar in New Jersey
An outright purchase used to be the only way to get solar, and it's still the option that provides the "biggest" financial returns. The reason we put "biggest" in quotes here is because it's technically true—with rebates and tax credits, solar costs less than ever before, and the SREC market and electricity savings in New Jersey are so good that a solar installation pays itself off in just a few short years. But if you're interested in solar as an investment, taking a loan to pay for the system is a better option.
With a loan, you can make monthly payments instead of putting $16,000 down on a solar system, which means you save money on electricity as you pay down the cost of your panels. If you have equity in your home or can get a large loan with an interest rate of 4% or less, a loan is the option to go with. It's like being able to start a business that is sure to succeed, just by having a roof. Read about loans below.
If you've got cash and you prefer to pay up front, you'll have to plunk down $16,250, but tax breaks and energy savings will erase a bunch of that after just 1 year. Over 25 years, your system will have produced about $35,000 in income, after your system cost is paid back. The reason this works is that solar offsets your electricity costs—enough to save you $936 in year 1—and it just goes up from there. As the electric company raises rates, you save more and more, and more...
Here’s how the numbers work for a 5-kW rooftop solar system in New Jersey:
- Installing a typical 5-kW solar system should start at about $16,250. That's cheaper than solar has ever been, but it still might seem like a big investment. Don’t worry, because after tax breaks and energy savings, your first-year costs will be considerably less than that.
- The Federal government offers a great income tax credit of 30% of system costs. That's $4,875 you won't be paying to Uncle Sam this year, and it brings your first-year investment down to $11,375.
- After the tax credit we subtract your first year’s energy savings, which we estimate to be $936. That reduces your cost after the first year to only $10,439.
- But wait, New Jersey has that excellent SREC market we talked about above. The sale of your SRECs will net you $1,164 this year, bringing our final first-year estimate to just $9,275. That's 40% off the starting cost, just in year 1! And here's more good news: those SREC sales will continue for 15 years, which means lots of income through 2030!
- Those electricity savings and SREC sales will quickly make your money back, and your system will pay for itself in just 6 years. You'll see a total net profit of $34,753 by the end of your panels' 25-year warranty. The internal rate of return for this investment is an amazing 18.3%. That's basically twice the return the stock market's traditional return, and it's more reliable, too!
- And here's a nice bonus to consider: your home's value just increased by just about $22,000, too (your expected electricity savings over 20 years).
- In addition to all that cash (and home value), you’ve created some green for the earth as well by not using electricity from fossil fuels. It's like planting 97 trees a year, every year your solar power system is humming.
Keep in mind, the numbers above are based on an average home in New Jersey. If you're ready for a custom quote for a solar panel system, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
New Jersey Solar Policy Information
Ever wonder why solar seems to be everywhere in some states, but not in others? We did too.
State legislatures and public utilities commissions can enact rules to make solar power accessible for everyone. Favorable rules explain why some of the cloudiest states—New York, New Jersey, and Connecticut, are doing so well with solar, and yet some of those with the most natural solar resources—like Alabama, Mississippi, and Florida—are doing so poorly.
Below is important information about the public policy, rules, and economic reasons that affect your ability to go solar here in New Jersey:
22.5% by 2021
A Renewables Portfolio Standard (“RPS”) requires utilities in the state to eventually source at least a certain percentage of their electricity from clean, renewable sources like solar panels.
New Jersey used to have one of the strongest RPS goals in the nation, mandating that 22.5% of all energy must come from renewable sources by 2021. That number is looking very attainable, and, truth be told, it’s in the middle of the pack now compared to the best solar states. The one thing the RPS has going for it is a huge solar-specific target of 4.1% of all electricity, meaning that solar is vital to the state meeting its goals (more about the carve-out just below).
New Jersey’s RPS is critical to strong renewable energy policy. Utility companies aren't really all that gung-ho about you producing your own power. After all, it costs them money when you use less of their electricity. They also don’t naturally want to give you big payments for energy you're feeding back into the grid. The main reason the utilities are aiding your transition to lower electric bills and offering you incentives to put solar on your roof is because the state forces them to. If the utilities don't hit their RPS numbers, they have to pay large fees back to the state.
