The complete guide to New Jersey SRECs
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If you’ve been looking to go solar in the Garden State, you’ve probably come across the term “SRECs”. SRECs, though one of the most lucrative incentives for New Jersey homeowners to go solar, can be a bit confusing to understand at first.
Don’t worry - we’ve taken the time to break down exactly what NJ SRECs are, how much they’re worth, how much money they can save you, and what incentives you may get instead of SRECs.
Before we get into the specifics of New Jersey’s SREC program, we need to break down what SRECs are and why they exist.
Solar Renewable Energy Credits, also known as SRECs, represent all of the positive environmental attributes of generating electricity with solar. One SREC is generated for every megawatt-hour (MWh) of solar electricity a solar system produces.
In New Jersey, systems installed after 2018 but before April 2020 will receive SRECs for their energy production for 10 years. All solar system installations after April 2020 will instead be eligible for TRECS, a similar incentive, which we’ll explain in detail below.
SRECs exist because of something called a Renewable Portfolio Standard (RPS), which requires utility companies to get a certain amount of their electricity from renewable, clean energy sources. Some RPS include something called a “solar carve-out”, which dictates how much of that renewable energy needs to come specifically from solar.
In 2021, New Jersey utilities are required to procure 23.50% of their electricity from renewable energy sources, and 5.1% of that renewable energy has to come from solar.
The thing is, no utility in New Jersey owns enough solar power plants to produce the required amount of electricity. This is where SRECs come in - utilities purchase SRECs from people who do own solar panel systems to meet their RPS solar carve-out requirements.
New Jersey homeowners with solar also make money from utilities through net metering. SRECs are sold independent from electricity, meaning, you get paid for your SRECs in addition to what your utility will pay you for net metering.
New Jersey’s solar-carve out is what makes the SREC market in the Garden State so strong. So how much are utilities willing to pay you for NJ SRECs? More than you’d probably think.
As of May 2021, NJ SRECs generated in 2021 are selling for about $235 each, and the price of SRECs seems to be trending upwards. In New Jersey, SRECs expire five years after they are generated. So an SREC created in 2020 can still be sold until 2025. However, the older an SREC is, the less it’s worth.
The following table outlines how much NJ SRECs are selling for, based on when they were generated, according to FlettExchange:
SREC pricing is determined by two things: market factors and alternative compliance payments. Market factors include things such as the number of SRECs on the market and how many SRECs utilities need. If the demand for SRECs is high and supply is low, the price will go up.
However, the price that SRECs will sell for is capped by something called a solar alternative compliance payment (SACP). The SACP is a fine that utilities have to pay if they don’t purchase enough SRECs to meet their RPS requirements. If SRECs cost more than the SACP, then no utility would bother buying SRECs because they would have to spend more money.
For 2021, the SACP for NJ SRECs is $248 per MWh. So, the price of SRECs won’t be over $248.
In order to generate SRECs, you must register your system with the PJM Generation Attribute Tracking Systems (GATS).
Once registered, you can report your solar generation and start racking up SRECs. You must go into the GATS tracking system monthly and report your generation, otherwise, you will not produce SRECs.
GATs credits SRECs monthly, on the last business day of every month. The SRECs shown will be from the electricity produced one month earlier. For example, the SRECs that show up in your account on May 31 will represent the electricity you generated in the month of April.
There are a few options for selling SRECs in New Jersey.
Most homeowners choose to sell their SRECs through an aggregator or broker that helps find buyers. This makes it much easier to sell SRECs, as SREC buyers would rather buy the certificates in bulk than from individual system owners.
Each aggregator and broker will have its own process for buying and selling SRECs. Some NJ SREC aggregators include FlettExhange, Solsystems, and SRECTrade.
However, you can choose to sell SRECs on your own through the GATS Bulletin Board.
Most solar systems in New Jersey have a payback period of under 10 years - some even as low as 5 years - because of SRECs.
For example, a 6 kW solar panel system in New Jersey would generate about $19,000 in revenue over a 10-year period just from SRECs. This assumes the following:
If you purchased a system for $12,340, which is the average cost for a solar panel system in New Jersey after the federal tax credit, SRECs alone would pay off the system after just 6 years. No wonder the New Jersey solar industry is so strong!
Unfortunately, the NJ SREC program is closed for new solar projects. Any solar panel system that was installed before April 2020 still generates and trades SRECs. However - not all hope is lost for new solar system installations.
Solar systems installed in New Jersey after April 2020 are instead part of the Transition Program, and generate Transition Renewable Energy Credits (TRECs). One TREC is generated for every MWh of solar energy produced, and they are sold to utilities at a fixed price of $91.20 per TREC.
TRECs sell for less than SRECs have historically, however, the price is not dependent on volatile market factors, so they are less risky. You can read more about the TREC program and how it works here.
TRECs will not last forever. The New Jersey Board of Public Utilities (BPU) is already working on creating the SREC Successor Program, which will replace TRECs and serve as a permanent replacement for the NJ SREC program.
Although new solar energy systems in New Jersey can no longer participate in the SREC market, New Jersey is still one of the best states to go solar. The state is preparing to complete a program to replace SRECs that will be more predictable and will cost ratepayers less, while still providing significant solar savings.
If you’re considering going solar in New Jersey, now is the time! To get the best price and the biggest savings on a solar installation, get multiple quotes from local solar installers. Once you find the right solar installer, you’ll be on your way to getting extra money in your pocket.
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