Solar FAQs

Frequently Asked Questions

How has New Jersey become such a leader in solar energy?

New Jersey is one of the fastest growing markets for solar photovoltaics in the U.S. and is second only to California, in terms of installations. Our success is due to New Jersey’s Solar Financing Model which relies on strong Renewable Portfolio Standards (RPS), as well as executive level support through the aggressive renewable energy goals set by Governor Corzine through New Jersey’s Energy Master Plan (EMP).

Why is New Jersey considered a ‘model program’ for solar development?
New Jersey’s Clean Energy ProgramTM (NJCEP) was established in 2001. That year there were only 6 solar installations. Since that time New Jersey has established a model program and an integrated approach to solar development that includes:

  • A strong RPS with a 2.12% requirement for solar photovoltaic;
  • A Solar Alternative Compliance Payment (SACP) schedule established for eight years at levels set high enough to motivate compliance, create demand for Solar Renewable Energy Certificates (SRECs), and build investor confidence in the market;
  • Excellent Interconnection and Net Metering Standards that have made it much easier for systems to connect to the distribution system and be compensated at retail electric rates for the generation of clean, emission-free electricity;
  • An SREC financing program that facilitates access to the SREC tracking system and marketplace which provides the revenue stream and long term financing options for solar installations;
  • A solar rebate program for small systems to help reduce the upfront cost of installation.

What has been the result of this integrated approach?
New Jersey has more than 11,500 solar installations and over 560 MW of solar capacity as of December 31, 2011.

What are your goals for the growth of New Jersey’s solar program?
New Jersey’s solar industry has seen triple digit growth over the last few years and is well positioned to continue to grow. This commitment was recently expanded to a total of 5000 MW set aside for solar. This is the nation’s largest solar commitment relative to population and electricity consumption.

How will New Jersey reach its solar goal by 2026?
New Jersey’s RPS requires 5000 MW by 2026. In just 14 years as much as 5000 MW of solar capacity, or approximately 250 MW each year, will need to be added to the existing capacity in order to reach this goal. New Jersey has developed a model program designed to foster a vibrant and competitive marketplace for solar energy in New Jersey that includes:

  • A strong RPS with a 2.12% requirement for solar photovoltaic;
  • An SACP schedule established for eight years at levels set high enough to motivate compliance, create demand for SRECs, and build investor confidence in the market;
  • Excellent Interconnection and Net Metering Standards that have made it much easier for systems to connect to the distribution system and be compensated at retail electric rates for the generation of clean, emission-free electricity;
  • An SREC financing program that facilitates access to the SREC tracking system and marketplace which provides the revenue stream and long term financing options for solar installations;
  • A solar rebate program for small systems to help reduce the upfront cost of installation.

How does New Jersey’s solar financing program work?
New Jersey’s solar financing program relies on a combination of electricity cost savings through net metering, SRECs through the RPS marketplace, and rebates for small systems that complement federal tax credits, and depreciation benefits to reduce the total cost of installation and drive investment in solar.

  • Federal Tax Credits
  • Electricity Cost Savings through Net Metering with a NJ Electric Distribution Company
  • SRECs sold to RPS & Voluntary Markets
  • Out of Pocket and private capital
  • Historically, New Jersey’s solar financing program relied heavily on up front rebates to provide up to 70% of the installation cost. A combination of SRECs and electricity savings provided through New Jersey’s net metering regulations provide additional incentives that help bring the internal rate of return to approximately 12% or payback period to less than 10 years.

What is the Solar Transition and how does market-based financing work?
On September 12, 2007 the BPU adopted a market-based financing program that relies primarily on the use of SRECs with provisions to continue rebates for small solar systems less than 50 kW. To support this approach the SACP, the amount that electric suppliers and providers must pay if they are unable to meet their solar RPS requirement with SRECs, was increased and extended in a multi-year SACP schedule for reporting years 2009 – 2017. A higher SACP, in effect, increases the value of SRECs which offset the need for rebates.

This approach shifts state contributed incentives from up front rebates to longer term production based incentives through SRECs. Spreading these costs over time will lower the annual impact to the ratepayer. Another benefit is that the Multi-Year SACP, combined with rebates for smaller systems, builds upon the existing infrastructure which will help facilitate a sustained and orderly market development. The combination of a multiyear SACP schedule and rebates will also build investor confidence, while allowing the market to grow rapidly enough to meet the aggressive RPS goals.

What is a Solar Renewable Energy Certificate (SREC)?
SREC stands for Solar Renewable Energy Certificate and is a type of clean energy credit in the form of a tradable certificate useful for demonstrating compliance in state RPS markets. In New Jersey’s RPS rules, an SREC is issued once a solar facility has generated 1,000 kWh (1MWh) through either estimated or actual metered production, and the SREC represents all the clean energy benefits of electricity generated from a solar electric system. SRECs can be sold or traded separately from the power, thus providing solar system owners a source of revenue to help offset the cost of installation.

