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Newark, New Jersey Solar Power for Your Home – Leases, Loans, Rebates, and Incentives

Recent history has been pretty kind to Newark. Even through the tumult of three mayors (and one big hurricane) in three years, the city continues to grow and change, and there’s definitely a positive feeling in the air. Yes, Newark is that special kind of place that just keeps rolling along, working hard to provide for everyone.

One good way for homeowners in the city to carve out their own stake on the future is to install solar panels on their roofs. A solar installation can provide you with stable electric prices far into the future, which means big savings over time. You can do it for $0 down, paying a lease over time, or you can throw down some cash and take advantage of New Jersey’s hot Solar Renewable Energy Credit (SREC) market, which can mean thousands of dollars in payments on top of those energy bill savings.

Now the details of those payment options can seem complicated, so we’ll break it down for you below in an easy-to-understand way, and you can decide whether solar sounds like the right thing for you. There are actually a few different ways to pay for solar, and each one means different levels of investment from you and different returns over time. Let’s take a look the options and what they mean for you, financially speaking:

Lifetime Return For 4 Different Methods of Going Solar in Newark, NJ

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 for a lease. As you can see, the purchase option leads to great returns over time, but it also requires a big up-front investment. There’s a PSE&G loan program that can take away a chunk of that initial investment but results in similarly great returns, or you can try covering the whole cost with a home equity line of credit (HELOC) and pay the system off over time.

The final option represented is a lease, and it’s definitely the simplest. Instead of dealing with loans and rates of return, you can sign a $0-down lease and start saving money immediately. It doesn’t make you as much money over time as the other methods, but it still saves you over $16,000 in 20 years.

Let’s look at some detailed info about how each option could work for you:

 Option 1: Solar Lease or Power-Purchase Agreement

Solar leases can be really great for people who don’t qualify for a tax break or who want to incur less risk (with less reward). Here are some of the advantages of a solar lease in New Jersey:

  • No money down
  • A monthly payment that rises by a smaller increment than electricity prices do
  • The lease is transferable if you decide to sell your house.
  • You just have to find an installer, sign on the dotted line, and then save money
  • The installer takes care of everything, including maintenance and repair

With a lease, you sign an agreement to pay a low monthly price for 20 years. The panels go up on your roof and you get all the electricity they provide, which reduces your electric bill by just about the same as your lease payment. Over time, your payment rises by a small amount (usually 2.5%), while the cost of electricity goes up by about 3.5% per year. In the last year of the lease, you’ll be saving about $580 on electricity, just for having a roof!

A similar option is called a Power Purchase Agreement, or PPA. In this case, the installer owns and maintains the system on your property, and you sign an agreement to buy the power at a rate somewhere just a little below the utility company’s prices. You pay less now, and your rate rises at a set percentage per year, somewhere between 1% and 2.5%.

Here’s the other major benefit of leases and PPAs: the installation company actually owns the system, and they do all the maintenance and repairs as needed. That takes away a ton of responsibility for you, the homeowner. All you have to do is get quotes from installers in your area, sign up for a lease or PPA through them, and get solar for no money down! You can sign a 20-year agreement with a low monthly payment that will lock in your savings long into the future.

In our example, the lease runs for 20 years with a 2.5% annual increase in payments. You put no money down. And though the savings aren’t major in year 1, they add up over the term of the lease, and each year, the savings get a little bit bigger as electricity rates climb. By the end of the lease, over $16,000 of your money will stay in your pocket. Talk about a sweet deal!

 Option 2: Solar Purchase with NJ SREC sales

Okay, so you’ve got some cash and you’re ready to buy. An outright purchase is a great idea in New Jersey, because the system will start saving you money right away, and you can sell those SRECs to the utility company for the first 15 years of the system’s life.

In our example, you’re paying the $20,000 cost of a system up front, but at the end of year 1, you’ll get the solar tax credit, energy savings, and SREC sales to reduce that cost. When all is said and done, this is one of the best investments you can make, with tens of thousands in possible returns. If you’re the kind of person who can afford an investment in solar, read on:

Here’s how the numbers work for a solar purchase in Newark:

  • Installing a typical 5-kW solar system should start at about $20,000. Don’t worry – that number is going to get way smaller in a hurry.
  • At the end of the year, the federal government will give you a 30% tax credit based on the cost of your system. That’s $6,000. You can take the credit over two years if you don’t owe $6,000 in taxes this year.
  • The electricity you’ll save in the first year of operation would have cost $1,079. That’s enough to pay for a nice dinner out once a month.
  • Don’t forget your SRECs! The market price for them has been hovering around $185 for a couple years, but since we’re making a conservative estimate, we’ll assume a price of $150. That’s about $880 per year, every year.
  • All those savings and incentives mean the first-year cost of your 5-kW system is just $12,281.
  • With a conservative estimate of 3.5% per year for the future rise of electricity prices, and SREC sales continuing every year for 15 years, your investment will be fully paid off after 7 years, and you’ll be making a profit until 2039 or later.
  • Your total profit in 25 years will be a mind-boggling $41,194! The rate of return on your investment will be 17.6%, which is more than twice as good as an investment in an S&P 500 index fund.
  • And don’t forget… your home’s value just increased by close to $22,000, too (your expected annual electricity savings over 20 years), and thanks to New Jersey’s property tax exemption for solar, you won’t pay taxes on any of it!

Remember: these figures are estimates. Your home is unique, and how much money solar will save you depends on that uniqueness. Thankfully, we know some experts in New Jersey. Just sign up for personalized savings estimates and one of them will be more than happy to go over all those details and help you craft a plan to get the maximum savings from a solar power system in your home. Your quote is 100% free, so go ahead and shop around… grab two or three, or five, and compare all your possible options.

