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The Relationship Between SREC Prices and Solar Leasing

Several forums, including this one, covering residential solar developments have commented on the volatility of SREC markets in some states. But few have yet to note the potentially tremendous impact on solar leasing, and residential solar adoption in general, in those SREC states experiencing severe fluctuations in pricing. You may have read how the New Jersey and neighboring Pennsylvania SREC markets have declined in SREC prices. After a few years of trading above $600/SREC, New Jersey’s SREC market – which is largely responsible for making the Garden State a national leader in residential solar – plunged to prices between $200-$250 for the second half of 2011. Now, prices have started to drop further, and will continue well below that point for at least the next year or two (assuming no legislative action is taken). There is understandable frustration for the early adopters that expected a 3-5 year payback on their solar investment with an incoming cash flow based on high SREC prices (even though their system is still saving money on electricity bills and earning something for their SRECs). The unanticipated glut in the market has depressed prices as too many SRECs are being generated than the RPS law requires utility companies to buy.

But what does this mean for homeowners that want to go solar, but have yet to put together the finances? The answer to that question is not yet obvious, but the hunch is the volatility in SREC pricing in New Jersey, a state that has installed over 650 MW of solar (second only to California), will drive prospective solar customers away from owning their panels. The obvious alternative is a solar lease, which has an edge in this scenario of not being dependent on SREC revenues whatsoever. The question being posed now to prospective solar adopters is: Do I hedge my bets on volatile SREC markets, or on the predicted rise in electricity costs? Though there are many advantages to owning a system, and SREC prices will not necessarily remain low in all states, solar leasing seems to carry lower risk.

What’s particularly interesting, however is how this development could perpetuate itself in state like New Jersey that are susceptible to volatile SREC pricing. It’s not entirely clear how solar leasing companies like Sungevity and SolarCity monetize their SRECs from the systems they lease to homeowners. The likely scenario is they look for long-term contracts and settle for spot trades when possible. But either way, these large sales will drive down SREC prices, because solar lease companies do not depend on SREC revenues to make their margins, i.e., SRECs are just gravy at the end of the day for them.

Additionally, as solar leasing is tapping into a new income demographic, which is expanding the residential PV market, a greater supply of SRECs is expected to come online from systems that otherwise would not have been built. Even if these SRECs were not sold in the open market, speculative SREC pricing, which looks at potential supply of SRECs, will trend downward in anticipation of a prolonged oversupply. These self-perpetuating factors have yet to take hold on a large scale, but I’ll be curious to see if the markets pan out that way (and feel bad for the early adopters that hedged their bets on high SREC prices!)

The best way to get an up-to-date snapshot of the SREC situation versus leasing is to get a quote today, and check out aggregators like SRECTrade and Flett Exchange.

Original Article on Residential Solar 101

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Comparing SREC Aggregators

Anyone interested in installing panels, or who already has, has probably heard of solar renewable energy credits, or “SRECs”. An SREC is basically a rebate for PV system owners. But instead of one big payment based on capacity (e.g., $1.00/watt), the rebate is based on solar electricity generation, and thus paid out over time. PV system owners receive an SREC every time they generate 1,000 kWh of electricity from their PV panels, which they can then sell. The dollar amount fluctuates with respect to the annual targets laid out by state legislatures; if more systems come online in a year to generate electricity (and earn SRECs) than the annual targets, the price of the SRECs drops until the targets increase to create a scarcity in the market. It’s a neat mechanism that states are still tweaking, but there is a lingering question many homeowners with panels are left asking themselves: How do I actually sell these things?

We’ve covered the rise of leasing companies in residential solar, and we expect that trend to continue. But perhaps because SREC prices have dropped in some states, SREC markets have recently been given a bad name. Yet several states are still trading above $200 (and as high as $540 in Massachusetts), and several homeowners would still rather own their systems and sell SRECs rather than lease their panels and fork the SRECs over to the leasing company or installer. But homeowners don’t have the leverage nor the time to go up to a big energy company and ask them to buy 2 SRECs for $250 apiece. Instead, there are brokers/aggregators that trade SRECs on behalf of homeowners. Below is an overview of what to look for when selecting a broker/aggregator to monetize your SRECs.