How do SRECs help finance solar development?
New Jersey’s RPS requires that electric suppliers and providers retire SRECs in scale with their retail electricity sales in increasing amounts each year through 2026 and beyond. This long term demand for SRECs provides solar owners a predictable source of additional revenue that can facilitate long term financing for solar installations.

Who buys SRECs?
Solar system owners can choose to sell their SRECs to a broker, aggregator, or Load Serving Entity (LSE), who must buy SRECs to meet their RPS obligations. Some solar installers or project developers will offer to buy the SRECs as part of the project financing, thereby reducing the installation costs and hence the amount of capital needed up front to finance a project. All residential and commercial customers considering financing options for a solar installation should ask their installer about the value of SRECs and who will have the rights to claim them.

How have SRECs replaced the need for rebates?
SRECs provide a source of revenue and facilitate long term financing necessary to drive investment in solar. By increasing the value of SRECs, the rebate was able to be eliminated.

New Jersey is recognized as a solar market leader with a model program that integrates one of the nation’s best set of rules and financing programs for solar energy. The BPU decision on September 12, 2007 to move to a market-based solar financing program and the policies and programs which resulted ensure the continued growth and health of New Jersey’s solar market. New Jersey’s decision to phase out rebates and rely on SRECs to spur private investment and market development sends a strong message of fiscal responsibility and commitment to New Jersey’s solar market and is a model for other states to follow.

How is the price of the SREC determined?
The price of an SREC is determined by a number of factors, including supply and demand for SRECs in any given year and the cost of SACP. Electric suppliers and providers (load serving entities) are required to pay a SACP if they do not meet the Solar RPS through purchasing SRECs. Generally, SACP levels are set by the BPU above the SREC levels necessary for electric suppliers to have an incentive to purchase SRECs instead of paying SACPs and necessary to provide an internal rate of return attractive for enough solar capacity to reach the RPS requirements. Historical SREC pricing information is recorded.

Does the BPU guarantee SREC prices?
No. SREC pricing is neither determined nor guaranteed by the BPU. SRECs trade in a competitive market, and SREC pricing is determined by competitive factors such as supply and demand. SRECs are expected to trade somewhere below the SACP. It should be noted that SRECs are a market instrument to assist in financing solar energy development. The actual price of an SREC during a trading period can and will fluctuate depending on supply and demand, contract terms and other factors. Historical SREC pricing information is recorded. The BPU makes no representation as to current or future prices of SRECs, and this risk is entirely assumed by the registrant or investor.

NJ has some of the best interconnection and net metering policies in the country. How do they work and why are they so beneficial to consumers?
New Jersey was one of the first states to streamline its interconnection rules to ensure that customers with small on-site renewable energy systems could easily connect to the grid and receive compensation from the utility.

Whereas before each utility had different interconnection standards and procedures, New Jersey now requires utilities to follow a standardized process, making it easy to connect to the grid. This is critical to getting the full value of small generation systems for both the customer and for New Jersey.

One of the key benefits of solar electric generation, for example, is that it can offset peak demand. During the summer, when air conditioners are running full tilt, solar electric systems are also producing at near peak capacity reducing strain on the distribution systems and the need for heavily polluting sources of peak generation.

What is “Net Metering”?
In New Jersey, Electric Distribution Companies and third party electric suppliers are required to credit customers with solar systems or other renewable energy generators for each kilowatt-hour produced on an annual basis. The customer-generator reduces consumption for electricity with their renewable energy system during a monthly billing cycle with any excess generation being credited at retail rates on the following month’s bill. Should excess generation accrue to the end of an annual period, the customer-generator is compensated for any remaining credits at the wholesale power rate by the Electric Distribution Company or their third party electric supplier.

In New Jersey, all BPU-regulated Electric Distribution Companies and electricity suppliers offer net metering to their residential and small commercial customers that generate electricity on the customer’s side of the meter, using Class 1 renewable energy sources, provided that the generating capacity of the customer-generator’s facility does not exceed 2 MW and does not exceed the customer’s annual electric consumption.

Together, our interconnection and net metering rules ensure solar generators are compensated for the clean, renewable energy they are generating, and that New Jersey ratepayers share in the benefits of solar and other small renewable energy generation.

Where can I find more information on New Jersey’s solar financing programs?
More information on New Jersey’s solar financing program is available on line at
www.NJCleanEnergy.com/renewable or you can call 866-NJSMART 866-NJSMART.