Solar Incentives in New Jersey
In addition to the Federal Investment Tax Credit (ITC), New Jersey has a number of incentives for home solar.
First, home solar equipment is tax exempt in New Jersey, so your solar contractor won’t pay sales tax when they purchase the equipment for your home solar system. You can learn more about that on page 17 here.
So how much could that save you? Let’s do some quick math: If we use an average 9 kilowatt (kW) system, we’d expect that the equipment would cost about $12,000 to $14,000. New Jersey’s sales tax is currently 6.625%, so that means your contractor will avoid paying about $800 to $930 in sales tax and your home solar system should be that much less expensive.
Next, as we’re sure you’re well aware of, New Jersey has one of the highest average property tax rates in the country. The good news is that home solar won’t add to your property tax bill since New Jersey has a property tax exemption for solar equipment. Homeowners will need to file form CRES with their local municipality. You can find information about the home solar property tax exemption here and the form here. You can also learn more about how solar increases home values here.
The last incentive which New Jersey has for home solar is its SREC program. The SREC program is a little more complicated and worthy of spending some more time on so you understand how it works.
Solar Incentives in New Jersey
In addition to the Federal Investment Tax Credit (ITC), New Jersey has a number of incentives for home solar.
First, home solar equipment is tax exempt in New Jersey, so your solar contractor won’t pay sales tax when they purchase the equipment for your home solar system. You can learn more about that on page 17 here.
So how much could that save you? Let’s do some quick math: If we use an average 9 kilowatt (kW) system, we’d expect that the equipment would cost about $12,000 to $14,000. New Jersey’s sales tax is currently 6.625%, so that means your contractor will avoid paying about $800 to $930 in sales tax and your home solar system should be that much less expensive.
Next, as we’re sure you’re well aware of, New Jersey has one of the highest average property tax rates in the country. The good news is that home solar won’t add to your property tax bill since New Jersey has a property tax exemption for solar equipment. Homeowners will need to file form CRES with their local municipality. You can find information about the home solar property tax exemption here and the form here. You can also learn more about how solar increases home values here.
The last incentive which New Jersey has for home solar is its SREC program. The SREC program is a little more complicated and worthy of spending some more time on so you understand how it works.
What are SRECs?
“SREC” is an acronym that stands for Solar Renewable Energy Certificate. One SREC is generated when a solar system in New Jersey generates one megawatt-hour or 1,000 kilowatt-hours of solar energy. New Jersey requires its utilities to generate a certain amount of energy from renewable sources. When a utility isn’t able to generate enough renewable energy on its own to meet its requirements, it will purchase SRECs from solar system owners to make up the shortfall.
In the last two years, there have been a number of changes to the SREC program in New Jersey. First, the original SREC program was replaced by a Transitional Renewable Energy Certificate (TREC) program. Shortly thereafter, the TREC program was replaced with the current SREC-II program. Despite the changes, all of these programs are what is known as a performance-based incentive (PBI). A performance-based incentive is exactly what it sounds like – it’s an incentive for the performance of the renewable energy system, or in other words how much solar energy the system produces. Performance-based incentives are notably different from other incentive types, which can be based on a percentage of the cost (the Solar Federal Tax Credit, for example) or on a dollar per watt basis (for example, a rebate of $0.50 per watt of generating capacity).
What are SRECs?
“SREC” is an acronym that stands for Solar Renewable Energy Certificate. One SREC is generated when a solar system in New Jersey generates one megawatt-hour or 1,000 kilowatt-hours of solar energy. New Jersey requires its utilities to generate a certain amount of energy from renewable sources. When a utility isn’t able to generate enough renewable energy on its own to meet its requirements, it will purchase SRECs from solar system owners to make up the shortfall.
In the last two years, there have been a number of changes to the SREC program in New Jersey. First, the original SREC program was replaced by a Transitional Renewable Energy Certificate (TREC) program. Shortly thereafter, the TREC program was replaced with the current SREC-II program. Despite the changes, all of these programs are what is known as a performance-based incentive (PBI). A performance-based incentive is exactly what it sounds like – it’s an incentive for the performance of the renewable energy system, or in other words how much solar energy the system produces. Performance-based incentives are notably different from other incentive types, which can be based on a percentage of the cost (the Solar Federal Tax Credit, for example) or on a dollar per watt basis (for example, a rebate of $0.50 per watt of generating capacity).