Transparency. Definitely the most important one. All aggregators find buyers to purchase SRECs. However, some trade on behalf of their customers, while others actually purchase their customer’s SRECs, then re-sell them at a mark-up. The latter approach is typically less transparent for the homeowner, because for the business model to work, the aggregator has to make revenue from buying low and selling high. For example, an aggregator under this model may purchase a number of SRECs from its customers during an oversupply when prices are low, then re-sell them at a later date when prices come back up. The homeowner doesn’t know what the real market value is, nor when the final sale was made.

An aggregator that simply trades SRECs without taking a speculative position usually earns its revenues from a straight commission out of the traded price. This model lends itself to greater transparency, because the aggregator’s interests are more closely tied to the homeowner’s; higher prices for the homeowner means larger revenues for the aggregator.

Volume. Generally speaking, buyers in SREC markets are energy companies that supply electricity to power grids. Most of these companies aren’t going to buy a measly 5 SRECs directly from you, since their quotas climb to several thousand SRECs per year; 5 SRECs in one transaction is a lot of work for a small gain. That’s why you need an aggregator in the first place. Regardless of the model an aggregator chooses, as a rule of thumb, aggregators that offer larger volumes per transaction achieve higher prices. This is partially because of the efficiencies larger volumes achieve, but also because aggregators with large volumes will attract more buyers that places bids to buy, which typically creates an upward pressure on prices.

Aggregators may not have a precise idea of their market share in a particular state, but they’ll have a good idea of how many systems – and therefore SRECs – they have under their services. For example, SRECTrade has over 6 MW in their aggregation, the largest in Massachusetts, according to a senior broker there (name Steven?).

Flexibility. What are the different options offered to sell your SRECs? Some aggregators exclusively trade in spot, or over-the-counter transactions, some broker contracts ranging from 1-5 years, some do a mix of both. Spot trades tend to be more volatile, since buyers adjust their bids based on the supply and demand in the market. Brokered contracts set a fixed price for a period of time for SRECs, but usually this price is lower than the spot market trades. Each homeowner has different appetites for risk that would determine which of these options to choose, and this appetite (like all appetites) can change over time, so why not choose an aggregator that offers several options?

Another consideration for flexibility are the contract terms. Typically, aggregators that do not take a speculative position on SRECs (see above section on transparency) do not lock their customers into contract obligations for their services. Obviously, aggregators that broker forward contracts obligate their customers to stay with them for the duration of the contract. If, for example, you sign up with an aggregator that brokers a contract to sell your SRECs for $100 for three years, but then the spot market jumps to $200 during those three years, you can’t opt out for the higher spot trades (another reason why flexibility in options is preferable).

I hope this provides a nice overview to help differentiate between aggregators. If you are thinking of leasing your system (in which case you likely would not own your SRECs), check out our post on what to look for. Or, if you want to go straight to the pros, fill out a quick evaluation form and we’ll contact installers your area!

Posted by Stuart Ivy

Original Article on Residential Solar 101

Clean Contracts vs. SRECs

The low risk and transparency of CLEAN Contract Programs can provide states with more solar at a lower cost than solar renewable energy certificate (SREC) programs, says a new report released last week.  Produced by the Institute for Local Self-Reliance (ILSR), CLEAN v. SREC: Finding the More Cost-Effective Solar Policyfinds that an otherwise identical solar project installed for $4.00 per Watt in the nation’s second-largest solar market, New Jersey, costs ratepayers 20 percent more when financed by SRECs rather than CLEAN Contracts.

The report also models the potential impact of New York’s proposed solar Solar Industry Development & Jobs Act of 2011 and finds that “the CLEAN Contract Program provides 40 percent greater ratepayer savings than an SREC program while providing 13 percent more solar power.”

CLEAN Contracts finance solar power development by requiring utilities to offer long-term (e.g. 20-year) contracts on a first-come, first-served basis at per-kilowatt-hour prices sufficient to attract solar development.  The policy (under various names) has provided financing for nearly 90 percent of the world’s solar power.  In contrast, SRECs represent the environmental value of a megawatt-hour of solar electricity.  Their price is high when there is a shortage of solar and low when there is a surplus of solar relative to the state’s mandated quantity.  This “market-based” mechanism served eight U.S. states fairly well until recent oversupply crashed nearly every state SREC market simultaneously.

“Many states were attracted to SRECs by the deceptive allure of the market,” said John Farrell, ILSR senior researcher and report author, “but this report highlights the irony: the volatility and cost of SRECs make this ‘market-based’ policy an inferior choice to CLEAN Contracts for states hoping to establish a robust and resilient solar market.”

