In New Jersey — and a growing number of other states — owners of solar energy systems are able to sell things called solar renewable energy credits (SRECs). In a nutshell, SRECs provide cash payments to homeowners and business owners who install solar panels.
We’ve got a fairly no-nonsense explanation of how SRECs work here. And see the bottom of this post** for a full description from the New Jersey Clean Energy Program. But, for now, this is essentially what you need to know:
Solar photovoltaic (PV) panels generate electricity. (Some of you may be saying “duh,” and that’s OK.)
One SREC commonly refers to 1,000 kilowatt hours (kWh) — or 1 megwatt hour (MWh) — of electricity.
So, every time a solar panel system generates 1 MWh of electricity, its owner is entitled to sell one SREC.
Two questions follow, naturally:
(1) How much can you sell an SREC for?
AND
(2) What does this price mean for the typical owner of a residential solar energy system?
Lucky for us, New Jersey keeps up-to-date data on SREC trades across the state, which means we can get a glimpse into how the price of these credits varies over time:
As you can see, SREC prices in New Jersey started out 2010 at around $540 and climbed steadily throughout the the first half of the year. The highest monthly average price (weighted) was recorded in November, when your average SREC fetched $615. This means New Jersey homeowners who sold their credits in that month could have received $615 per SREC — not bad, particularly when you consider the following:
A 5-kilowatt (kW) residential solar panel system in New Jersey would generate enough electricity over the course of a year to make five SRECs. At the average price through November 2010, a system of this size would yield around $2,900 in annual SREC payments to the system owner.
A 7-kW system would generate about eight SRECs in its first year of operation — and, in 2010, would have yielded about $4,000 in SREC payments.
Ask anyone who has installed solar power in New Jersey over the past year or so, and you’re sure to get positive reviews on the state’s efforts to promote renewable energy.
The bad news? It’s not possible to trade solar renewable energy credits in all states (although, as noted above, the number is growing). New Jersey has the most developed SREC market — and the one that with the highest SREC prices — though Pennsylvania, Massachusetts, Pennsylvania, Maryland and a few others are beginning to catch up. For instance, see Solar Home & Business Journal’s recent article on how tradable renewable energy credits (TRECs) may eventually become a part of California solar energy market.
**Here’s the New Jersey Clean Energy explanation of SRECs:
Each time a system generates 1,000 kWh of electricity an SREC is earned and placed in the customer’s electronic account. SRECs can then be sold on the SREC tracking system, providing revenue for the first 15 years of the system’s life.
Electricity suppliers, the primary purchasers of SRECs, are required to pay a Solar Alternative Compliance Payment (SACP) if they do not meet the requirements of New Jersey’s Solar Renewable Portfolio Standard (RPS). One way they can meet their RPS requirements is by purchasing SRECs. As SRECs are traded in a competitive market, the price may vary significantly. The actual price of an SREC during a trading period can and will fluctuate depending on supply and demand.
Standard Solar — a Maryland solar installation company – has partnered with Sol Systems to help make clean energy more accessible for mid-Atlantic homeowners.
At core, the arrangement allows qualified buyers to use solar renewable energy credits (SRECs) to pay for up to 30 percent of a solar energy installation. Sol Systems, which is based in Washington, D.C., handles the financing, while Standard Solar does the design and solar installation. Working together, the two companies can make solar energy affordable for thousands of property owners throughout the mid-Atlantic.
Here’s Standard Solar President Scott Waiter:
“This partnership will go a long way for our current and future customers. Not only will it help businesses and homeowners significantly cut costs of their solar energy systems, but it will help those considering solar energy to realize that alternative energy is an affordable solution.”
Sol Systems is also offers a solar lease program to schools, homeowners, churches, businesses and non-profit organizations in Washington, D.C. It’s in a pilot stage now, but if successful, it could be put to use in other parts of the country. As part of the lease program, the property owners don’t have to put down any money upfront. Instead, their solar power would be set at a fixed monthly lease payment for a decade.
Sol Systems’ primary focus is to help consumers get the largest return on investment (ROI) possible when installing a solar energy system. In order to do this, the company offers several REC-based options:
Receive a fixed payment for each SREC you compile over a five year term.
Receive one, upfront payment for all of your SRECs.
New Jersey and Massachusetts property owners can receive a variable payment for each SREC their systems compile.
Somerset County in central New Jersey may well become the most solar-powered county in the country.
That’s thanks to a three-phase solar power project that, according to NewJersey.com, will eliminate 15 million pounds in annual carbon emissions and save taxpayers over $1 million in annual energy costs over the next 15 years. It will also help generate revenue via Solar Renewable Energy Credits (SRECs).
