Your 2019 guide to getting solar panels for your home in New Jersey
This page is a complete guide to the complicated and sometimes confusing process of installing solar panels on your New Jersey home. Since there's a lot to consider, we've separated the page into sections to help you find what you are looking for. If you find this page useful, please share it with someone who might also find it interesting!
** What's new for 2019 **
New Jersey has long been a leader in renewable energy, and as of 2018 the state ranks #5 in the nation for total generation from solar panels. More importantly, New Jersey ranks #1 in our state solar power rankings, because the incentives here are so good, homeowners in New Jersey can't help bu make tons of money by installing solar.
But that's about to change, because the state's best solar incentive is ending soon.
Back in May of 2018, Governor Murphy signed Assembly Bill 3723, authorizing a new standard of 50% renewable energy by 2030. It was a huge success for solar, but there was a dark cloud for people who haven't yet installed solar: the Solar Renewable Energy Credits (SRECs) that have been the #1 incentive for New Jersey solar owners, will be phased out when the state hits 5.1% solar.
Currently at just under 4%, the threshold will likely be hit in 2019 or 2020, leaving precious little time for solar owners to take advantage of the program. Let's put it bluntly: If you miss out on the SREC market, you're leaving thousands of dollars on the table. The average homeowner will reap nearly $12,000 in rewards over the next 10 years from earning SRECs. It pays to go solar sooner, so get a quote for your home from local installers today.
If you want to read more about how SRECs work, skip ahead to the section about them.
The Solar Strategy section is focused on the 3 ways of paying for solar in New Jersey, so you can decide which is best for you. We've created a tool that asks you a few questions and recommends whether you should pursue a solar lease, loan, or outright purchase. Then, we provide detailed analysis of how each works.
The Policy Information section contains all our latest research on the rules set by lawmakers and the Public Utilities Commission, which determine how easy it is to go solar in New Jersey. These policies and rules govern everything from renewable energy mandates to interconnection, and have a huge effect on the viability of solar.
Finally, the Solar Incentives section includes information about money-back rebates and grants, tax credits, and tax exemptions for going solar in New Jersey.
Click any of the boxes below to go to that section of the page, or scroll down to read the page in order.
|Your New Jersey Solar Strategy|
|Comparing Solar Investment Options|
|Paying Cash for Solar in New Jersey|
|Solar Loans in New Jersey|
|Solar PPAs in New Jersey|
|Solar Purchase Payback Time in New Jersey|
|New Jersey Solar Policy Information|
|Renewable Portfolio Standard (RPS)|
|RPS Solar Carve-Out|
Your Solar Strategy in New Jersey
Figuring out the best way to go solar in New Jersey can be a little daunting. From loans and leases to power-purchase agreements, there are a lot of options out there. To help you pick the one that might be best, we've created the handy decision tool below.
We'll ask you a few simple questions about you and your home. Once you're done, we'll recommend a good option. Further down this page, we provide cost estimates and example return-on-investment calculations for all the various options:
How to pay for solar panels in New Jersey
The chart above shows the 25-year returns for an investment in an average-sized New Jersey solar system, whether you choose to purchase a system with cash or pay over time with a solar loan or PPA. Because of New Jersey's unique solar incentives, you can save between $40,000 and $50,000 dollars over the next 25 years!
To get these numbers, we looked at the average energy usage for a New Jersey home, and did some calculations to find out how many solar panels you'd need to wipe out your energy bill. The average home in New Jersey needs a 7.2-kW solar panel system to meet its energy needs
The cost of solar panels in New Jersey
For the average-sized 7.2-kW solar panel system in New Jersey, the cost comes out to about $3 per watt, or $21,600 before incentives. That cost comes down quickly when you consider the tax credits and other incentives available.
If you want to own your solar panels, you can choose to pay that cost with cash, or take a loan. You can also choose something called a Power Purchase Agreement, or PPA for short, which means the solar company installs the panels on your roof and charges you for the electricity they use.
The financial return of New Jersey Solar Panels
No matter how you choose to pay for solar panels in New Jersey, it's important to note that solar power will make you a lot of money. Yes, we said "make!" You see, New Jersey has a special financial incentive for encouraging homeowners to go solar, and it means thousands of extra dollars in your pocket for the next 20 years.
The incentive is called the Solar Renewable Energy Credit, or SREC. One SREC represents one megawatt of electricity generated from solar, and in New Jersey, your 7.2-kW system will earn you a little over 8 per year. On average, a homeowner makes about $200 from the sale of an SREC (though prices vary throughout the year), so those 8 SRECs you get equal about $1,600 in your pocket, every year until 2028.
Read on below to learn more about the financial returns of solar in New Jersey!