The report details the major differences in the two solar policies, focusing on the risk factors for developers.  In all categories – including policy transparency, longevity and certainty – CLEAN Contracts make the process of developing solar projects less complicated and less risky.  CLEAN Contracts also more accurately price solar power than SRECs, because the former provides a modest return on investment based on the actual cost of installing solar power projects while the latter represent the surplus or shortfall of solar relative to a state-mandated demand for solar (and can fluctuate wildly).

The result is that CLEAN Contracts deliver more solar power at a lower cost.

CLEAN v. SREC: Finding the More Cost-Effective Solar Policy can be downloaded on ILSR’s Energy Self-Reliant States website at https://energyselfreliantstates.org/content/clean-v-srecs-finding-more-cost-effective-solar-policy.

Original Article on Energy Self Reliant States

In Focus: Solar Renewable Energy Credits (SRECs)

Solar Renewable Energy Credits, or SRECs, are an extra financial benefit to generating solar energy. In Maryland, and other states, electricity suppliers must produce a part of their electricity from solar generators. In order to meet this Renewable Portfolio Standard (RPS) – discussed in an earlier blog post, companies either produce enough solar energy themselves, or they must buy credits made by other systems.

This requirement is what benefits both commercial and residential consumers who install a solar system. For every 1,000kWh of electricity generated from solar systems, one credit is earned. These credits are sold on an open market to utility companies that fell short of meeting their RPS. The price of the SRECs is entirely based on the supply and demand of the SREC market, making the credits work almost like a stock.

So, what does this really mean for a homeowner who wants to install a solar system? Let’s say the a homeowner installs a 3 kW system, an average-sized solar array. This system, depending on factors such as peak sunlight time and shading, could easily generate over 5000 kWh per year. At that production, the homeowner would have 5 SRECs they could sell. At the going rate in August of 2011 of $199.99 per credit, this system would essentially generate $999.95 in passive income– in addition to energy savings.

SRECs provide incentives for energy companies to go solar. But they also add benefits for homeowners and business owners alike. The value of SRECs helps savvy investors see a return on their investment even quicker than through energy savings alone.

Original Article on Solar Energy World

Connecticut SRECs Back In Play

Connecticut Resumes Commercial Solar ProgramMany solar installers in Connecticut forecasted growth in the industry was hinging on the approval of anenergy bill that was introduced last year.   After being passed by large margins in the House and Senate, the legislation was eventually vetoedby Governor Jodi Rell, citing that the bill was introduced so late inthe session that it “was disrespectful to those who honestly desired toread and deliberate the bill’s provisions” and expressed “deep concernsthat the measure would raise utility rates for consumers – not reducethem, as bill sponsors claim.” 

Energy reform encouraged support for energy efficiency and alternative power sources, including solar energy, wind energy, and fuel cells.  There were many specific provisionsrelated to solar.  In fact, Environment Connecticut predicted that these alone would create 300 MW of installed solar capacity statewide.  Thelegislation introduced a Solar Renewable Energy Credit (SREC) marketinto the state.    An SREC program in Connecticut could drastically change the economics of an energy project.  Just to give you an example,  SRECs were introduced in Massachusetts last year and cut the payback of a solar electric investment in half. 

The legislation also called for an overhaul of the Department ofPublic Utility Control which would bring together all state officesdealing with energy policy under one administration renamed theConnecticut Energy and Technology Authority.  It’s most controversialmandate was a 15 percent reduction in the state’s electric utility rates by 2012.   Right now, Connecticut has the highest electricity rates in the domestic United States and this change would have put consumers at the same rates as neighboring states.

Even with disapproval that it was too substantial andall-encompassing, the bill will go back in front of lawmakers mostlyas-is.  After removing one provision about separate billing for energyretailers and utilities, retailer suppliers broke from the oppositionand are now behind energy reform.  Governor Dan Malloy is known to be aproponent of renewable energy technologies.  As Mayor of Stamford,Malloy supervised the first municipal solar installation in Connecticut.  The new governor also mentioned he would have signed the above SenateBill into law if he was in his post last year, although he hasn’tcommented on supporting the legislation in coming months.

2011 is going to be a great year for solar energy in Connecticut, and it will only get better if SREC legislation is signed into law. Although SRECs are not currently available in the state, solar powergenerators can earn some money selling Class I Renewable Energy Credits(RECs).  Brightstar Solar, a licensed Connecticut solar installer, can provide a complimentary evaluation to determine if solar energy would be a viable option for your home or business in Connecticut.  If you decide to move forward, our company will help you complete thenecessary paperwork to maximize available incentives for your project. Please contact us today to schedule your free solar evaluation.

