New Jersey is leading the way for state sponsored solar energy rebates and tax incentives in the United States with an overwhelming public response.

New Jersey offers rebates and tax incentives for residential solar energy systems that could pay for themselves in as few as three to five years. With California in the lead, New Jersey has the second most number of homes with solar technology installed. Due to the overwhelming amount of applicants for the superior solar energy rebates the Board of Public Utilities put new requests on hold in May of 2010. The great state of New Jersey has mandated something known as a “Solar Alternative Compliance Payment”.  New Jersey chose a market-based alternative financing model to meet its solar goals On September 12, 2007. The New Jersey Board of Public Utilities adopted the market-based financing program that leans mostly on the use of Solar Renewable Energy Certificates, often coined SRECs by those in the industry. Solar Renewable Energy Certificates are tradable certificates that represent the electricity generated from a residential solar electric system which the end-user can sell or trade. A SREC is issued when a solar equipped facility generates 1,000kWh, or 1MWh, through metered energy production. SREC sales and trades to electric utility suppliers that are required to invest in solar energy under New Jersey’s Renewable Portfolio Standards (RPS) are facilitated by the program. To help with the transfer of SRECs, a certificate can be listed on a publicly accessible bulletin board via the SREC website www.njcep.com/srec. The SREC program also continues to provide rebates for small solar systems that are capable of producing less than less 10kw at a time. The RPS required suppliers of electricity to provide, at the very least, 0.01% of the electricity sold in 2005 to be produced from solar energy systems within the state borders of New Jersey.

The New Jersey born Solar Alternative Compliance Payment (SACP) is a mandate that essentially results in a utility paying a penalty if it does not meet the solar RPS requirement of SRECs. This penalty was increased somewhat recently and also adjusted to a multi-year SACP for energy years 2009 until 2017. A greater SACP effectively increases the value of SRECs and will act as a method to offset the need the greater state government rebates and incentives. The New Jersey Board of Public Utilities believes this approach will likely shift financing from rebates typically issued “up-front” to financing with longer terms via SRECs. The goal of this concept is to spread the costs of solar equipment installation over a longer average of time, and hopefully lower the burden and liabilities to every “ratepayer”.

Another benefit of the intricately designed market-based approach is that the Multi-Year SACP combined with rebates for smaller systems builds upon the current and rapidly growing solar infrastructure. It is thought that this will aid in sustainable and ethical market development. New Jersey is betting on a multiyear SACP schedule and rebates will enhance investor confidence and allow this emerging solar energy market to rapidly expand and satisfy or outperform the aggressive nature of the goals laid out in the New Jersey Renewable Portfolio Standards. New Jersey natives are motivated even more so by the above average costs of energy produced by coal and nuclear plants. In 2010, the average cost per kilowatt hour in New Jersey was about 19 cents, almost 40% more than the nation average of 11 cents per kilowatt hour.
Green conscious consumers with a long-term interest in alternative energy were inspired by enough incentives to invest in solar with the combination of rebates and advances in technology lowering the cost of entry never before experienced. New Jersey has a population of roughly 9 million, yet in 2006 there were only around 6,000 residential properties fitted for solar energy production. At that time, federal tax credits were 30% of the total cost of an installed system, up from the previous measly $2,000 maximum, and these incentives were believed to last until 2016.

During the first day of New Jersey’s funding cycle in early May of 2010, about 1,200 residents submitted applications for state sponsored energy rebates at a household average of approximately $10,000 each. A week later, the New Jersey Board of Public Utilities made a public announcement that it did not make any plans to accept any new applications for at least four more months. Other states across the country have also balked at aggressive rebates and incentive plans that foster the growth of the solar energy market over the past few years. Delaware, once with arguably the best economics for solar in the United States, offering rebates for solar photovoltaic installations as high as 50%, were later reduced all the way down to 25%.
While 25% is still considerable with regard to factoring the solar equipment installation internal rate of return (IRR) and cost benefit analysis (CBA), paying $50,000 “out-of-pocket” for an average $100,000 system seems much more likely for upper class Americans that would now need to pay $75,000 out-of-pocket for a system of equal energy production potential.

When a New Jersey resident combines energy savings, SRECs, state rebates, and federal tax credits, the homeowner could reach the break-even point on a solar equipment installation investment in as little as three years, maybe even less. Despite the possibilities of New Jersey shutting down the solar energy rebate programs, the break-even point is still likely to only be a little over four years. The pace for New Jersey residents with solar homes to realize a return on the investment in solar energy equipment is greater than the national leader for solar homes, California at less than seven years. New Orleans has lucrative incentive offerings as well with an expectation of residential solar energy systems to pay for themselves in about seven and a half years.

The use of solar electricity grew 40 percent between 2004 and 2008 (Source: Federal Energy Information Administration). Despite this significant growth, solar energy only makes up a minute portion of the market at less than 2%. Many sources speculate that New Jersey may use a lottery for applicants wanting state sponsored rebates for a solar equipment installation. The downside of this remedy for continuing the deployment of New Jersey solar rebates is all persons applying for rebates will receive them. A homeowner would expect to make as much as $600 for the sale of every SREC to a utility, and the average residential solar producer anticipates generating seven SRECs per year on average (at least 7,000kWh annually). Under the current program and market conditions, a residential solar-equipped homeowner could expect to earn a little over $4,000 annually. The program is promising 15 years of SREC earnings, with the potential of the sale of SRECs to fluctuate upwards or downwards. If the program stays consistent to the levels of today, a realized return of a little more than $60,000 in SREC benefits spread over 15 years for systems costing about $50,000 BEFORE federal and other state rebates (at a cost of slightly more than $9 per watt for the installed system) to produce 600 kWh per month with the 4.21 hours of average insolation hours for the State of New Jersey. 600kWh multiplied by 12 months in a year gives an expected 7,200 kWh per year to satisfy the equation for 7 SRECs annually. The likelihood of reaping the benefits of a reduced energy bill and a $10,000 profit on investment are slim however, because as the program gains more popularity (and accepted applications) in 15 years’ time, the supply of SRECs will likely increase as well, driving demand down, and therefore the worth of an individual SREC as dictated by “supply-and-demand”. However, it is possible for New Jersey to increase the minimum SREC requirements for utilities to purchase as time goes on, driving the value up as a result. This scenario creates a profound improvement the conditions of the solar market when the technology improvements that are expected to be realized in the solar equipment over the next decade are combined with the new “green-collar job market” America is posturing for.

In conclusion, what does the “on again, off again” nature of New Jersey’s solar energy SREC incentives, Delaware’s 50% state sponsored solar rebate reduction, and a booming solar market for California indicate for the average American homeowner? FindSolarCompany.com believes it means that the demand for solar has been overwhelming for states that have the greatest rebates and incentives, regardless of location, climate, and sun insolation hours. The trendy nature of such technologies and lifestyles leave us to predict explosive growth in the solar industry within the next 5 years and a dwindling of federal, state, and local rebates and tax incentives is likely to occur as the market beings to flourish. In the game of solar energy, timing is everything. From now until the eminent consolidation of the solar market, rebates and tax incentives are likely as good as they are going to get. The time to research the potential benefits of solar energy for your pocketbook and tax liability is now. Do the math, crunch the numbers, shop for solar energy installation professionals in your area with the best reputation, find the best rate on a short-term loan, second mortgage, home refinance, or solar energy loan specialist and see what the cost-benefit analysis and internal rate of return is for your home or business today, while you can still get in on all the great government programs available to hasten your return on your solar energy equipment installation investment. Go green, save the world, and save for your early retirement, all at the same time.

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