What's an RPS? Your state legislature paves the way for strong solar energy incentives to flourish by setting standards for renewable energy generation within their territories. Those standards are called the state’s renewable portfolio standard (RPS). If utility companies do not meet these standards, they must pay alternative compliance fees directly to the state. Many utilities then determine the best ways to source their energy from renewable sources that are less expensive than this fee.
An RPS is a mandate that says "Hey utilities! Y'all now have to make a certain percentage of your electricity from renewable sources. If not, you'll have to pay us huge fines." The consequences are good, because utilities usually try to meet these RPS standards by creating solar power incentives for you, the homeowner. Read more about Renewable Portfolio Standards.
RPS solar carve out
4.1% by 2028
The New Jersey RPS now includes a solar specific carve-out of 4.1% by May 2028. That means for every 100 kilowatts of electricity generated in the state, 4 have to come from the sun by 2028. That may not sound like much, but trust us, that's huge!
The result of setting the bar so high is NJ's solar panel rebate and SREC (Solar Renewable Energy Certificate) programs, which offer homeowners and businesses terrific incentives to get solar panels.
What's a solar set aside? A solar set aside guarantees a specific portion of the overall renewable energy mix generated comes from the sun. For those states with progressive standards, high alternative compliance payments, and clear solar carve outs, the faster those areas become ripe for solar.
Some states have higher alternative compliance fees than others, and some states have more progressive alternative energy standards and deadlines than others do.
For instance, New Jersey has an overall RPS of 22.5% by the year 2021. That requires local utilities to source 22.5% of their energy mix from renewable sources by the year 2021. Pretty good. However, New Jersey also has a specific solar set aside of 4.1% by 2028. That’s the type of firm commitment which really gets the industry rolling forward. No wonder why New Jersey is one of the hottest solar markets right now!
New Jersey Electricity Prices
As a homeowners in New Jersey, we pay about 16 cents per kilowatt-hour of electricity we use. That's solidly above the national average of 13 cents/kWh. Paying upwards of 20% more for electricity than many other people in the country is painful.
But while you see larger bills now, you could be seeing bigger savings in the future with solar power! Higher electricity prices means greater opportunity to save money by producing your own clean, earth-friendly power with solar panels. And electricity prices will likely continue to rise in the future with new regulations on carbon pollution and decreased supplies of fossil fuels. People who switch to solar now will be patting themselves on the back in short order.
Why are electricity prices so important? Because that is what solar power is directly competing against. The cost to produce power with solar is relatively constant (of course how much sun hits your area has an effect), so if you are paying $0.40 per watt for power, then you make FOUR TIMES AS MUCH as the guy or girl paying $0.10 per watt electricity.
The caveat here is that if the $0.10 per watt person has a HUGE rebate, they may be better off than the $0.40 per watt person. Because of that, states without any renewable standards tend to be heavily reliant on cheap coal for electricity, and also have very low electricity prices. When electricity prices are artificially low, that hinders the ability of solar energy to achieve meaningful payback in the state.
New Jersey Net Metering
Net Metering requires your utility to monitor how much energy your solar power system produces and how much energy you actually consume, and make sure you get credit for the surplus.
New Jersey’s net metering rules ensure the utility company tracks your excess power generation and credit it to your next bill at the full retail rate. If you run a surplus for an entire year, the utility will cut you a check for the surplus at the company's avoided-cost (wholesale) rate. All investor owned utilities and certain competitive municipal utilities and electric cooperatives are required to provide net metering.
What is net metering? Net metering is the billing arrangement where you can sell excess electricity back to your utility for equal the amount you are charged to consume it. The more customer friendly net metering policies, the higher the grade.
The grade here specifically reflects individual solar system capacity, caps on program capacity limits, restrictions on “rollover” of kWh from one month to the next (yep just like cell phone minutes), metering issues (like charges for new meters), Renewable Energy Credit (REC) ownership, eligible customers and technology (the more renewables the better), being able to aggregate meters across the property for net metering, and safe harbor provisions to protect customers from solar tariff changes.
New Jersey Interconnection Rules
Interconnection standards are strong here as well. Regulations have created a three-tiered system for interconnection procedures, depending on the size of the energy system. Your residential system of less than 10 kW qualifies for simplified procedures with no application fees. The law actually prevents the utilities from charging small systems like yours any additional fees whatsoever to get hooked up to the grid. Nor may the utility require you to install a redundant external disconnect switch, or to purchase any additional liability insurance. There is a bit of room for improvement on standard procedures for larger generators (hence the "B" grade), but everything should be smooth sailing for your residential solar power systems.