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Massachusetts Announces Change to SREC Program

When Will MA Solar Rebate Program Reopen?Today, the Massachusetts Department of Energy Resources (DOER) has announced a change that mayaffect the price of Solar Renewable Energy Credits in 2011.  The agencyannounced a 10% reduction to the Alternative Compliance Payment (ACP)for this year.   They have the right to make these changes in accordance with 225 CMR 14.08(3)(b)2.

The marketplace for Solar Renewable Energy Credits (SRECs) in Massachusetts opened in January 2010.  SRECs are tradeable certificates thatrepresent all the positive environmental attributes of electricitygenerated from a solar electric system.  Each time a PV system generates 1,000 kilowatt hours (1megawatt hour) of electricity, an SREC is issued which can then be soldor traded separately.

The price of SRECs in Massachusetts is based on market availability. In 2010, that range could have beenanywhere from $285/MWh  to $600/MWh.  The Solar Credit ClearinghouseAuction essentially creates the price floor because they will purchaseany SRECS that cannot be sold on the open market for $300/MWh minus a 5% administrative charge, or $285/MWh.  If electricity suppliers fallshort of their SREC requirement for their RPS obligation, they will have to pay an Alternative Compliance Payment, or a penalty of $600/MWh. This is how we get to the price ceiling because the market value ofSRECs will never be greater than that penalty.

It is acceptable for DOER make a 10% rate reduction to the ACP if it is announced by January 31st of that year.  Today’s announced change for 2011 will reduce theAlternative Compliance Payment from $600/MWh to $550/MWh.  DOER hascited that the reduction was made because of falling PV equipment prices and the agency used conservative projections in their initial analysis.

So what does this mean to those who are interested in pursuing a solar installation or just recently purchased a PV system in 2010?  Perhaps, very little.  The prices for Massachusetts SRECS were over $500 in 2010.  As Imentioned above, SRECs are based on market availability.  SRECaggregators, who are closest to the market, believe that electricitysuppliers will not meet their 2011 solar carve-out requirements and SREC prices should remain above $500.  However, there is no guarantee of the future and I will be watching and waiting to see what happens aseveryone else is.

Between falling solar equipment prices and federal and state incentives, there has never been a better time to invest in a solar installation in Massachusetts.  Brightstar Solar is a licensed solar installer and we work with our customers to help navigate the installationprocess, maximize incentives, and manage all of the rebate andpermitting paperwork involved.  If you have a home or business in Massachusetts and are interested in solar power, please contact us for a free evaluation.

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Will SRECs Save the U.S. Solar Industry?

California may be the America’s reigning Little Germany for PVinstallations, but states with Solar Renewable Energy Credit (SREC)markets may be where new solar dreams are made.   Results from theinaugural SEIA/GTM Research U.S. SolarInsight™ (to be launched at Solar Power International in mid-October) show that the seven states with SREC markets haveinstalled a combined 110 MWdc in the first half of 2010.  If second half installations continue at a similar pace, year-on-year growth will beover 148% in these states, dwarfing a 28% year-on-year growth for theoverall U.S. market’s pace.  In actuality, growth rates for all marketswill be higher, as SEIA/GTM Research forecasts nearly 870 MWdc of U.S.PV installations in 2010, owing to uniformly strong second half surges.

New Jersey clearly leads SREC states with a phenomenal 59.4 MWdcinstalled in the first half of 2010 — already surpassing last year’stotal installed capacity.  However, the remaining SREC states ofDelaware, Maryland, Massachusetts, North Carolina, Ohio and Pennsylvania are also rocketing off with a combined 33.6 MW installed in the secondquarter alone.  As covered in PVNews’ October issue, Pennsylvania installations this year have reached a stellar 14.4 MW –despite the lack of any new utility solar projects — in the first halfof 2010 from just 3.9 MW in 2009.

SRECs are specialized tradable renewable/alternative energy credits(measured in MWh) created by generation portfolio standards that require a certain percentage of the utilities’ electricity to be generated from solar.  Due to this PV “carve-out,” SRECs have a built-in premium incomparison to RECs from other sources.  The price of SRECs is determined by the supply of solar generation and the demand to meet state RPSrequirements, with a price ceiling created by the Solar AlternativeCompliance Payment (SACP) — the penalty that electricity suppliers must pay if they fail to acquire the requisite SRECs.  In some states, likeMassachusetts, a price floor is created to lessen the risk offluctuating SREC prices.