A brief history of SRECs
In addition to higher-than-average electricity prices and a good amount of sunshine, New Jersey’s SREC program and its favorable incentives for solar made New Jersey one of the largest markets for home solar in the country. The SREC program has gone through several iterations since its inception.
In 2004
The first SREC program was implemented in New Jersey to incentivize the adoption of solar energy. SRECs quickly became very valuable and drove a significant amount of solar adoption in New Jersey – so much so that in 2011, New Jersey was second to only California in solar power installation.
On April 30, 2020
New Jersey’s Board of Public Utilities moved from the original SREC program to the TREC program. TRECs are named “transitional” because it was always intended to be a temporary program while the state figured out what the next long-term program would be.
On July 28, 2021
New Jersey’s Board of Public Utilities announced that it had approved the next program. That plan is known as SREC-II and applies to all solar installations which submit applications on or after August 28, 2021.
Here’s a simplified comparison of all three programs:
| Program | Project eligibility start date | Project eligibility end date | REC price | Value of each REC | Program length |
|---|---|---|---|---|---|
| SREC | 2004 | April 29, 2021 | Based on supply & demand | $220 – $680 | Not specified |
| TREC | April 30, 2021 | August 27, 2021 | Fixed | $91.20 | 15 years |
| SREC-II | August 28, 2021 | To be determined | Fixed | $90.00 | 15 years |
A brief history of SRECs
In addition to higher-than-average electricity prices and a good amount of sunshine, New Jersey’s SREC program and its favorable incentives for solar made New Jersey one of the largest markets for home solar in the country. The SREC program has gone through several iterations since its inception.
In 2004
The first SREC program was implemented in New Jersey to incentivize the adoption of solar energy. SRECs quickly became very valuable and drove a significant amount of solar adoption in New Jersey – so much so that in 2011, New Jersey was second to only California in solar power installation.
On April 30, 2020
New Jersey’s Board of Public Utilities moved from the original SREC program to the TREC program. TRECs are named “transitional” because it was always intended to be a temporary program while the state figured out what the next long-term program would be.
On July 28, 2021
New Jersey’s Board of Public Utilities announced that it had approved the next program. That plan is known as SREC-II and applies to all solar installations which submit applications on or after August 28, 2021.
Here’s a simplified comparison of all three programs:
| Program | Project eligibility start date | Project eligibility end date | REC price | Value of each REC | Program length |
|---|---|---|---|---|---|
| SREC | 2004 | April 29, 2021 | Based on supply & demand | $220 – $680 | Not specified |
| TREC | April 30, 2021 | August 27, 2021 | Fixed | $91.20 | 15 years |
| SREC-II | August 28, 2021 | To be determined | Fixed | $90.00 | 15 years |
How will the SREC-II program affect me?
If you were considering home solar under the previous TREC program, the new SREC program will have almost no effect in terms of changing the economics of a home solar investment. The compensation that you would receive under the TREC program of $91.20 per MWh of solar energy generated is nearly equivalent to the SREC-II price of $90.00 per MWh. In addition, both the TREC program and the new SREC-II program specify a15 year term, meaning that homeowners are eligible to be compensated for renewable energy generated for 15 years.
Let’s illustrate the value of SREC-IIs with some simple math:
| Program | System size | Annual energy / RECs generated | REC Value | Annual REC income | Program length | Total REC income |
|---|---|---|---|---|---|---|
| TREC | 9 kW | 11.5 MWh / 11.5 RECs | $91.20 | $1,049 | 15 years | $15,735 |
| SREC-11 | 9 kW | 11.5 MWh / 11.5 RECs | $90.00 | $1,035 | 15 years | $15,525 |
| Difference | $14 | – | $210 |
In this example, with the SREC-II program you’d generate $210 less in revenue over 15 years. Every dollar is important, but when compared to your total energy savings and SREC-II income over that period, $210 doesn’t change the fact that home solar in New Jersey is a great investment.