Interconnection rules are a little technical, but they basically allow you to “plug in” to the electric grid with solar panels on your roof. The more complex, out of date, or nonsensical the state rules are for plugging into the grid, the lower the grade.
Specifically, the grade reflects what technologies are eligible, individual system capacity, removing interconnection process complexity for smaller systems, interconnection timelines and charges, engineering charges, prohibiting the requirement of unnecessary external disconnects, certification, spot interconnection vs. wide area interconnection, technical screens, friendliness of legalese, insurance requirements, dispute resolution, and rule coverage.
Solar Incentives in New Jersey
New Jersey Solar Power Rebates
Varies, New Construction Only
New Jersey's renewable energy program does offer rebates for some clean energy types. Unfortunately legislators made the decision to back solar power exclusively with the SREC market. That means the cost of solar panels in NJ may be a bit higher at the outset, but those tremendous long-term payments still more than make up for it.
BUT... there is a way to get some rebates if you're building a new home and using renewable energy to power it. New Jersey has a program called "The NJ Clean Energy Residential New Construction Program," which offers rebates to incentivize the construction of new homes that meet the New Jersey ENERGY STAR standards.
Do some reading at the link above, and you'll see that it's possible to get thousands back if you build a home that meets or exceeds those standards. Connect with our solar experts in New Jersey to find out more about this exciting program!
How do solar rebates work? Similar to getting a rebate card from your local big box store for a dishwasher purchase, state legislatures also provide rebates for solar panel purchases to spur on investment and create new jobs. If you purchase the solar panel system yourself, you qualify for this free cash, which many times is a lump payment back to you. Some solar installers like to take this amount directly off the total installed price, and they'll handle the paperwork for you to make things a lot less complex.
The availability of state and utility rebates were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The better the rebates, the higher the grade.
New Jersey Solar Power Tax Credits
New Jersey also lacks any personal tax credits for solar panels. NJ's pending reduction in SREC prices means a statewide solar power rebate or tax credit (with rollover, if necessary) would be an excellent way to keep solar growth humming here. With SREC prices still providing substantial payments, even a small rebate or tax credit would be a significant boon to homeowners like you, without costing the state all that much.
About state solar tax credits: State tax credits are not technically free money. However, they are 'credits' and not 'deductions' which means that if you have the tax appetite to take advantage of them, then they can be a 1-to-1 dollar amount off your taxes instead of a fraction of the cost of the system. So that means they can be an important factor to consider. In certain circumstances, state tax credits can provide a very powerful incentive for people to go solar.
(Keep in mind, we are not tax professionals and give no tax advice so please consult a professional before acting on anything we say related to taxes)
The availability of personal tax credits for solar energy were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the tax credit amount, the higher the grade.
Solar Power Performance Payments
SREC Market- Varies
The heart of NJ's solar panel push can be summed up in four words: “Solar Renewable Energy Certificates” ("SRECs"). Let's talk a little more about SRECs, from the top.
Think of SRECs as proof for the New Jersey’s utilities that they are complying with the law to produce their share of clean power. If they’re not producing that power through their own solar farms or wind farms, then they have to “buy” that power from someone else—you, Mr and Mrs. Homeowner. That means extra moolah for you!
How do you get New Jersey SRECs?
Each time your panels generate 1,000 kilowatt-hours (kWh) of electricity, you get an SREC which you can sell for cash! For NJ solar panels, the ratio of SRECs produced per year to system size in kilowatts is about 1.15 to 1. So if you've got a 5-kW solar system (a solid average for a single-family home), you will generate a little less than 6 SRECs a year.
How much are SRECs worth, and how do you get money for them?
SRECs are traded on an open exchange, so their value will vary from year to year. However, in New Jersey, their value is strongly correlated to the Solar Alternative Compliance Payment (SACP) the utility would incur for not meeting their requirement to source some of their electricity from the sun.
As of 2017, the SACP has dropped to $315, leaving SREC prices hovering between $180 and $240. The SACP will be slowly decreasing to $239 by 2028. Recent SREC market prices can be found at the New Jersey Clean Energy website.