Option 1: Paying cash for solar
Paying for solar with cash can be a smart move if you like things uncomplicated. You'll put down almost $22,000 for your home solar system, but you'll own your solar panels from day 1, and because of incentives like SRECs and tax credits, that cost is paid off in just 5 years.
Over 25 years, your system will have produced about $48,000 in income, after the intial cost of the solar panels is paid back. one reason this works is that solar offsets your electricity costs—enough to save you $1,350 in year 1. And thos savings rise every year as your electric company raises rates.
Add in the income from SRECs, and the total year 1 savings tops $3,000.
Here’s a rundown of the numbers on an average installation of solar panels in New Jersey:
- Installing a typical 7.2-kW solar system should start at about $21,600.
- The Federal government offers a great income tax credit of 30% of system costs. That's $6,480 you won't be paying to Uncle Sam this year, and it brings your first-year investment down to $15,120.
- After the tax credit we subtract your first year’s energy savings, which we estimate to be $1,348. That reduces your cost after the first year to only $13,772.
- But wait, New Jersey has that excellent SREC market we talked about above. The sale of your SRECs will net you $1,685 this year, bringing our final first-year estimate to just $12,087. That's 44% off the starting cost, just in year 1! And here's more good news: those SREC sales will continue for up to 10 years, which means lots of income through 2028!
- Those electricity savings and SREC sales will quickly make your money back, and your system will pay for itself in just 5 years. You'll see a total estimated net profit of $48,210 by the end of your panels' 25-year warranty. The internal rate of return for this investment is an amazing 24.2%. That's basically three times the return the stock market's traditional return, and it's more reliable, too!
- And here's a nice bonus to consider: your home's value just increased by just about $15,000, too (your expected cost after tax incentives).
- In addition to all that cash (and home value), you’ve created some green for the earth as well by not using electricity from fossil fuels. It's like planting 140 trees a year, every year your solar power system is humming.
Keep in mind, the numbers above are based on an average home in New Jersey. If you're ready for a custom quote for a solar panel system, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Option 2: Using a loan to pay for solar
You don't need $22,000 sitting around to pay for solar. As long as you have equity in your home, you can still own solar panels and reap all the benefits. Heck, even if you do have the cash, getting a loan to pay for solar is by far the best option when it comes to percentage return on investment.
That’s because, in New Jersey, using a loan to pay for solar is like investing in a business that's sure to succeed, and also earns you a tax break. You'll come out thousands ahead this year, and you'll still see a spectacular profit over the 25-year life of your system. The reason this works so well is that you're paying over time, but reaping all the benefits now. You'll get tax breaks, SRECs, and energy savings to offset the loan payments, which sounds a lot like it's too good to be true... so let's take a look at the numbers.
A solar purchase like this will make sense for you if the following is true about you and your current situation:
- You can qulaify for a solar loan or home-equity line of credit (HELOC) for $22,000, with a fixed rate of 4.5% or lower and a 15-year repayment period. Don't be put off if you're offered a higher rate. It just means a tiny bit less of the thousands of dollars you'll make with solar.
- You love making money without much risk.
Here’s how the numbers pencil out for a New Jersey homeowner who purchases solar panels with a loan:
- Installing a typical 7.2-kW solar system should start at about $21,600. That's how big your loan will need to be to cover it.
- The electricity you'll save in the first year of operation would have cost $1,348, but your annual loan payments will be $1,983, meaning you would spend a net of $635 on solar this year, but...
- You'll also get to sell your SRECs for about $1,685, putting you $1,050 ahead for the year! But then...
- You'll also see a huge Federal tax breaks! Uncle Sam will give you 30% of the cost of your system back as an income tax credit, which in this case means $6,480 you won't be paying the government this year.
- All those incentives mean you'll come out $7,530 ahead after year 1, and it's clear skies from them on out. You'll continue to net over $1,000 per year after your loan payments, making home solar in the Garden State a $0 investment that pays from day 1.
- By the time you've paid off your loan in 2033, you'll see yearly savings of over $2,000—even without SREC income. After 25 years, we estimate your total profit at over $40,000!
- On top of the green that will stay in your pocket, your system will mean green for the environment, too—140 trees-worth, every year!
Keep in mind, the numbers above are based on an average home in New Jersey. If you're ready for a custom quote for a solar loan, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Option 3: Buying the electricity, not the panels with a Power Purchase Agreement (PPA)
A PPA is kind of a last-resort way to go solar. You see, the solar company owns the panels and gets all the SRECs and tax credits, leaving you benefitting the least in this whol arrangement.
Still, if you don't have the income to take the tax credit, a PPA might be right for you. In New Jersey, getting solar panels with a PPA costs nothign up front, and saves you money from day 1.