 Option 3: Solar Purchase with PSE&G Loan

This is a great purchase option if you want to own solar panels but don’t have a lot of equity in your home (check out Option 4 if you do have equity). It relies on a loan program from PSE&G that is fully paid back with income from SRECs, which means you’ll see savings immediately, just like with an outright purchase.

You’ll still have to pay several thousand dollars out of pocket to begin with, because the income from the SRECs can’t cover a very large loan, but you’ll get a good amount of your initial outlay back at the end of the year. The loan is basically a way to pre-sell your SRECs, and it works because you submit a bid with PSE&G with a set price for 10 years of SRECs.

The loan has an interest rate of 11.179%, which, if you follow finance, you know is a pretty raw deal. But don’t underestimate the power of locking in a rate for SRECs. That move eliminates a lot of risk, since the price of SRECs is market-based and fluctuates over time. Locking it in means you’re guaranteed to get that price no matter what the market does.

Ultimately, this loan is a great way to get into solar for less, and make nearly the same amount of money over the 25-year life of your system. The best news of all is that you can still sell your SRECs from years 11 through 15 at market prices, and make that extra profit after your loan is paid off.

Here’s how the numbers work for a PSE&G Solar loan in Newark:

  • Installing a typical 5-kW solar system should start at about $20,000. Don’t worry – that number is going to get way smaller in a hurry.
  • We use a conservative estimate of $200 per SREC in a bid for the PSE&G solar loan. That mean the loan will cover $7,026 of the cost. You could try to submit a bid with a higher price for your SRECs and get a larger loan, but like we said, we’re being conservative. Your cost after the loan is $12,074.
  • At the end of the year, the federal government will give you a 30% tax credit based on the full cost of your system. That’s $6,000.
  • The electricity you’ll save in the first year of operation would have cost $1,079. That’s enough to pay for a nice dinner out once a month.
  • That makes the final year 1 cost of your system just $6,920. IF you can afford that, this is the payment method for you.
  • With a conservative estimate of 3.5% per year for the future rise of electricity prices, your investment will be fully paid off in just 6 years, and you’ll be making a profit until 2039 or later. Don’t forget those SREC sales from year 11 to year 15, which will net you several thousand more dollars.
  • Your total profit in 25 years will be an astonishing $39,879! The rate of return on your investment will be 20.8%, which is almost three times as good as an investment in an S&P 500 index fund.
  • And don’t forget… your home’s value just increased by close to $22,000 (your expected annual electricity savings over 20 years), and thanks to New Jersey’s property tax exemption for solar, you won’t pay taxes on any of it!

Remember: these figures are estimates. Your home is unique, and how much money solar will save you depends on that uniqueness. Thankfully, we know some experts in New Jersey. Just sign up for personalized savings estimates and one of them will be more than happy to go over all those details and help you craft a plan to get the maximum savings from a solar power system in your home. Your quote is 100% free, so go ahead and shop around… grab two or three, or five, and compare all your possible options.

 Option 4: Solar Purchase with HELOC

This is without a doubt the best option when it comes to percentage return on investment. That’s because it relies on using someone else’s money for the biggest part of the purchase price, and paying it off over time while your system is earning you SRECs. This assumes a few things about you and your current situation:

  • You can afford to spend $6,000 up front on a solar installation (don’t worry you’ll get it back within a year)
  • You can get a home-equity line of credit (HELOC) for $14,000, with a fixed rate of 6.5%, and a 15-year repayment period.
  • You love making money without much risk

The reason this works so well is that your small initial investment ($6,000) will be paid back by April 15th next year through the federal government’s Solar Investment Tax Credit (ITC). Also, your energy savings and SREC sales will add up to about $163/month, while your loan payments will only be about $122/month, so you’ll actually be saving $41/month right away, with essentially no money down. The loan term of 15 years coincides with the SREC sales period, so you’ll pay your loan with the savings, and start making really huge money for ten years after.

The rest of the numbers work just like the purchase example above. Monthly savings just get bigger as the cost of electricity from PSE&G goes up over the next 25+ years; your home value goes up, and you get the satisfaction of solar ownership and yearly profits without having to put $20,000 of your own money on the line.

Additional Information about Solar Power in New Jersey

New Jersey Solar Power Rebates

New Jersey doesn’t offer any rebates for solar like other states do. Instead they rely on a market-based mechanism. That would be the SREC we’ve been talking about. See below to find out more about how SRECs work!

New Jersey Tax Exemptions for Solar

New Jersey does recognize the value of solar with some really sweet tax exemptions. That means all sales tax is waived on a solar purchase, saving you over a thousand dollars at the time of sale. It also means that the value added to your home by the solar panels on your roof will not raise the assessment of your home’s value. That’s great, considering the research from around the country that shows buyers are willing to pay more for a house with solar. 20 times the annual utility savings, in fact.

New Jersey’s SREC Market

NJ does home solar a little different than other states; instead of offering tax credits and rebates to homeowners, they have a payment system called Solar Renewable Energy Credits (SRECs). An SREC is created when a solar panel system generates a megawatt-hour (MWh) of electricity, which for a typical 5-kilowatt (kW) home solar installation happens almost 6 times per year.

So an SREC is basically just proof of clean energy generation, and utility companies buy them from generators (aka homeowners with solar) because they need to show the state that a certain percentage of their energy supply comes from renewable sources. The price for SRECs fluctuates, like any publicly-traded asset, but for the past couple years, it’s averaged around $200.

SRECs are sometimes bundled and sold through brokers and sometimes signed over to the utility as payments for a solar loan (see above). It’s best to work with a local installer to set up the sale of your SRECs.

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