New Jersey’s Solar Credit Program Wins Clean-Air Excellence Award from EPA
A program that allows solar owners in New Jersey to sell the credit for producing clean energy while using it themselves has won an award from the U.S. Environmental Protection Agency.
The solar financing mechanism, begun in 2004 and overseen by the state’s Board of Public Utilities and the New Jersey Clean Energy Program, was recognized by the EPA’s Clean Air Excellence Awards Program in the category of regulatory and policy innovations.
The financing method, called Solar Renewable Energy Certificates, or SRECs, has helped make New Jersey the second-leading solar state in total grid-tied solar electric capacity, behind California. Such certificates can go a long way toward offsetting the installation cost of a solar photovoltaic system.
As solar rebates decline over time, market-based SRECs can have a key role in stimulating the use of solar electricity.
“We are honored to receive this award from the EPA,” said Lee Solomon, president of the New Jersey Board of Public Utilities. “New Jersey’s SREC program is the first in the nation to successfully begin the transition from upfront incentives to a market-based system for project finance. By avoiding upfront incentives, the SREC program lowers the financial impact on ratepayers while continuing to motivate solar electricity installations.”
Solar Renewable Energy Certificates, now used in many states, allow solar system owners to use the electricity their systems generate and sell the credit for producing it. Buyers include utility companies that are required to generate a certain percentage of their electricity from renewable sources, and companies that wish to receive credit as producers of solar electricity.
A solar owner receives one certificate for every 1,000 kilowatt-hours of electricity produced by a system. An ideally located, unshaded residential system in New Jersey rated at 7 kilowatts of production capacity might generate as many as seven or eight certificates a year.
Owners’ certificates are registered in a tracking program that also allows them to be sold in the SREC marketplace. A recent average price was about $573 per certificate. A system is eligible for SREC sales for 15 years after installation.
At recent gross installation prices as low as $6 per watt of installed capacity, a 7-kw system might cost about $42,000. A federal tax credit of 30 percent could reduce the net cost to $29,400. Income from SREC sales could potentially offset much if not all of a system’s cost, not including the owner’s savings on electricity bills.
SREC prices may vary a great deal, however. A mechanism called an alternative compliance payment in effect sets a ceiling on SREC prices in markets that use them. Utilities that do not meet their renewable generation requirements may be required to make an alternative compliance payment, which serves as a market cap.
In New Jersey, the alternative compliance payment for the current reporting year is $693. It is scheduled to decline annually to $594 in 2015-16. Compliance payment amounts after that have not yet been set.
Some solar installation companies may offer consumers an opportunity to receive an upfront payment for SRECs, which may be less than the possible payment total that an owner could elect to receive with yearly sales, but eliminates the risk that the SREC program could change or be halted, or that prices could drop. Companies also may offer to buy customers’ SRECs on a yearly basis.
The utility Public Service Electric & Gas offers a loan program that allows customers to install solar photovoltaic systems and pay the money back using SRECs. Loans can cover 40 to 60 percent of a system’s cost. The company offers a floor price for solar certificates and the potential to receive credit for higher prices.
“While SREC prices may seem high now, there is no guarantee on where they will be in 2, 5, or 10 years,” the utility says on its website. “If you lock in your SREC prices with PSE&G you can benefit from higher prices and have the security of a floor price.”
Solar rebates offered under New Jersey’s Renewable Energy Incentive Program are no longer being accepted because of an unprecedented number of applications recently. A new funding cycle is scheduled to begin in September, but changes to the solar rebate program are likely to be considered later this month. The rebate program has been an additional way for solar consumers in New Jersey to reduce costs and reap savings on utility bills.
