New Jersey Solar Overview
New Jersey has long been an early leader in solar energy and is consistently one of the top solar states in the nation. The Garden State’s solar market continues to experience strong growth, partially due to Assembly Bill 3723, which was passed in May 2018 and requires that 50 percent of New Jersey’s energy comes from renewable sources by 2030.
The state’s aggressive Renewable Portfolio Standard, combined with other favorable solar policies and attractive solar incentives, makes New Jersey one of the most financially beneficial places in the country to install a solar energy system.
Here’s an at-a-glance description of the current benefits and drawbacks of switching to solar in New Jersey:
Benefits of going solar in New Jersey:
- Relatively high electricity prices = more savings with solar
- 30% federal tax credit
- 100% property tax exemption
- 100% sales tax exemption
- Performance payments of $180-$240/SREC
- RPS of 50% by 2030 with solar carve out of 5.1% by 2021
- Statewide net metering policy with credit rollover and end-of-year payout
- Multiple financing options available
- Easy to connect to the grid
- Good for the environment
Drawbacks of going solar in New Jersey:
- Fewer natural solar resources than other states
- Rebates for new construction only
- No state tax credit
We break down and explain each of these items in the article below.
Cost of Solar in New Jersey
Prices of solar in New Jersey have fallen 47 percent over the last five years, and as of 2019, the average price per watt for a solar energy system purchased outright in the Garden State is approximately $3.10. For an average-sized 8 kilowatt system, this comes out to be $24,800 before tax credits and other local incentives are applied. After incentives are applied, the cost drops to about $16,500 on average.
In terms of price per kilowatt-hour of energy used, those with solar panels in New Jersey will pay only about $0.08 per kilowatt-hour. This is low compared to the average price of electricity from the utility, which is currently about $0.16 per kilowatt-hour. Utility prices are expected to go up over the next several years, which means that New Jerseyans who switch to solar now will only see their savings increase over time.
Considering this, as well as inflation and financial benefits from available incentives, the average home or business owner in New Jersey who purchases a solar energy system could expect to recoup their solar investment in about 5 years. After that, they will essentially be able to use the energy production from their solar panels to power their house or office building for free or for a very low rate.
In fact, over the life of the solar energy system, the average New Jersey resident could reasonably expect to save upwards of $50,000.
New Jersey Solar Financing Options
Several solar financing options are available to New Jersey residents, including outright purchases, loans, leases, and power purchase agreements.
In New Jersey, buying a solar panel system outright will provide the biggest dollar-for-dollar savings in the long run, but it does require the system to be paid for in full upfront. However, since you’ll be the owner of the system when you purchase outright, you’ll get to take advantage of the 30 percent federal tax credit and any local incentives that are available, which will help you to recoup a good portion of those costs in the first year. In addition, you’ll own the solar equipment and the energy it produces. In about five years after it pays itself off, all the electricity produced by the system will be pure profit.
Although this option is not feasible for everyone, you may want to consider it if you are capable of buying with cash. Some solar companies will even offer a discount if the system is paid for in full upfront.
Getting a loan to finance a solar system in New Jersey is a great way to go solar if you are interested in solar ownership but are unable to purchase the system outright. With a solar loan, you’ll be paying for the system over time but taking advantage of the perks and savings from the beginning.
Many solar companies partner with banks or companies that specialize in providing loans for solar projects. These loan companies typically offer loans contracts ranging from 5 to 20 years and interest rates between 1.99 and 4.99 percent, depending on your credit score and the length of the loan. Common benefits that come along with getting a solar loan include the ability to take advantage of federal tax credits and available local incentives, as well as the option to pay off the loan early with no prepayment penalties.
When you choose to go solar with a loan in New Jersey, you’ll actually start making money in the first year thanks to high electricity prices and Solar Renewable Energy Credit payments. Your savings will then increase each year as electricity prices go up. Essentially, the money you save on your utility bill as a result of having solar combined with the cash you receive by selling your SRECs will be higher than your loan payment. Once the loan is paid off, you’ll be able to power your home or business for free or for a very low cost for the remainder of the system’s life.
Leasing a solar panel system for your home basically means that you will be renting the system from a solar company or a third-party financier for the duration of a contract, which is generally 20 years, at a locked-in monthly rate. Leases typically do not require the homeowner to put any money down upfront, but because the solar company owns the system, the customer does not get to take advantage of tax credits, net metering, performance payments, or long-term financial benefits.
Since electricity prices in New Jersey are higher than the national average, home and business owners can take advantage of decent savings by leasing solar panels because the lease payment will be lower than their electricity bill without solar. As electricity prices go up over time, so will solar savings. Plus, let’s not forget the positive impact on the environment.
Power Purchase Agreements
PPAs are similar to leases in that the homeowner typically does not have to put any money down and a third party owns the system. However, instead of renting the system at a locked-in rate, the homeowner buys the electricity produced by the system at a set rate.
Due to New Jersey’s relatively high electricity prices, New Jerseyans can absolutely save money with a PPA, and those savings should increase each year as the cost of electricity goes up.
New Jersey Solar Incentives
While New Jersey is lacking in solar rebates and state tax credits, the state offers some of the best tax exemptions and performance payments in the nation.