Continue Reading at Greentech Media

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What Your Solar Installer May Not Have Told You About Massachusetts SRECs

MassachusettsQuarterWith the arrival of Solar Renewable Energy Credits (SRECs) in Massachusetts, the economic viability of solarhas improved dramatically.  Unlike state and federal rebates and taxcredits, there is still a lot of uncertainty about how much SRECs are worth and how long they will be around. Solar Renewable EnergyCredits (SRECs) are tradeable certificatesthat represent all the positive environmental attributes of electricitygenerated from a solar electric system.  Each time a solar systemgenerates 1,000 kilowatt hours (1 MWh) of electricity, anSREC is issued which can then be sold or traded separately. 

Massachusetts SRECs are priced at market valuerather than a fixed price.  The price floor is established by the SolarCredit Clearinghouse Auction which may purchase SRECs notsold on the open market at a $300/MWh fixed rate minus a 5% administrative charge.  The price ceiling is created by the SolarAlternative Compliance Payment (ACP), or the penalty that utilities must pay if they do not meet their SREC requirement mandated by theRenewable Portfolio Standard.  The ACP is currently priced at $600/MWh, but can be reduced in future years based on supply and demand.  Basedon this information, it is safe to safe that a home or business with asolar installation can receive between $285/MWh and slightly less than $600/MWh this year.  That’s a prettywide range. 

From my perspective (and please let me know if yourinterpretation differs), the owner of a solar installation has twooptions.  You can roll the dice and try to sell your SRECsaggregator and try to getcloser to the price ceiling of $600/MWh.  From myconversations with Knollwood Energy, one of the largestSREC aggregators in the Northeast, they are optimisticabout the value of SRECs generated in 2010.  If youinstalled your PV system in January 2010, then you would record theelectricity generated for the first quarter (January 1 to March 31) atthe beginning of April.  The market value would be determined about onequarter and two weeks after the end of the first period which would bethe mid-July timeframe and solar system owners would bepaid soon after.  In the open market arrangement, there is someambiguity to how long SRECs will be available inMassachusetts.  The market for SRECs opened on January 1,2010 and it will only support 400 MWh of new solar (PV)capacity.  The Massachusetts Department of Energy Resources stated ontheir website that there is no way of knowing when that goal will bereached, but the state initially targeted they would reach this goal in2016.on the open market through an

The other option is a term agreement at the price floor through the Solar Credit Clearinghouse Auction.  Each solar installation willbe given a set term of years during which it will have the right (butnot the requirement) to deposit Solar Renewable Energy Certificates (SRECs) into the Auction Account. The term begins at 40 quarters or 10 yearsfor Compliance Year 2010; however, it may be adjusted downward by twoyears annually.  All projects installed in a given year will be giventhe same term established for that year.  As mentioned above, theauction rate is set at a fixed rate of $285/MWh. Therefore, you know exactly what you’re getting for a 10 year period. The timing of payment differs from selling SRECs on theopen market through an aggregator.   The auction for SRECs generated in calendar 2010 will be held the following July, – July2011.  That means that a PV system owner who decides they want todeposit their SRECs into the Auction Account will have towait until they can cash in on the value of these credits.

If you are in the process of evaluating a PV system, payattention to what your solar installer predicts is the value of SRECs and also look at the duration of payment.  They should be showing youthe most conservative calculation.  DO NOT… I repeat, DO NOT pick asolar installer just because they promise a higher value for your SRECs.  Their own best interest is to show an aggressive valuation that showsyou the quickest payback.  On paper, it may look like you’re getting the best bang for your buck from this installer, but they will not be theentity that will be exchanging or paying you for SRECs.  If you see anything above $285/MWh, ask to speak to the SREC aggregator that gave them this pricing.  A good solar installer should beeducating you about the options and should help you navigate the SRECprocess.

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Massachusetts SRECs Explained – Part I

SolarPanelsBeingInstalledMassachusetts joins other stateslike New Jersey , Pennsylvania, and Maryland in creating an SREC marketin 2010.  However, what sets the Massachusetts SREC system apart is that it is a market driven system that allows flexibility to react to market conditions.   In addition, most of the other states have an SREC system that is based on  requiring a certain portion of electricity to comefrom solar generation, where Massachusetts imposes a “minimum standard”.