When all three phases are completed, Somerset County could have the highest solar installed generating capacity of any U.S. county. The solar power project will begin with a $40 million, 7.6-megawatt (MW) solar energy system that will be installed across 31 separate Somerset County sites, including government-owned rooftops, parking lots, school district buildings and the Somerset County Courthouse, among others. The system will be the largest of its kind in New Jersey — a state second only to California in installed solar energy capacity. According to Somerset County Freeholder Jack Ciattarelli, the size of the system could double in the next few years.
The Somerset County Improvement Authority contracted Vanguard Energy Partners to build and install the newest system. Under a 15-year power purchasing agreement (PPA), the county will purchase electricity at a fixed rate. New Jersey-based Noveda Technologies will contribute a web-based monitoring system to track the performance of the system in real-time.
If you’ve noodled around on the Web looking for information on residential solar energy systems, you may have come across something called a “Solar Renewable Energy Credit” — or SREC (pronounced “S wreck“) for short. Since SRECs help make solar panels a great investment in some states, we figured it might be helpful to explain what these credits are and how they work.
We’ll start with the textbook definition: An SREC is a certificate representing the “green attributes” of one megawatt-hour (MWh) of electricity generated from solar energy.
What does this mean in practice? If you install solar panels on your home, you roof will, in effect, start generating kilowatt-hours (kWh). As these kWhs add up, you’ll be on your way to making one SREC — which, as noted above, is the equivalent of one MWh, or 1,000 kWh.
How many SRECs does a system produce? It depends generally on the size of the system and the amount of sunshine available. By way of example, a 7-kW home solar energy system in Somerset County, New Jersey, would, according to our solar cost calculator, produce roughly eight SRECs over the course of a given year.
Now comes the good part. Once you’ve accumulated an SREC (or two or three), you’ll be able to sell your credits. Exact SREC prices vary from state to state, but the highest price recorded so far has been around $680 in New Jersey. At this price, SRECs would generate $5,440 in annual revenue for our hypothetical 7-kW solar array in Somerset County. Put differently, we would earn $0.68 for every kWh that our system produces — this in a state where the average residential price of electricity is around 16 cents. Clearly, SRECs in New Jersey provide a generous incentive!
To be fair, SRECs are traded actively in only a handful of states — but that number is growing. Also, it’s important to note that the going price of an SREC tends to fluctuate, and that $680 levels are likely the exception, not the rule. Finally, in some states, like Colorado, utilities offer an upfront payment for all the SRECs a given system is expected to generate — rather than buying them over time.
How did all this SREC business get started? Many states have passed a Renewable Portfolio Standard (RPS), legislation requiring them to produce a certain percentage of their electricity from renewable resources by a certain year. For example, New Jersey’s requires the state to produce 22.5 percent of its electricity from renewable resources by 2020. State requirements vary based on their political support, baseline level of renewable electricity in use, and level of public investment. An RPS almost always includes a policy plan to incentivize renewable energy development and installation within their state. In the residential sector, this is most traditionally done though subsidies awarded based on the number of watts of renewable energy installed. California’s solar rebate programs, for example, award a per-watt payment to homeowners who install solar panels.
Many states include a provision specifically for solar energy, requiring a smaller percentage of total renewable energy to be met by solar photovoltaics. Each electricity provider that does not meet this percentage must purchase SRECs to correct their deficit, and non-compliance means a hefty fine. As a result, SRECs are sold for prices determined strictly by the market for RPS compliance. It’s a simple case of supply and demand: fewer solar installations means higher prices for available SRECs, creating an incentive for future solar installations.
So far, Delaware, Maryland, Massachusetts, New Jersey, North Carolina, Ohio, and Pennsylvania, have funded and implemented SRECs to promote the level of solar energy development that their policies demand. To see how SRECs might affect your solar system, check out our solar cost calculator. Or, if you’ve got burning questions, post them below!
New Jersey’s solar energy rebate program is somewhat fickle, to say the least. In recent months, the state’s Renewable Energy Incentive Program (REIP) has been switched off, then on, then back off again. Last we heard, the solar rebate was tentatively slated to return at the beginning of September — but no one knew at what level, and uncertainty abounded.
The New Jersey Board of Public Utilities last week moved to provide a bit of clarity. The NJ solar rebate, it seems, will return on September 1, 2010, at the following levels:
Residential solar installations: $0.75 per watt of installed solar capacity, up to 7.5 kilowatts (kW); notably, home solar systems larger than 10 kW are not eligible for the rebate.
Public and non-profit solar installations: $0.75 per watt up to 30 kW.
Commercial solar installations are not eligible for solar rebates.