This is a whole lot of money, paid straight to you every year! SREC prices should continue to track the ACF, meaning you figure to bank nearly $1,000 a year.
To get money for your SRECs, you can sign up with an SREC broker, such as SRECtrade. These guys handle the paperwork, aggregate a lot of homeowner SRECs together, handle the trading with the utility companies and take a commission for their trouble. Their efforts are worth the hassle, since it isn't cost effective for the utilities to connect with thousands of homeowners to negotiate a small number of SREC purchases each month from each homeowner.
For more information on how all this pencils out for you, connect with one of our friendly New Jersey solar experts.
Explanation of performance payments: Performance payments represent a big chunk of the financial rationale for going solar, and in many instances they make your decision a wise one. For certain states, if you’ve got solar panels on your roof, not only will you be cutting your electric bill down to size, but you'll be getting paid additional cash from your utility company. Pretty awesome, huh? Not only are you generating electricity for yourself, freezing your own popsicles with sun, and feeling like you’re doing something smart for your children or any of the other 4 reasons people go solar, but you are getting PAID!
Utility companies are paying people with solar panels on their roofs because their states say they have to, otherwise they will pay a fee. Therefore, the payment amount to homeowners is typically a little bit less than the amount they would be billed for by the state. For states with these alternative compliance fees, Solar Renewable Energy Credit (SREC) exchanges have popped up. In the above chart, we outlined an estimate of yearly payments a homeowner might expect from the utility company for the SREC credits from their solar energy system.
Expected SREC payments were calculated by using the latest trade values in the SRECtrade database. The availability of feed-in tariffs were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the expected monthly payments, the higher the grade.
If you don’t know what an SREC is, or how they work, check out this great SREC video
Property Tax Exemption
When the property tax assessor comes a knockin’ at your front door, by law, they are not allowed to charge you any more property taxes because you’ve got a new valuable solar system on your roof. At the same time, your home WILL be worth significantly more when you sell, because, hey, what home buyer doesn't like free electricity?
About solar property tax exemptions: Property tax exemption status is a pretty big factor when putting together your investment considerations. Many argue that solar power adds approximately 20 times your annual electricity bill savings (if you are owning the system and not leasing. Leasing still has a positive impact on the ability to sell your home though, in our opinion).
For many average-sized solar power systems on a house, that can mean $20,000 to your home value. (Edit April, 2014: Some companies, like Solar Mosaic, are starting to offer traditional style equity-based home loans for such a thing). An additional $20,000 in property tax basis in many states amounts to a big chunk of change owed back to the state. However, many states have complete exemptions from added taxes when you install solar on your home!
The availability of a property tax exemption for solar energy was also sourced from the Database of State Incentives for Renewables and Energy Efficiency. The stronger the tax exemption, the higher the grade.
Sales Tax Exemption
Contrary to other home improvements like a new kitchen or bathroom, with solar panels in NJ, you will not have to pay any sales taxes on your system. That's 7% you're saving right upfront, even without any statewide solar power rebates.
What's the deal with solar power sales tax exemptions? When states give you a sales tax break on solar, we notice. You should too. State sales tax exemption status for the purchase of solar energy systems were sourced from the Database of State Incentives for Renewables and Energy Efficiency. Sales tax exemptions, if present, were all 100%. A handful of states are completely exempt from sales tax regardless, and therefore received ‘A’ grades by default (OR, DE, MT, AK, and NH).
The consensus on New Jersey solar power rebates and incentives
New Jersey’s Office of Clean Energy is charged with the success of the state’s aggressive Renewable Portfolio Standard, which depends in part on installing “sufficient solar capacity to meet the RPS requirements, at the lowest cost to ratepayers, taking into account other policy goals – fairness and equity to all ratepayer classes, job growth, improved reliability/security and improved environmental quality.”
They have a big job facing them, but we applaud the New Jersey government and business leadership for putting their shoulders to the task. We’d like to see a statewide rebate back in place to bring down the initial out of pocket investment, but even without that initial discount, the cost after year 1 remains low, and the expected payback time frame is one of the fastest in the nation. That’s enough to earn highest marks with us.
Again, if you are confused about how these numbers work and would like some personalized assistance or a quote of your own, simply connect with our network of solar experts. They’ll help sort out all the pricing, get you access to special deals, and they’re super friendly to boot!