What are SRECs?

SRECs, or Solar Renewable Energy Credits, are tradeable certificatesthat represent all the positive environmental attributes of electricitygenerated from a solar electric system.  Each time a solar systemgenerates 1,000 kilowatt hours (1 megawatt hour) of electricity, an SREC is issued which can then be sold or traded separately.

What projects qualify for SRECs?

In order to qualify for SRECs, projects must be in Massachusetts(with some exemptions to previous contracts) and must be grid-tiedsystems under 2 megawatts (DC).  For 2010, the Solar Carve-Outrequirement is 30 megawatts DC, with a soft target of  70 megawatts DCin 2011, and the maximum is to estimated be reached in 2016 at 400megawatts.

What is an SREC worth in Massachusetts?

There is not definitive answer.  The price of SRECs is created bymarket availability and can range anywhere from $285/MWh  to $600/MWh. The Solar Credit Clearinghouse Auction essentially creates the pricefloor because they will purchase any SRECS that can not be sold on theopen market for $300/MWh minus a 5% administrative charge, or $285/MWh. .  If electricity suppliers fall short of their SREC requirement fortheir RPS obligation, they will have to pay a penalty of $600/MWh.  This is how we get to the price ceiling because the market value of SRECswill never be greater than that penalty.

How can I participate in the  SREC program?

Homes or business with solar electricity-generating systems canparticipate in this program via an “opt-in” agreement, which guaranteesparticipation for a set number of years.  In 2010, the “opt-in”arrangement is for 10 years and can be adjusted downward by 2 yearsannually.

Example of SREC potential benefit in Massachusetts.

Let’s take a look at a 10 kW DC system for a residential customer.  A system of this size would produce about 12 MWh so it could qualify for12 SRECs annually.

Minimum SREC Payment: 12 MWh  x $285/MWh =  $3,420 annually

Minimum SREC Payment over 10 years =  $34,420

The above is a very conservative estimate.  If SRECs are priced atthe ceiling, the SREC payment would be significantly more generous.

Maximum SREC Payment over 10 years = $72,000  – That’s a pretty goodincentive to go solar!!

Why should I install a solar electric system now?  Will SRECs expire?

As stated above, the opt-in agreement is for 10 years and can beadjusted downward by 2 years annually.  You have the opportunity toreceive the most benefit this year since you can sign on to a 10 yearterm.  In addition, the Solar Carve-Out will only support 400 MW of newsolar capacity in Massachusetts. Once the  goal is reached,  the opt-interm for all solar generators has expired, and SRECs will no longer begenerated. At that time, solar facilities can generate renewable energycredits (RECs) and can sell those for compliance under the Class Istandard.

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New Jersey SREC Program Commended by the EPA

SRECThe New Jersey SREC Programwhich has made solar financially viable for many New Jersey residentshas won an award from the U.S. Environmental Protection Agency (USEPA). The SREC program which was established in 2004 and is managed by theBoard of Public Utilities and the New Jersey Clean Energy Program, was recognized by the USEPA’s Clean Air Excellence Awards Program in thecategory of Regulatory and Policy Innovations.

After receiving the award Lee Solomon, president of the NewJersey Board of Public Utilities said,
We are honored to receive this award from the EPA. NewJersey’s SREC program is the first in the nation to successfully begin the transition from upfront incentives to a market-based system forproject finance. By avoiding upfront incentives, the SREC programlowers the financial impact on ratepayers while continuing to motivate solar electricity installations.

If you want to see just how lucrative these credits can be take alook at the example on our New JerseySolar Rebates, Incentives, and Tax Credits page. TheSREC program has propelled New Jersey to second place behind Californiain total grid-tied solar electric capacity and more importantly theprogram will continue to drive solar adoption as solar rebates declineover time.

If you think you might be a good candidate for solar and want to find out more about how much you could save (or make) by installing a solarpower system, let us connect you with qualifiedinstallers who can answer any questions and provide you with tailored,no obligation quotes.

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SRECs Explained

Even among the solar-savvy, many people do not know what Solar Renewable Energy Credits (SRECs) are or what potentialbenefits they represent. As we’ve mentioned before, SRECs (or often simply RECs) allow generators of renewableenergy to sell credits to businesses like utilities who need them tocomply with government regulations. These credits accrue automaticallyto solar panel owners and often can be traded and sold like stocks onthe stock market. 