Previously, the residential rebate level was $1.35 per watt.
As many New Jersey residents know, solar renewable energy credits — or SRECs — provide strong incentive to install solar panels, irrespective of the solar rebate. Put simply, owners of renewable energy systems also own the SRECs associated with their systems’ electricity output. Sell your SRECs, either up front or over time, and you’re looking at a pretty decent return on investment — arguably the best in the entire country. The SREC market is so promising, in fact, that New Jersey homeowners have been proceeding with their solar projects using only SRECs and the federal 30-percent renewable energy tax credit, a combination that, by many measures, provides incentive aplenty.
Back to the REIP rebate news: if you’re considering solar power for your New Jersey home, you may be wondering how to proceed. Do you try for the rebate? Or do you proceed with the installation solely on the basis of SRECs?
As with most things, we try to counsel a conservative approach. The last time the New Jersey Clean Energy Program opened, it received over 1,000 new applications — literally in a matter of hours. As a result, the REIP was shuttered shortly thereafter. One can only assume, then, that when the rebate program reopens on September 1, the office will again be hit by a deluge of applications. There’s no guarantee, in other words, that you’ll be able to secure solar rebate funds for your project.
So, if you’re interested in installing solar panels for your New Jersey home, we’d suggest that you start by looking at SREC-only proposals (i.e., proposals that don’t take into account solar rebates). If that looks good to you, proceed. If the proposal doesn’t meet your financial or budgetary criteria, but you’re still interested in pursuing solar, go ahead and factor in the newly announced $0.75/watt rebate. But do so with a grain of salt. As stated before, there’s no guarantee yours will be among the applications accepted under the next cycle of funding. If it’s not accepted, your application would likely be rolled into the next funding cycle — which will be even further out and, doubtless, at a lower per-watt rate. All the while, you’d be missing out on generating SRECs, which (as noted above) deliver real value to owners of renewable energy systems.
Over the last few years, the largest sporting event in the United States has shown some awareness of the enormous draw it makes on energy resources wherever it’s hosted. Yesterday’s 44th Super Bowl, accordingly, was the greenest yet: Florida Power & Light Group’s (NYSE: FPL) subsidiary NextEra Energy supplied the NFL with enough renewable energy credits (RECs) to completely offset the energy usage of not only the Pro Bowl and the Super Bowl, but of the preparations leading up to the games in Miami, as well.
NextEra’s energy portfolio (PDF) includes 310 gross megawatts of solar energy and over 7,640 gross MW of wind power. The solar energy in NextEra’s portfolio comes from seven California solar installations. The NFL purchased wind and solar RECs, meaning that you watched the Saints win a partially solar-powered game last night.
The NFL’s efforts to green the Super Bowl got a lot less media attention than one lonely little ad, however. The by-now infamous Audi Green Police commercial is hilarious–and controversial. Some feel the commercial plays to fears that greater environmental regulation could lead to “green policing”, while others champion its willingness to take a stand on the fact that personal behaviors will have to change if we truly want to move towards a clean energy future. Haven’t seen the ad? Take a look:
As part of the Bay State’s Green Communities Act, investor-owned utilities must solicit bids for 10-15 year renewable energy production contracts at least twice in the next four years. The first round of solicitations–for 750,000 MWh–is being organized by the Massachusetts Department of Energy Resources (DOER). The state’s Renewable Portfolio Standard requires electricity suppliers to include a minimum percentage of renewable power in their energy portfolios each year:
Set at 5 percent in 2010, the minimum benchmark increases by 1 percent annually under the Green Communities Act. Both the RPS and the new requirement for long-term contracting are meant to provide certainty for clean energy developers and help them obtain the financing needed to build successful projects. (DOER Press Release)
Eligible renewable energy technologies are those with Renewable Energy Credits (RECs)–so, solar energy systems are most definitely included. The state’s new Solar Credit Market gets its backbone from a solar carve-out in the state’s RPS. That is, within the percentage of a utility’s energy portfolio that must come from renewable sources, a specific percentage of that must come from solar power only. Massachusetts solar installations, which were on hiatus for a few months last year as the state tried to figure out how to re-fund its solar rebate program, are expected to boom this year as a result.
Colorado’s state Congress may have an interesting bit of legislation before them this session: a bill that would allow solar panels installed in community gardens to qualify for the solar rebates currently available through Xcel Energy. The brainchild of State Rep Claire Levy (D-Boulder), the bill would allow multiple people to buy into an off-site solar installation and, like shareholders, all receive a portion of the benefits of the solar energy, from installation cost reductions to any net-metering credits for excess electric generation. Levy told the Daily Camera that:
“It’s for people who are renters, who live in condominium projects and don’t have rooftops, people whose lots are shaded, people whose houses aren’t the right orientation — a whole variety of things.”
