Homeowner Highlights on New Jersey Solar Investment
For homeowners in NJ, an investment in a home solar electric system is a smart choice that provides both financial and environmental benefits.
Solar will:
- stabilize or reduce your energy costs
- increase the value of your home
- create a cleaner environment
- allow you to generate your own supply of clean energy
- generate a financial return comparable or better than alternate investments
How the Technology Works
A solar electric system converts sunlight directly into electricity when sunlight strikes the solar modules (panels). Modules are wired together to form an array which is connected to an inverter that changes the DC current produced by the modules to AC current that can be used by the appliances in your home. Most systems in New Jersey are connected to the utility grid which allows you to continue to use power from your utility at night or if you need more power than your system can produce during the day. Any excess power you produce can be sent to your utility and will be recorded as a credit on your bill. This concept is known as net metering and is an important benefit to owning a solar electric system.
Benefits
Solar is the most widespread renewable resource available to New Jersey residents. With your system you will be able to:
- reduce your electric bill because you'll be generating your own power
- through net metering further reduce your bill with the credits you'll receive for the surplus electricity you send back to the grid
- generate significant revenue through the sale of solar renewable energy credits (SRECs)
- stabilize your electricity cost over the life of the system, which can be as long as 35 years
- be friendly to the environment because there are no emissions or noise
Key Considerations
For your system to operate at its highest efficiency your roof will need an unobstructed view of the sun during most of the day and preferably your system will face south. Most homes have enough roof area to supply their power needs but if you don't have a large roof area you can take advantage of higher efficiency modules. Mounting modules on the ground is another option. An asphalt shingle is a preferred roof material but a system can be installed on almost any roof type. Since systems have very long lives, if your roof is a candidate for replacement in the near future, you should consider obtaining a new roof prior to the installation.
OnPeak can help you determine the size of the system that will meet your needs. Larger systems will produce more power but will also require more of an investment from you. Because of installation labor, a larger system will be more cost effective than a smaller system on a per watt basis. For New Jersey, the average system size is about 7 kilowatts.
Required Investment Amount
Residential systems will require an investment of approximately $5.50 per watt before any up-front incentives and income tax credit. A 5 kW system would be $27,500 but after application of incentives and tax credits the out-of-pocket investment is significantly reduced. The attractive rates of return for systems make it possible for homeowners to leverage their investment by easily financing the remaining cost.
Incentives
For homeowners there are three incentives that currently apply
1. Federal Solar Investment Tax CreditProvides a 30% investment tax credit with no maximum credit limitation.
2. State Up-Front IncentiveThe State of New Jersey's Clean Energy Program instituted a EDC Solar Financing Incentive or "ESFI" for 2011 which offers an incentive of $0.50 per watt DC for homeowners for systems less than 10kw DC, however, the incentive is only applicable to the first 7.5kw DC. The maximum payment is $3,750. The ESFI requires participation in the EDC SREC-Based Financing Program. This up-front incentive involves a great deal of paperwork and also a bid process that accordingly does not guarantee acceptance. There are also potential long time delays and the program may not be for those homeowners who are looking to install solar immediately to take advantage of high SREC values currently available.
3. Solar Renewable Energy Credits (generation based incentive)
These credits are created through the generation of solar electricity and are considered a production based incentive.
New Jersey and other states have created Renewable Portfolio Standards or RPS's. The New Jersey RPS requires utilities in the state to obtain 22.5% of their power from renewables by 2021 of which a portion needs to be from solar electric systems. This solar portion is around 10% of the total renewable requirement and does not sound like much but by 2021 would represent 2,518 gigawatt hours of electricity or enough to power 300,000 typical New Jersey homes. In order to meet their RPS requirements, the utilities purchase SRECs from homeowners and business which have solar electric systems and are generating SRECs. If they don't purchase the SRECs, there is a minimum value per Megawatt Hour (mWh or 1,000 Kilowatt Hours) they need to pay to the State called a Solar Alternative Compliance Payment (SACP) whose value is $675 for energy year 2011 (ending May 2011).
When the new SREC program was developed, it was expected that SRECs would trade in the open market at approximately $100 below the SACP, however, the values could fluctuate depending on the number of SRECs available. In 2009 and 2010, because there were not enough SRECs generated in New Jersey, the SREC prices traded very close to the SACP value. As the solar capacity in New Jersey continues to increase, SREC's will become more available and along with decreases in the SACP it is expected that the price of SRECs will decline. New Jersey has set a fixed SACP value schedule for the next 8 years and is working on a 15 year schedule. The SACP for energy year 2012 is $658 (ending May 2012).
For every Megawatt Hour (mWh or 1,000 Kilowatt Hours) generated by your system, one SREC will be provided by New Jersey to you which you can then trade(sell) to the utility that needs it to meet their RPS requirement. Companies and even individuals can purchase SRECs which allows anyone who purchases an SREC to say they use solar power and are "green". If you sell all your SRECs, technically you cannot state that you use green power (even if you use all the power that you generate in your home) but you can say you host a system which is just as good for your wallet as it is for the environment. You can also just retire your SRECs (not sell them) and in that case you can say you use solar power and are "green". SRECs are created for 15 years, however, after that period you can still create Renewable Energy Credits and be able to trade them on their respective market.
Financing
Your investment can be acquired with cash or by financing through a refinancing of your existing home mortgage or by acquiring a home equity loan or a solar loan from your utility if it is PSE&G. It is also possible to receive an up-front payment in exchange for your SRECs which can reduce the out-of-pocket cost of your system. Three and Five year long-term Fixed Price SREC Contracts are also available. By utilizing a Fixed Price SREC Contract in conjunction with a home equity loan, you may find it easier committing to the loan knowing that you have a fixed price to look forward to on each SREC you generate that can be used to service the loan payments. See our Residential Financing page for detail on these options.
Inspections and Administrative Matters
Most of the paperwork involved in acquiring your solar electric system will be handed by OnPeak. We'll need to provide an application to register you in the SREC Program. We'll also need an interconnection agreement with your Utility in order to connect you system to the grid. As usual, we'll need a permit from your local municipality and they will also require an inspection. In addition, OnPeak will set up your SREC trading account so you can begin generating and selling your solar renewable energy credits (SREC's).
It's time to get started with Solar!
Now that you have an overview of how to Go Solar in New Jersey, take a look at our Residential Solar web pages for detailed information. You can find them here: Residential.