For now, the savings from a solar PPA in New Jersey are about $.02 per kWh of energy, or around $160 in the first year. That's not a ton of cash, but you'll also be contributing to environmental sustainability! And as the cost of electricity from the power company increases, you'll save more every year. Over the course of a 25-year PPA contract, we estimate a total savings of more than $7,100 in New Jersey, just for saying "yes" to solar power!
Keep in mind, the numbers above are based on an average home in New Jersey. If you're ready for a custom quote for a solar PPA, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
New Jersey Solar Policy Information
Ever wonder why solar seems to be everywhere in some states, but not in others? We did too.
State legislatures and public utilities commissions can enact rules to make solar power accessible for everyone. Favorable rules explain why some of the cloudiest states—New York, New Jersey, and Connecticut, are doing so well with solar, and yet some of those with the most natural solar resources—like Alabama, Mississippi, and Georgia—are doing so poorly.
Below is important information about the public policy, rules, and economic reasons that affect your ability to go solar here in New Jersey:
New Jersey's Renewable Portfolio Standard
50% by 2030
A Renewables Portfolio Standard (“RPS”) requires utilities in the state to eventually source at least a certain percentage of their electricity from clean, renewable sources like solar panels.
New Jersey used to have one of the strongest RPS goals in the nation, mandating that 22.5% of all energy must come from renewable sources by 2021. That number is looking very attainable, and, truth be told, it’s in the middle of the pack now compared to the best solar states. The one thing the RPS has going for it is a huge solar-specific target of 4.1% of all electricity, meaning that solar is vital to the state meeting its goals (more about the carve-out just below).
New Jersey’s RPS is critical to strong renewable energy policy. Utility companies aren't really all that gung-ho about you producing your own power. After all, it costs them money when you use less of their electricity. They also don’t naturally want to give you big payments for energy you're feeding back into the grid. The main reason the utilities are aiding your transition to lower electric bills and offering you incentives to put solar on your roof is because the state forces them to. If the utilities don't hit their RPS numbers, they have to pay large fees back to the state.
New Jersey's RPS solar carve out
5.1% by 2021
The New Jersey RPS now includes a solar specific carve-out of 5.1% by 2021. That means for every 100 kilowatt-hours of electricity generated in the state, just over 5 have to come from the sun by 2021. That may not sound like much, but trust us, that's huge!
New Jersey mandates solar production by the utility companies, and if they don't either produce or procure that much electricity from solar, they have pay fines called "Alternative Compliance Payments" (ACPs). But planning, siting, and building huge solar facilities is hard to do, so instead of doing it themselves, the utility companies pay money to people who can prove they've generated solar electricity in their area.
This is where you come in, New Jersey homeowner. The proof of that generation is called a Solar Renewable Energy Certificate (SREC), and you get one for every megawatt-hour (MWh) your system generates. As of right now, the average New Jersey homeowner will earn more than 8 of these SRECs, which they can sell at the market price.
Read more about SREC sales in our section on New Jersey SRECs, below.
New Jersey Electricity Prices
As homeowners in New Jersey, we pay about 16 cents per kilowatt-hour of electricity we use. That's solidly above the national average of 13.6 cents/kWh. Paying upwards of 20% more for electricity than many other people in the country is painful.
But while you see larger bills now, you could be seeing bigger savings in the future with solar power! Higher electricity prices means greater opportunity to save money by producing your own clean, earth-friendly power with solar panels. And electricity prices will likely continue to rise in the future with new regulations on carbon pollution and decreased supplies of fossil fuels. People who switch to solar now will be patting themselves on the back in short order.
New Jersey Net Metering
Net Metering requires your utility to monitor how much energy your solar power system produces and how much energy you actually consume, and make sure you get credit for the surplus.
New Jersey’s net metering rules ensure the utility company tracks your excess power generation and credit it to your next bill at the full retail rate. If you run a surplus for an entire year, the utility will cut you a check for the surplus at the company's avoided-cost (wholesale) rate. All investor owned utilities and certain competitive municipal utilities and electric cooperatives are required to provide net metering.
New Jersey Interconnection Rules
Interconnection standards are strong here as well. Regulations have created a three-tiered system for interconnection procedures, depending on the size of the energy system. Your residential system of less than 10 kW qualifies for simplified procedures with no application fees. The law actually prevents the utilities from charging small systems like yours any additional fees whatsoever to get hooked up to the grid. Nor may the utility require you to install a redundant external disconnect switch, or to purchase any additional liability insurance. There is a bit of room for improvement on standard procedures for larger generators (hence the "B" grade), but everything should be smooth sailing for your residential solar power systems.
Solar Incentives in New Jersey
Next to high electricity prices and net metering, solar incentives have traditionally been the most important factor for whether home solar power makes financial sense in a state. In the past, some states with otherwise lousy policy had tremendous incentives that drove down the up-front cost of going solar so much that homeowners could save oodles of money even without net metering or a good RPS.