Being able to take advantage of solar incentives for off-site solar installations could be a huge boon to urban dwellers. If this bill passes and successfully engenders more solar capacity in urban areas in Colorado, perhaps such legislation could serve as a model for other states where space is at a premium and few people own the rooftop real estate to host solar energy systems.
Right now, Xcel Energy customers can take advantage of the Solar Rewards program, which offers both solar rebates and solar renewable energy credits (SREC) purchasing to defray the costs of solar installations. The rebate is equal to $2/watt for systems under 500 kw; larger systems are treated on an individual basis. The SREC payments are structured differently for small, customer-owned systems and for larger and third party-owned systems, but are all for 20 year contracts. This predictable value makes your solar investment more transparent and sweetens an already sweet deal–now is a great time to get solar in Xcel Energy territory.
Beginning in late January, Massachusetts will once again be accepting applications for the Commonwealth Solar Rebate Program. The press release from Governor Deval Patrick’s office laid out the next phase for solar in the state:
…the new programs – Commonwealth Solar II and Commonwealth Solar Stimulus – will begin accepting rebate applications from residents and businesses seeking help financing their solar photovoltaic (PV) systems. The new rebate programs will be benefit from a two-pronged funding scheme. Funding for Commonwealth Solar II, providing rebates for small residential and commercial photovoltaic (PV) systems (5 kilowatts or less), will come from $1 million per quarter in existing funds from the Massachusetts Renewable Energy Trust.
The press release doesn’t stipulate how much funding an individual project can expect to receive; under the original Commonwealth Solar plan, residential rebates began at $1/watt but could be over $4/watt, if the applicant qualified for adders like moderate income, moderate home value, or Massachusetts-made solar components. However the rebate breaks down this time, $1 million per quarter in funding should help a substantial number of small solar projects get off the ground.
Accessing federal funds (ARRA), Governor Patrick will be able to offer solar installations of 5-200kw rebates as well. But the real buzz in the state is around the proposed Solar Credit market. This is essentially a market in which the solar renewable energy credits (SRECs) associated with the electricity produced by solar panels in the state can be sold, the proceeds going to the owner of the solar installation. This is the very successful model currently being used in New Jersey, most notably. Why the state couldn’t just call it an SREC program is beyond us–but we’re happy to see Massachusetts getting into the SREC game, regardless. For a state that has consistently provided thought and legislation leadership on renewable energy issues, its programs to help offset the high cost of solar installations have lagged behind neighbors like New York. Way to ring in the new year, Massachusetts!
If you own a business or live in PSE&G service territory in New Jersey and have been thinking about installing solar, but have not been sure how to finance such a large investment, now may be the time for you to move forward. The utility’s ultra-popular solar loan program just received the go-ahead from the New Jersey Board of Public Utilities (BPU) to expand to the tune of $143 million. This additional capital should fund up to 51 MW of additional solar capacity for what has turned out to be one of the country’s fastest-growing solar markets.
Here are some of the main points of the Solar Loan II program as laid out in yesterday’s press release:
Any solar installation is eligible, including residential, commercial, industrial, government, etc., as long as it’s a project of a PSE&G electric customer
Projects may not exceed 500 kw
The loan may cover up to half of the gross cost of the solar installation, to be repaid over a span of up to 10 years for residential customers and up to 15 for all others
Participation in the loan program does not affect eligibility for other solar incentives, such as New Jersey’s solar rebate and the federal tax credit
But here is what may be the coolest part of this program: the loan may be repaid with cash, or with the solar renewable energy certificates or SRECs generated by the system. This means you would be repaying your solar loan with value entirely produced by your solar panels. And the clever use of SRECs doesn’t end there: PSE&G will use the SRECs it receives to help offset the bill for this program, which is being footed currently by a surcharge on its customers’ monthly bill.
PSE&G’s electric customers will pay for the cost of the solar program through the RGGI Recovery Charge (RRC), which is included in the delivery part of their monthly bill. PSE&G will sell the SRECs it receives for loan repayment in an auction, and credit the proceeds from the sale to customers through the RRC, which will offset a portion of the program costs. The average residential customer who uses 722 kilowatthours in a summer month and 6,960 kilowatthours annually will pay about 36 cents more per year than they do now.
New Jersey’s unique package of incentives–a rebate coupled with a strong SREC trading program, on top of the federal tax credit–has made it one of the best states in the nation in which to pursue a solar installation for both homes and businesses. If you’ve been on the edge, you’re a PSE&G customer, and financing is what’s been holding you back, it may be time to take the leap.