How will the SREC-II program affect me?
If you were considering home solar under the previous TREC program, the new SREC program will have almost no effect in terms of changing the economics of a home solar investment. The compensation that you would receive under the TREC program of $91.20 per MWh of solar energy generated is nearly equivalent to the SREC-II price of $90.00 per MWh. In addition, both the TREC program and the new SREC-II program specify a15 year term, meaning that homeowners are eligible to be compensated for renewable energy generated for 15 years.
Let’s illustrate the value of SREC-IIs with some simple math:
| Program | System size | Annual energy / RECs generated | REC Value | Annual REC income | Program length | Total REC income |
|---|---|---|---|---|---|---|
| TREC | 9 kW | 11.5 MWh / 11.5 RECs | $91.20 | $1,049 | 15 years | $15,735 |
| SREC-11 | 9 kW | 11.5 MWh / 11.5 RECs | $90.00 | $1,035 | 15 years | $15,525 |
| Difference | $14 | – | $210 |
In this example, with the SREC-II program you’d generate $210 less in revenue over 15 years. Every dollar is important, but when compared to your total energy savings and SREC-II income over that period, $210 doesn’t change the fact that home solar in New Jersey is a great investment.
How do I maximize my SREC-II income?
First, remember that SREC-IIs are only awarded to the owner of the home solar system. If you sign a solar lease or solar PPA, where a third-party owns and operates your home solar system, you are not eligible to receive any payments for SREC-IIs. All incentives and benefits (including SREC-IIs and the Solar Federal Tax Credit) go to the third-party owner of your home solar system. Read more about third-party ownership here.
Second, since SRECs are awarded based on how much solar energy a system generates, you’ll want your system designed to maximize energy production. Placing solar panels in locations that receive the most sunshine and using panels with above-average performance characteristics and power warranties will increase the amount of SREC-II income you generate. There are nuances which you should understand, so we’ll discuss these in a little more detail.
Locate solar panels where they’ll receive the most sunlight
Today, home solar systems are designed using aerial imagery to create a 3D model of the homeowner’s roof and or property. Those 3D models chart the sun’s path over a year to generate irradiance and shading models. An irradiance model predicts which areas of the roof will receive the most sunlight based on local sunlight and weather patterns along with the roof plane’s orientation (southern-facing roof planes receive the most sunlight). Shading models predict how much shade nearby obstructions (trees, chimneys, second stories, etc.) will produce. When combined, these models indicate where the most efficient areas for solar panels are on your roof or property.
In summary, since you’ll pay the same amount for a solar panel whether it’s installed on the north side of your roof (least sunshine) or the south side (most sunshine), you’d want the solar panel to be located on the south side is possible. East and west facing roof planes with minimal shading are also good places for solar panels.
Understand the differences between solar panels
While many solar panels share similar performance characteristics, not all solar panels are the same. The simplest way to compare solar panels is based on their rated watts. One 340W solar panel should be just about the same as another 340W panel, right? Not necessarily.
It’s important to understand that the wattage of a solar panel is determined by testing it under one set of laboratory conditions called STC or standard test conditions. But solar panels don’t operate under controlled laboratory conditions when they’re on your roof.
If you dig down another layer or two, you’ll find that solar panels can be quite different in terms of their performance. Some types of solar cells and solar panels will perform better in different light conditions and different temperatures. And over the course of a year or even a day, your solar panels will constantly be exposed to varying amounts of light and temperature.
In summary, certain solar panels will produce more energy than others, even if they’re rated at the same wattage and placed in the same location.
Make sure you’ve got a good warranty
The ability of solar cells, and thus solar panels, to produce power will degrade over time. You can find this information in a manufacturer’s warranty. Historically the typical solar panel warranty predicted about 3 percent degradation in the first year, followed by 0.7 percent in years two through twenty-five, leaving you with 80 percent of the rated power at the end of the warranty. Recently, some manufacturers have improved solar cell technology and have updated their warranties to reflect the lower power degradation of their solar cells. Lower power degradation means that these solar panels will produce more energy over their lifetime.
