New Jersey’s SREC Solar Subsidy Is Ending Soon! Here’s What You Need To Know

To Solar or not to Solar?
April 14, 2018

Solar Subsidies are not new to the Solar PV industry. In fact, the very reason for the global boom in solar power has been due to solar subsidies. Governments globally over the past few years have introduced solar PV subsidies to stimulate the renewable energy market and it has worked. Globally Solar PV capacity has grown from 36 GW in the period 2005 – 2010 to a whopping 260 GW in 2016 and size is expected to increase even further to 438 GW by 2022 according to the International Energy Association.

What kickstarted the massive growth in renewables has been the financial subsidy support by governments around the world. Solar PV used to be a costly technology. But subsidies have resulted in aggressive competition for market share and advances in Solar PV technology. Varying different grants have been introduced over the years for both the residential and commercial sector. Subsidy type ranged from net-metering to feed-in tariffs and tax credits. All with varying degrees of success.

New Jersey has one of the most lucrative state solar subsidies available to owners of Solar PV systems. It’s known as SREC or Solar Renewable Energy Certificate and has been in operation since 2004; it’s the largest SREC program in the US. The State of New Jersey requires that utilities produce a certain amount of clean energy from renewables to offset carbon emissions from dirty fossil fuel. This is where the SREC subsidy comes into play. As the SREC program allows the owner of PV systems to sell the clean energy their solar PV systems produce to the utilities.

The state of New Jersey requires that utilities generate 15% of their energy from renewable energy sources. Further to this the standard also requires that 3.2 percent of 2018 electricity sales in the state come individually from solar power. This is known as the “Solar Carve Out”. SREC’s are used to track the amount of electricity that originates from solar energy. So how does it work then for the residential Solar PV homeowner?

Under current state SREC regulations, one Solar Renewable Energy Certificate is generated by the utility for every MWh generated by a Solar PV system. Now to put that into context, 1 MWh is equal to 1 000 kWh’s. An average sized rooftop Solar PV system generates about 6 MWH per an annum or 6 000 kWh’s. The utility will issue 6 SREC’s to the Solar PV homeowner for the 6MWh’s of clean energy generated. They will then use these SREC’s to meet their annual solar power quota requirements.

What makes the SREC so interesting is that you are being paid to use your own solar power system, so you benefit from both sides. Many subsidies work on the principle of a feed-in tariff. Any excess solar power not self-consumed in your home is fed into the utility grid that the utility will then pay for. The SREC is different though as it pays for the clean energy generated by your system regardless of whether excess power is fed into the grid. So, you benefit from the cost savings of not using utility electricity and get paid for using clean energy.

So how much can one earn through the SREC program? The principle of the SREC subsidy is based on free market principles. That is supply and demand factors are the main contributor to the price of these renewable energy certificates. SREC trade are one of the largest SREC aggregators in the country and the prices of SREC’s can be tracked on their web site. SREC prices were around the $220 mark in February 2017 and a year later have moved down to $192 per a certificate with a varying degree change throughout the year.

The whole concept makes the notion of Solar PV appealing from a financial perspective, as such the program had resulted in an almost modern-day “Gold Rush” – This has made the program successful in promoting the Solar PV industry and stimulating the green economy, not to mention create much-needed jobs. In it’s “Hey Day” SREC’S were going for $690 per an issued certificate back in 2009 as an all-time high.

Has the New Jersey SREC program been a victim of its own success though?

There has been a massive amount of investment that’s been going into Solar PV systems, taking advantage of the lucrative financial benefits being offered by the SREC program. Businesses, Schools and Homeowners have all been investing in Solar PV. Not only to take advantage of the Renewable Energy Certificates but reduce their reliance on the grid for power and to produce their own clean energy. The price of SREC’s hit an all-time low in 2011 where the value dropped to $151. The challenge is that so much investment is going into Solar PV that supply is starting to outstrip demand. Some would say this is the hidden hand of modern economics and that a self-correction of the price is being played out.

Current SREC’s run for a period of 15 years so if you install a Solar PV system today and signup to the SREC program then you would be guaranteed income from the issuing of SREC’s for that duration. The program has proved to be successful in reaching renewable energy goals developed by the state. So where to from here then? State government believe the current SREC program is long overdue for an overhaul and redesign. It’s being proposed to reduce the incentive from a period of current 15 years to 10 years as a starter.

They are also looking to phase out the SREC program with a cease in all new applications by 2021. The state is looking to replace the current program with more of an alignment of state subsidies with the federal investment tax credit. They are also looking at increasing the amount of solar power that utilities must have from the current level of 4.1% to 5.3% of all electricity sales by 2022. The idea is to really create a more sustainable program that is built on prior experiences and that will benefit everyone in the long-term.

This makes a case for investing in Solar PV now, as a day delayed is a day lost out on the financial benefits of solar power!

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