New Jersey is consistently ranked as one of the best states for solar power. You might be wondering how this is possible in a state that is not particularly sunny. The answer is simple: there is are strong statewide renewable energy policies, and a broad range of financial and tax incentives for home and business owners who deploy solar panels.
New Jersey has an ambitious goal of generating 22.5% of all electricity from renewable sources by 2021, and a specific solar power generation target of 4.1% by 2028. Local utility companies such as Jersey Central Power & Light, Rockland Electric Company, Public Service Electric and Gas, and Atlantic City Electric have three options to meet these goals. These utilities can either build renewable energy projects themselves, buy Renewable Energy Credits (RECs) from private companies and homeowners, or pay hefty fines. Buying RECs is cheaper than paying fines, so most utilities buy RECs over paying large fines.
Electricity consumers in New Jersey pay 16 cents per kilowatt-hour (kWh), on average. Although there are states with more expensive electricity, this is still 23% higher than the national average of 13 cents per kWh. This increases the financial attractiveness of a solar panel system. Not only can home and business owners earn Solar Renewable Energy Credits (SRECs) that can be sold for extra income, they can also save money by generating their own electricity instead of buying from the utility.
In New Jersey, the benefit of generating 1,000 kWh of clean energy is significant. Home and business owners save $160 and earn as much as $200 for every 1,000 kWh of electricity their solar panel system produces. The total benefit of generating 1,000 kWh of solar power is often more than $300!
The New Jersey Clean Energy Residential New Construction Program offers rebates for homes and multi-family dwellings that deploy solar panels, as well as other clean energy measures. The incentive is calculated based on the fraction of your energy consumption that is met with on-site renewable generation.
As implied by its name, this incentive is exclusive for new constructions. However, solar panels for existing buildings are still a solid investment even if they miss out on this rebate.
New Jersey has done a great job easing the tax burden of installing solar panels. First, solar panel systems are exempt from state sales tax, which reduces the upfront cost of solar by nearly 7%. In addition, the property on which the solar panel system is installed is exempt from a property tax increase, even though your property value will rise after installing solar!
In addition to paying zero taxes for your solar panel system, you can claim a federal tax credit equivalent to 30% of your solar investment. This nationwide benefit is set to expire at the end of 2019, so the best time to install solar at your home or place of business is now.
Solar Renewable Energy Credit (SREC) sales are the top incentive for solar power in New Jersey. SREC income in the state is often greater than the electricity savings. Each time your solar panels generate one megawatt-hour (MWh) of electricity, you can claim another SREC and sell it to your utility. SRECs can sell for over $200 each, and that income is in addition to your electricity savings.
A SREC is basically a proof of having generated 1 MWh of clean energy. Utility companies are willing to purchase them at generous prices because they help them avoid non-compliance fines. However, as renewable energy becomes more popular, the value of a new SREC will decline. This makes today the best time to go solar!
In New Jersey and other states with ample benefits for solar power, it makes sense to purchase your solar panel system with a loan, assuming you can get a low interest rate and a long repayment period. For homeowners, the best option is generally a HELOC (home equity line of credit); these typically have an interest rate below 5% and a repayment period of over 10 years.
The advantage of using a loan is that you can claim the 30% federal tax credit right away, which can lower your monthly payments. With your electricity savings and income from selling SRECs to your utility, you can cover your monthly loan payment. In other words, the solar panel system can cover its own cost in New Jersey!
If you want to install solar panels at no upfront cost but would prefer not to take a loan, you can consider a Power Purchase Agreement (PPA). This is how a PPA works:
A PPA offers energy savings right away, at zero upfront cost and without taking on debt. However, all tax benefits and income from SREC sales goes to the owner of the system. In this case, the company with whom you signed the PPA is the owner and receives all incentives. They can pass the savings on to you, though, through a lower electricity rate!