In addition to looking at the actual power warranty, you’ll also want to ensure that the equipment and installation are from a reputable manufacturer and contractor. No warranty will compensate you for lost SREC-II income because the system failed and stopped producing power. And a warranty is only good if the company who provided it is still in business.
In summary, you’ll want to select manufacturers and contractors with strong warranties and good reputations for quality products and workmanship.
Pick a good contractor
Home solar contractors and salespeople typically make more money when they sell more solar panels, regardless of where they’re placed and how much sunlight they receive. They can also make more money is also made by selling lower-performing solar panels which they can purchase at a lower cost. This doesn’t mean that all home solar contractors and salespeople are going to try to sell you more lower cost solar panels to pad their bottom line. But the natural disconnect between their best interest and your best interest means that some will try to do just that.
How do you know whether you’re getting the right home solar system for you at a fair price? Honestly, with rapidly changing technology and hidden assumptions influencing the 25 year forecast for your home solar system, it’s very difficult to figure it out on your own. You could get several quotes to compare and ask the contractors very detailed questions on their equipment, system design and forecasting assumptions. Or you could use experts at a company like Sentinel do it all for you. Learn more about how we deliver better home solar here.
How do I maximize my SREC-II income?
First, remember that SREC-IIs are only awarded to the owner of the home solar system. If you sign a solar lease or solar PPA, where a third-party owns and operates your home solar system, you are not eligible to receive any payments for SREC-IIs. All incentives and benefits (including SREC-IIs and the Solar Federal Tax Credit) go to the third-party owner of your home solar system. Read more about third-party ownership here.
Second, since SRECs are awarded based on how much solar energy a system generates, you’ll want your system designed to maximize energy production. Placing solar panels in locations that receive the most sunshine and using panels with above-average performance characteristics and power warranties will increase the amount of SREC-II income you generate. There are nuances which you should understand, so we’ll discuss these in a little more detail.
Locate solar panels where they’ll receive the most sunlight
Today, home solar systems are designed using aerial imagery to create a 3D model of the homeowner’s roof and or property. Those 3D models chart the sun’s path over a year to generate irradiance and shading models. An irradiance model predicts which areas of the roof will receive the most sunlight based on local sunlight and weather patterns along with the roof plane’s orientation (southern-facing roof planes receive the most sunlight). Shading models predict how much shade nearby obstructions (trees, chimneys, second stories, etc.) will produce. When combined, these models indicate where the most efficient areas for solar panels are on your roof or property.
In summary, since you’ll pay the same amount for a solar panel whether it’s installed on the north side of your roof (least sunshine) or the south side (most sunshine), you’d want the solar panel to be located on the south side is possible. East and west facing roof planes with minimal shading are also good places for solar panels.
Understand the differences between solar panels
While many solar panels share similar performance characteristics, not all solar panels are the same. The simplest way to compare solar panels is based on their rated watts. One 340W solar panel should be just about the same as another 340W panel, right? Not necessarily.
It’s important to understand that the wattage of a solar panel is determined by testing it under one set of laboratory conditions called STC or standard test conditions. But solar panels don’t operate under controlled laboratory conditions when they’re on your roof.
If you dig down another layer or two, you’ll find that solar panels can be quite different in terms of their performance. Some types of solar cells and solar panels will perform better in different light conditions and different temperatures. And over the course of a year or even a day, your solar panels will constantly be exposed to varying amounts of light and temperature.
In summary, certain solar panels will produce more energy than others, even if they’re rated at the same wattage and placed in the same location.
Make sure you’ve got a good warranty
The ability of solar cells, and thus solar panels, to produce power will degrade over time. You can find this information in a manufacturer’s warranty. Historically the typical solar panel warranty predicted about 3 percent degradation in the first year, followed by 0.7 percent in years two through twenty-five, leaving you with 80 percent of the rated power at the end of the warranty. Recently, some manufacturers have improved solar cell technology and have updated their warranties to reflect the lower power degradation of their solar cells. Lower power degradation means that these solar panels will produce more energy over their lifetime.
