New Jersey is a national leader in solar energy, right up there with sunny California and Arizona. The 1,489 megawatts (enough to power 234,000 homes) of solar energy installed as of 2014 put the state third in the U.S. in terms of installed solar capacity.
The reasons many in the Garden State have embraced the sun as a power source are the area’s high prices for electricity combined with the way the state structured its renewable energy program.
New Jersey residents know their utility bills seem high, but it helps to compare with other parts of the U.S. to get a sense of the scope and reason people are looking for relief from the sun.
Electricity in the U.S. is measured, and pricing is cited, in kilowatt hours (kWh). One kWh of energy is 1,000 watt hours, which phrased another way is how much electricity is required to power a 100 watt light bulb for 10 hours (100 watts x 10 hours = 1 kWh). According to Duke Energy, one kWh is the power you use to watch television or work on computer for approximately 10 hours.
While prices fluctuate with the seasons, the national average cost for a kWh in 2014 was 10.45 cents, according to the national Energy Information Administration. In New Jersey, however, the average price that year was 14 cents per kWh, 34 percent higher than the U.S. average.
Only 9 states have higher electricity rates than New Jersey. Yes, one of those states is neighboring New York. But Pennsylvania, the neighbor to the south, is way down the list and below the national average.
New Jersey began allowing competing energy providers to sell electricity to customers 15 years ago. However, the providers’ pricing, while low at times, is not as stable as a traditional utility. That is because utility companies buy or generate electricity with pricing set by long-term contracts. The third-party companies buy power on the short-term market, so they are more reliant on the whims of the weather as well as supply and demand.
Turning toward renewable
New Jersey chose an approach different from tax credits or rebates as an incentive for people and firms to adopt solar as a solution. The state’s Clean Energy Program, established in 2001, includes a tough Renewable Portfolio Standard (RPS) or goal. New Jersey is aiming for 22.5 percent of its electricity to come from renewable resources by 2021.
The state’s growing economy also makes renewable power a logical choice. New Jersey gets approximately half of its power from nuclear plants and imports about 30 percent from out of state. The rest comes from local plants burning coal and natural gas, both of which are affected by the state’s strict environmental laws. The area’s flatness rules out expansion of hydropower, and the best wind sources in the area are offshore.
As one of the state’s four major utility companies, Public Service Electric and Gas Company (PSE&G), succinctly put it on their Web site, “There is no cleaner or cheaper kilowatt-hour than the one that is not used.” Short of turning off all appliances, the next cheapest source of electricity is generating it oneself. So, it is only natural that people are turning to the rooftops and sky for a solution.
The state’s solar program
Instead of tax incentives (which are available to New Jersey residents on the federal level) the state devised a different set up based on Solar Renewable Energy Certificates, or SRECs, to help offset the cost of installing solar panels.
Those who install solar panels are required to register with the SREC program. Each time their solar installation generates 1,000 kWh, an SREC is earned. The SRECs can be sold, which provides a way to recoup the installation costs and possibly even generate a profit for the first 15 years of the solar energy system’s life.
Electricity suppliers, such as the third-party providers, buy the SRECs. They are incented to do this to avoid being hit with a Solar Alternative Compliance Payment (SACP) requirement if they do not meet the state Solar RPS levels. To prevent excessive speculation and some of the deregulation problems California had a decade ago, the possible price for an SREC has a cap.
Homeowners and businesses with solar panels do not have to get into the SREC sales market themselves. Intermediaries will bundle the SRECs generated by groups of homes and then sell them to utilities. Companies with large facilities can put solar installations on the roof and become an SREC vendor. U.S. Foods, McGraw-Hill and Holt Logistics Gloucester Terminal are some very large facilities that have significant solar installations. Even Six Flags Great Adventure theme park announced plans to build a 90-acre solar farm to meet all of its future electrical needs.
There are still a lot of empty roofs in New Jersey. But, with the steep requirement for renewable electricity in the future driving demand for the SRECs as well as the high prices already in place for electricity, the solar market in the Garden State will continue to be a booming one.
RGS Energy designs and installs solar power systems for homes and businesses in New Jersey. To learn more about incentives and to get a free quote, go to RGSEnergy.com.