There are two tax credits you need to be aware of when getting solar. The first is the 30 percent federal tax credit that anyone in the United States who owns their solar panel system can qualify for. Because these credits are given on a 1-to-1 basis according to your tax liability, you will want to have an idea about what your federal tax liability is to know how many years it will take for you to take full advantage of this tax credit.
The second is the state tax credit. This will differ depending on which state you live in. Unfortunately, New Jersey does not currently offer a state solar tax credit. However, New Jerseyans who purchase a solar energy system outright or with a loan are still eligible for the 30 percent federal tax credit.
Some states offer tax exemptions on the sales and property tax of the solar panel system, while other states don’t offer tax exemptions of any kind.
New Jersey residents are eligible for a 100 percent property tax exemption, which means that even though the value of your home will likely increase due to the addition of solar panels, your property taxes will not. Additionally, the Garden State offers a 100 percent sales tax exemption, which will save you hundreds of dollars right off the bat because you will not have to pay any sales tax on your solar energy system.
Many utility companies offer rebates to homeowners that own a solar panel system. These rebates are similar to those that you’d receive on an electronic or appliance purchase and result in money back in your pocket after the solar installation.
Currently, there are no solar rebates available for homeowners with existing homes in New Jersey. However, if you are looking to build a new home in the Garden State and plan to use solar to power it, you may be able to qualify for rebates through the New Jersey Clean Energy Residential New Construction Program if your home is constructed in a way that meets New Jersey’s Energy Star standards.
Performance payments reward solar owners for the electricity their panels produce on an ongoing basis. Utility companies will typically either offer a per-kWh bonus or pay you for your Solar Renewable Energy Certificates, or SRECs.
One of the best financial solar incentives for homeowners in New Jersey is the performance payments offered in the state. New Jersey utilizes the SREC market to pay solar owners for the energy their panels generate. Each SREC is worth approximately $200 and the average solar owner can earn about six SRECs each year, which means solar owners will receive about $1,200 in cash each year simply for having a solar energy system. Solar owners are allowed to sell their SRECs for the first 10 years of owning their solar system, which means they’ll be able to earn about $12,000 over that period.
However, New Jerseyans should be aware that New Jersey will not make its SREC program available to those who purchase a solar system after 5.1 percent of the state’s energy comes from solar power. Currently, about 4.2 percent of the state’s energy comes from solar, and New Jersey is expected to cross the 5.1 percent threshold sometime in late 2019 or early 2020. This means if you are interested in participating in New Jersey’s SREC program, you’ll need to act fast.
New Jersey Solar Policy Information
Legislators in New Jersey have done a nice job of enacting favorable net metering, Renewable Portfolio Standard, and interconnection policies, making it easy and attractive to go solar in the Garden State.
Net metering refers to utility companies crediting solar owners for the excess power that they feed back into the grid from their solar energy system. During the day while solar panels are generating power, the meter typically runs backwards and sends surplus energy to the grid, as many homes aren’t consuming as much energy as their system is producing. At night, when the system is no longer producing energy, most homes pull energy back from the grid to cover their electricity needs. Through net metering, solar owners are able to generate credits to help offset any bills they receive from their utility company for tapping into the grid.
New Jersey’s statewide net metering policy is one of the best in the country. It states that the utility companies must monitor how much power your solar panels are generating and credit your next electricity bill at the retail rate for any surplus energy that you didn’t use during the month. Credits may be rolled over from month to month. If you are still carrying a surplus at the end of the year, the utility company is required to pay you for that energy at the wholesale rate.
Renewable Portfolio Standard
Utility companies are required by their state legislature to make sure that a certain percentage of their energy production comes from renewable energy sources, such as solar, by a specific
date. If the utility companies in the state do not comply with RPS law, they will be heavily fined. Therefore, states that have a large RPS requirement usually have great incentives up for grabs from the utility companies in that state.
New Jersey’s RPS, which is currently set at 50 percent by 2030, is one of the most aggressive in the country. In addition to this, the state’s RPS includes a solar carve out of 5.1 percent by 2021, which means that 5.1 percent of New Jersey’s energy production must come from solar power. This probably explains the awesome tax incentives and performance payments available in the Garden State.
Interconnection standards have to do with the requirements involved when it comes to connecting a solar system to the grid. It’s important to know if your state has any additional requirements that must be met in order to get your home solar system plugged into the grid.
In New Jersey, requirements for connecting to the grid depend on the size of your solar system. For systems under 10 kilowatts (most residential systems), the process is simple and there are no application fees, external disconnect switch requirements, or liability insurance stipulations.
New Jersey Solar Statistics
To date, more than 2,700 megawatts of solar have been installed in New Jersey, enough to power over 450,000 homes in the state with solar energy. New Jersey ranks eleventh in the nation for projected solar growth, and over the next five years, more than 2,000 additional megawatts of solar are expected to be installed in the Garden State. Currently, there are nearly 600 solar companies and over 6,400 solar jobs in New Jersey.
Interested in a solar quote? Check out the top-rated solar companies in New Jersey and read reviews from verified solar customers.