In addition to looking at the actual power warranty, you’ll also want to ensure that the equipment and installation are from a reputable manufacturer and contractor. No warranty will compensate you for lost SREC-II income because the system failed and stopped producing power. And a warranty is only good if the company who provided it is still in business.
In summary, you’ll want to select manufacturers and contractors with strong warranties and good reputations for quality products and workmanship.
Pick a good contractor
Home solar contractors and salespeople typically make more money when they sell more solar panels, regardless of where they’re placed and how much sunlight they receive. They can also make more money is also made by selling lower-performing solar panels which they can purchase at a lower cost. This doesn’t mean that all home solar contractors and salespeople are going to try to sell you more lower cost solar panels to pad their bottom line. But the natural disconnect between their best interest and your best interest means that some will try to do just that.
How do you know whether you’re getting the right home solar system for you at a fair price? Honestly, with rapidly changing technology and hidden assumptions influencing the 25 year forecast for your home solar system, it’s very difficult to figure it out on your own. You could get several quotes to compare and ask the contractors very detailed questions on their equipment, system design and forecasting assumptions. Or you could use experts at a company like Sentinel do it all for you. Learn more about how we deliver better home solar here.
SREC-II FAQs
Do I need any special equipment to participate in the SREC-II program?
You do not need any special equipment to participate in the SREC-II program for residential home solar systems. Even though you don’t need any specialized monitoring equipment to measure and report solar energy production, you should always ensure that your system includes web or app-based monitoring so that you can view the system’s performance.
How do I sign up for the SREC-II program?
Signing up for the SREC-II program is relatively easy. Once you’ve finalized a contract with your home solar contractor, they will prepare the documents required to reserve a spot in the SREC-II program. When the installation is complete and the system is operating, the contractor will submit the final forms, and that’s it! You’ll need to review and sign the documents, but your contractor should do all the heavy lifting for the most part.
Learn more about the SREC-II program at https://solarincentivesnj.com/.
How do I get paid for the SREC-IIs I generate?
Once you’ve been approved, you’ll receive a unique SREC-II certification number. To get paid for SREC-IIs you generate, you’ll need this number to sign up and create an account with the grid administrator PJM-EIS. During this process, you’ll register your bank account with PJM-EIS for direct deposit payments. You can learn more about the PJM-EIS account creation process here.
Once you have your account set up, you’ll need to log in to report your solar energy generation. PJM-EIS recommends reporting your solar energy generation once a month, but don’t worry if you miss a month. The more frequently you report your solar energy generation, the more often you’ll get paid. If you miss a month or two of reporting, it will take a little longer to get paid for your TRECs, but you’ll still get paid for the full balance.
FAQs about the PJM-EIS process can be found here.
SREC-II FAQs
Do I need any special equipment to participate in the SREC-II program?
You do not need any special equipment to participate in the SREC-II program for residential home solar systems. Even though you don’t need any specialized monitoring equipment to measure and report solar energy production, you should always ensure that your system includes web or app-based monitoring so that you can view the system’s performance.
How do I sign up for the SREC-II program?
Signing up for the SREC-II program is relatively easy. Once you’ve finalized a contract with your home solar contractor, they will prepare the documents required to reserve a spot in the SREC-II program. When the installation is complete and the system is operating, the contractor will submit the final forms, and that’s it! You’ll need to review and sign the documents, but your contractor should do all the heavy lifting for the most part.
Learn more about the SREC-II program at https://solarincentivesnj.com/.
How do I get paid for the SREC-IIs I generate?
Once you’ve been approved, you’ll receive a unique SREC-II certification number. To get paid for SREC-IIs you generate, you’ll need this number to sign up and create an account with the grid administrator PJM-EIS. During this process, you’ll register your bank account with PJM-EIS for direct deposit payments. You can learn more about the PJM-EIS account creation process here.
Once you have your account set up, you’ll need to log in to report your solar energy generation. PJM-EIS recommends reporting your solar energy generation once a month, but don’t worry if you miss a month. The more frequently you report your solar energy generation, the more often you’ll get paid. If you miss a month or two of reporting, it will take a little longer to get paid for your TRECs, but you’ll still get paid for the full balance.