Click here to view the embedded video.

The team over at 1bogcreated this video that explains SRECs and how they can yield financialbenefits to owners of solar panels.For more information check out 1bog’s SREC page here.

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Making Money with New Jersey SRECs

In addition to the federalinvestment tax credit, in which 30% of your solar investment can bewritten off against your taxes no matter where you live, states like New Jersey have begun to offer tremendous local incentives for residents to adopt solar lifestyles.  One of those incentives is known as a Solar Renewable Energy Credit (SREC), which can appear confusing at first but isactually quite straightforward.

Think of it this way: your rooftop photovoltaic(PV) system is your own business enterprise.  Inthe world of business, as a company generates revenue, it issues stocksand bonds, which are then sold in a financial market, bringing in evenmore money for the firm.  Your PV system isn’tgenerating financial revenue, however; it’s generating clean energy“revenue.”  And as you generate a predeterminedamount of energy, you are issued a “share” in the form of an SREC,occasionally known as a Green Tag, which you can then sell on the market to the highest bidder.

Why would anybody want to buy an SREC from you?  The answer is that many states have what’s known as a renewable portfolio standard (RPS), in which the state has decided that a certain percentage of its total electricity has to come from solarpower each year.  Power utilities need to meetthat percentage, or pay huge fines.  So they turnto residential and commercial suppliers (i.e. you) to buy green powercredits.

In New Jersey, for example, once your installer has connected your PV system to the grid, you’ll earn one SREC forevery 1000 Kilowatt hours (kWh) of generation, which is thesame as one Megawatt hour (mWh).  Mid-Atlanticstates typically get 10,000-12,000 hours of usable sunlight per year, so for every kilowatt in your PV system, you’ll get 1-1.2 SRECs annually.  So if a typical home requires a 7 kilowatt system,you can expect to earn at least 7 SRECs per year.  Once you install your system, you can earn SRECs for fifteen years, and they last for two years once issued.

Now, onto the fun part—making money. Once you register your system with the SREC tracking system, you’ll create an online account that will log your green power generation.  You’ll be issued energycredits, which you can then post onto a message board on the website and negotiate the terms of your sale directly with utility buyers.  For those who’d prefer to let someone else handle thenegotiations, you can arrange to have an agent or “aggregator” handlethe sales of SRECS.  

So how much can you expect to make? Well, in New Jersey the state has issued what’s known as a Solar Alternative Compliance Payment.  It’s the penalty per mWh that utilities have to pay if they don’t have enough SRECsrelative to their target.  This year it’s around$690, which acts as ceiling price (i.e. they’ll never pay you more, butthey will pay up to it per SREC).  So far thisyear the average price has hovered around $550 per SREC in New Jersey.  So if you’regenerating 7 SRECs per year, that’s $3850 in cash coming in to you every year—not bad!

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New Jersey Solar Rebates, SRECS, and Incentives

New Jersey State Picture

New Jersey gets bad wrap about a lotof things.  All those turnpike exits, and that glorious smell as you gopast the oil refineries in the Northern part of the state. But onething you can’t fault the garden state is Solar. In fact, New Jersey isat the top of our 2009 Solar Report Card. It got an A, and here’s why:

  • It’s got net metering with easy interconnection standards (Little hassle and red tape.)
  • It’s got a great rebates and incentives, including a very generousSolar Renewable Energy Certificate (SREC) program that PAYS you forgenerating your solar power.

Bottom line, for an average size 5Kw system for someone with a $100/month electric bill before solar:

  • Cost Before Incentives: $35,000 (5000watts x $7/watt installed) (Don’t panic!)
  • State Rebate: subtract $8,750
  • SREC value: subtract about $3400/year for 2009 (probably less as years go by)
  • 30% Federal tax credit: subtract $7875 (calculated after State rebate)
  • Years to Payback: 8-9 years, depending on SREC value.

Estimated NET cost: $ 14,975

Oh, yeah. This helps too:

  • Greenhouse Gas (CO2) Saved: 9618lbs/year, or like not driving 11,500 miles a year.
  • New monthly electric bill (first year): About $13/month.

Check out the more detailed explanation of New Jersey’s solar rebates and incentives.Or, if you just want to see what it will cost you and your family, justfill out our form, and we’ll set you up with a free quote.

Feel great about yourself, Solar People of New Jersey. You Rock!

Original Article on Solar Power Rocks

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