These days, the big incentive most people can get is the Federal Solar Tax Credit that earns you 30% of your total system costs back after just 1 year. State incentives play less of a role than in the past, but some really good ones are still out there, ready to help homeowners go solar and save money before you know it.
Let's see how New Jersey measures up:
The availability of state solar incentives for residential solar systems was sourced from the Database of State Incentives for Renewables and Efficiency, utility company websites, and the state public utility commission.
New Jersey Solar Power Rebates
Varies, New Construction Only
New Jersey's renewable energy program does offer rebates for some clean energy types. Unfortunately legislators made the decision to back solar power exclusively with the SREC market. That means the cost of solar panels in NJ may be a bit higher at the outset, but those tremendous long-term payments still more than make up for it.
BUT... there is a way to get some rebates if you're building a new home and using renewable energy to power it. New Jersey has a program called "The NJ Clean Energy Residential New Construction Program," which offers rebates to incentivize the construction of new homes that meet the New Jersey ENERGY STAR standards.
Do some reading at the link above, and you'll see that it's possible to get thousands back if you build a home that meets or exceeds those standards. Connect with our solar experts in New Jersey to find out more about this exciting program!
New Jersey Solar Tax Credits
New Jersey also lacks any personal tax credits for solar panels. NJ's pending reduction in SREC prices means a statewide solar power rebate or tax credit (with rollover, if necessary) would be an excellent way to keep solar growth humming here. With SREC prices still providing substantial payments, even a small rebate or tax credit would be a significant boon to homeowners like you, without costing the state all that much.
New Jersey Solar Performance Payments
SREC Market- Varies
The heart of New Jersey's solar panel push can be summed up in four words: “Solar Renewable Energy Certificates” (SRECs). Let's talk a little more about SRECs, from the top.
Think of SRECs as proof for the New Jersey’s utilities that they are complying with the law to produce their share of power from solar. If they’re not producing that power through their own solar farms or wind farms, then they have to “buy” that power from someone else. Someone like you, Mr. and Mrs. Homeowner. That means extra moolah for you!
At this point, we should tell you, the New Jersey SREC program will end soon, once the state's electric utilities reach their goal of 5.1% of electricity coming from solar. Read more about the New Jersey SREC program expiration date.
How do you get New Jersey SRECs?
Each time your panels generate 1,000 kilowatt-hours (kWh) of electricity, you get an SREC which you can sell for cash! For NJ solar panels, the ratio of SRECs produced per year to system size in kilowatts is about 1.15 to 1. So if you've got a 7-kW solar system (a solid average for a single-family home), you will generate a bit more than 8 SRECs a year.
How much are New Jersey SRECs worth, and how do you get money for them?
SRECs are traded on an open exchange, so their value will vary from year to year. However, in New Jersey, their value is strongly correlated to the Solar Alternative Compliance Payment (SACP) the utility would incur for not meeting their requirement to source some of their electricity from the sun.
Remember those fees called ACPs from above? For 2019, they're about $270 per MWh, which keeps SREC prices around $225. The ACP will be slowly decreasing to $128 by 2033. Recent SREC market prices can be found at the New Jersey Clean Energy website.
To get money for your SRECs, you can sign up with an SREC broker, such as SRECtrade. These guys handle the paperwork, aggregate a lot of homeowner SRECs together, handle the trading with the utility companies and take a commission for their trouble. Their efforts are worth the hassle, since it isn't cost effective for the utilities to connect with thousands of homeowners to negotiate a small number of SREC purchases each month from each homeowner.
This is a whole lot of money, paid straight to you every year! SREC prices should continue to track the ACP, meaning you figure to bank nearly $1,600 a year, as long as you sign up soon. As the ACPs go down, so do SREC prices, and by extension, you potential profits. Don't sleep on this! Get solar savings estimates from local experts today.
Property Tax Exemption
When the property tax assessor comes a knockin’ at your front door, by law, they are not allowed to charge you any more property taxes because you’ve got a new valuable solar system on your roof. At the same time, your home WILL be worth significantly more when you sell, because, hey, what home buyer doesn't like free electricity?
Sales Tax Exemption
Contrary to other home improvements like a new kitchen or bathroom, with solar panels in NJ, you will not have to pay any sales taxes on your system. That's 7% you're saving right upfront, even without any statewide solar power rebates.
New Jersey has done just about everything right when it comes to helping homeowners go solar. The payback time here is a phenomenal 6 years, meaning you’ll have nearly 2 decades of free power under the original 25-year solar panel warranty.
If you can get solar for your New Jersey home in 2019, you should! The end of the SREC program very near and the decrease in the amount of the federal solar tax credit will have a negative effect on solar payback time after 2019.