FAQs about the PJM-EIS process can be found here.
New Jersey Home Solar Incentives Summary
- Combined with the 26 percent Solar Federal Tax Credit, sales and property tax incentives along with SREC-IIs make the economics of home solar very attractive for homeowners in New Jersey.
- Home solar equipment is exempt from the normal 6.625% sales tax in New Jersey. You’ll avoid paying hundreds of dollars when your contractor purchases your home solar equipment.
- The increase in the value of your home after you install solar is exempt from property taxes. You’ll avoid increasing your already high property tax bill.
- SREC stands for Solar Renewable Energy Certificate. The “II” at the end of SREC-II indicates that it’s the second SREC program and differentiates it from the first SREC program.
- SREC-IIs are a type of performance-based incentive which pays the owner of a residential home solar system $90.00 for each megawatt-hour (MWh) or 1,000 kilowatt-hours (kWh) of solar energy that their system generates.
- Once approved, the owner of a home solar system is guaranteed to receive SREC-II income for 15 years.
- Only the owner of the home solar system is entitled to SREC-IIs and the payment for them. Homeowners who choose a solar lease or solar PPA where a third-party owns the home solar system are not entitled to payments for SREC-IIs. Since a third-party owns the system, that third-party will receive the SREC-II payments.
- A typical home solar system can generate more than $1,000 in SREC-II income each year in addition to the energy savings a homeowner would realize by producing their clean energy at a lower cost than purchasing power from their utility.
- To maximize SREC-II income, it’s essential that a home solar system is designed for maximum efficiency and uses quality equipment installed by a reputable contractor.
New Jersey Home Solar Incentives Summary
- Combined with the 26 percent Solar Federal Tax Credit, sales and property tax incentives along with SREC-IIs make the economics of home solar very attractive for homeowners in New Jersey.
- Home solar equipment is exempt from the normal 6.625% sales tax in New Jersey. You’ll avoid paying hundreds of dollars when your contractor purchases your home solar equipment.
- The increase in the value of your home after you install solar is exempt from property taxes. You’ll avoid increasing your already high property tax bill.
- SREC stands for Solar Renewable Energy Certificate. The “II” at the end of SREC-II indicates that it’s the second SREC program and differentiates it from the first SREC program.
- SREC-IIs are a type of performance-based incentive which pays the owner of a residential home solar system $90.00 for each megawatt-hour (MWh) or 1,000 kilowatt-hours (kWh) of solar energy that their system generates.
- Once approved, the owner of a home solar system is guaranteed to receive SREC-II income for 15 years.
- Only the owner of the home solar system is entitled to SREC-IIs and the payment for them. Homeowners who choose a solar lease or solar PPA where a third-party owns the home solar system are not entitled to payments for SREC-IIs. Since a third-party owns the system, that third-party will receive the SREC-II payments.
- A typical home solar system can generate more than $1,000 in SREC-II income each year in addition to the energy savings a homeowner would realize by producing their clean energy at a lower cost than purchasing power from their utility.
- To maximize SREC-II income, it’s essential that a home solar system is designed for maximum efficiency and uses quality equipment installed by a reputable contractor.
We help homeowners get the most efficient home solar to maximize both their energy savings and their SREC-II income. Learn more about our process here.
Interested to learn whether your home is a good candidate for home solar and how much SREC-II income you might be able to generate? Click the button below to get started with a free Solar Assessment.
We help homeowners get the most efficient home solar to maximize both their energy savings and their SREC-II income. Learn more about our process here.
Interested to learn whether your home is a good candidate for home solar and how much SREC-II income you might be able to generate? Click the button below to get started with a free Solar Assessment.
Have a question on home solar incentives in New Jersey or anything else? Send us a message and we’ll answer ASAP.
Have a question on home solar incentives in New Jersey or anything else? Send us a message and we’ll answer ASAP.
Home solar in New Jersey
We’ve compiled and analyzed data about NJ home solar. These are our most useful and insightful findings.
Home solar in New Jersey
We’ve compiled and analyzed data about NJ home solar. Our most useful and insightful findings are below.
