How Do Solar Panels Work in New Jersey?
By Stefan Schulz, COO
New Jersey has been an early leader in solar… It is one of only three states in the U.S. to have more than 1 GW of installed capacity. But what exactly makes the Garden State so good for solar power? Why is the industry thriving? And why should you really consider installing solar panels for your home?
In New Jersey, we don’t always carry the highest opinion of our state and its decision makers. For some reason having the highest property taxes in the country and the third-highest cost of living has rubbed us the wrong way. Go figure! But when it comes to solar power policies, we should put those negative opinions aside, or at least on hold; New Jersey’s legislature and public utilities commissions have done a bang-up job there. And credit needs to be given where credit is due.
Heads-up: The below page is not a detailed, scientific explanation on how solar panels work. If you are looking for that, I’d recommend checking out this overview from the Union of Concerned Scientists. Instead, this page will share information on the favorable public policies and rules for solar power in New Jersey. Because let’s be real—most of us can answer the question: “How do solar panels work?” They collect energy from the sun to help power our homes. Sure, that’s a rather overly simplified explanation, but we have found that most consumers are focused on the incentives. I, like many others, always ask, “What’s in it for me?” As result, we feel a better topic of discussion is: “What makes solar panels work for the New Jersey homeowner?”
What’s an RPS? Short for Renewable Portfolio Standard (“RPS”), an RPS requires utility companies to source a certain percentage of their electricity from clean, renewable sources like wind, biomass, geothermal, and of course, solar. Each state has different requirements. Here’s what you need to know about New Jersey’s RPS:
Pretty cool that NJ stepped in and made this happen, right? The general public thinks so. However, electric companies, or load-serving entities, do not share our same sentiment. Think about it this way—when we use less of their electricity, they make less money. Electric companies also aren’t chomping at the bit to hand out big credits for energy we feed back into the grid. The sole reason they are helping us lower our electric bills and offering incentives to “go solar” is because the state forces them to. When they don’t hit their RPS numbers, they have to pay large fines back to the state. So, how do they show that they are in compliance?
To demonstrate that they are meeting RPS compliance, electric companies can either show that they have a) Generated power through their own renewable sources; or b) Purchased clean power from someone else, such as a homeowner.
SRECs are the heart of the New Jersey solar power push. In essence, they provide the power company the “proof of purchase”, helping them show RPS compliance. In the long run, it is a lot cheaper for them to purchase SRECs than build farms or pay hefty fines to the state. The SRECs program in New Jersey dates back to 2004. Below is an overview and where we are today:
In addition to providing a source of compliance for electric companies, SRECS give NJ homeowners that purchase solar, or solar system owners, a source of revenue to help offset the cost of installation. SRECs are like little booster packs for your return-on-investment (ROI). Also, if you’ve ever seen advertisements for $0 down solar or free solar system installation, know that the SRECs, in conjunction with the 30% Federal Tax Credit, are what makes flexible financial programs for solar panels possible.
Simply, net metering is a billing system where you can sell the electricity that you generate from your solar panels back to the utility company at the same rate. Net metering policies can vary significantly by country and by state. And per Freeing the Grid, New Jersey is one of the best states for net metering.
In many instances, a solar system may generate more electricity than the home uses. When a home is net metered, the electricity meter will spin backwards as you feed energy back into the grid. This then provides a credit against what electricity is consumed in the evening or other periods where the home’s electricity use goes beyond the system’s production. In New Jersey, all electric distribution companies (JCP&L, PSEG, Atlantic City Electric, and Rockland Electric) are required to provide net metering.
The residential solar market in New Jersey is fueled by favorable net metering rules, a RPS with a large solar carve out, and a strong SREC market. These policies and incentives do not collect energy from the sun to power your home. They are, however, critical components to what makes solar panels work for the New Jersey homeowner.
It is important to note that there are other things that drive the solar industry. For instance, earlier we noted the 30% Federal Tax Credit. Sales and property tax exemption for solar system installations are also important considerations, especially in New Jersey.
George Bernard Shaw, an Irish playwright, critic and polemicist, once said: “Science never solves a problem without creating ten more.” As a science, solar energy is no exception to Shaw’s rule, and most problems stem from the question: “How do we make this affordable and viable for consumers?” Fortunately, the people of New Jersey have proposed and implemented the Kryptonite to conventional solar power doubts.