Did you know that you can put solar on your roof in New Jersey, and earn actual cash for 15 years for doing so? Even though you’ll also get to use that clean power you make – because you can stop paying electric utility bills (that average 17 cents a kWh in the state) yet your solar home earns money for producing electricity. You get to have your cake and eat it too.
The money you can earn comes through legislation akin to the remarkable Feed-in Tariffs that shot Germany and Spain to solar leadership. You earn the money for sending clean sunshine power to the grid with Solar Renewable Energy Credits (SRECs).
The money you can make can be staggering.
Here’s how it works.
New Jersey utilities have to add a certain amount of renewable energy every year to the grid to meet a Renewable Portfolio Standard (RPS), like the utilities in more than half the states now. In New Jersey’s case, some solar is a requirement. They must get over 200 MW of solar power onto the grid, or 3 percent of the energy they sell by 2020 (and that rises to 5 percent by 2026).
Rather than battle over building their utility-scale solar requirement on empty deserts, like sunbelt utilities do – empty desert land is so hard to find in New Jersey – the utilities can meet the requirement if enough New Jersey homeowners and businesses in the state install a little bit of solar on each roof.
Then the utility can simply account for the power being produced off each roof, a megawatt hour at a time. Most homes have enough roof space to make at least 4 megawatt hours of power every year (that’s 4,000 kilowatt hours annually).
Each time your meter shows you’ve generated a megawatt hour – you can sell what amounts to your certification of power produced for your neighbors on the grid with a Solar Renewable Energy Credit or SREC. You get paid for your SRECs by auctioning them at SRECTrade (or Envirotrade which has operated in Europe for some time) because utilities will compete to buy your SREC at auction, or pay a non-compliance fine that is kept at over $600 in New Jersey. This amount is what keeps NJ SREC auction prices high.
In 2008, when they first went on sale, a New Jersey SREC auctioned for $461 (for an annual megawatt hour or for each 1,000 kWh you make in a year), but that price sailed up over $600 within months and has since consistently remained at over $650 a megawatt hour. This month it is $665.
Most homes have enough roof space to make 4,000 to 10,000 kilowatt hours a year. The earnings potential for this range is from $2,660 to $6,665 a year. Every year for 15 years.
This huge return means most solar systems in New Jersey will be fully paid for with SRECs within four years, no matter what size they are. And then you would be earning actual money while you stop paying your utility for electricity.
For example, a big 11 KW system (over 50 panels: you’ll need about 30 x 40 feet) would produce over 12,000 kWh a year (12 megawatt hours a year) of solar energy.
Lets say you connected 11 KW to the grid this month. The current auction price this month is $665 per megawatt hour, so this year’s 12 megawatt hours you will make will earn you almost $8,000 this year. Each year you sell that annual supply of 12 megawatt hours, so you keep earning about $8,000 a year in passive income from the one 11 KW solar system you hooked up this month. Over the 15 years that would be about $96,000.
Now subtract the cost of your 11 KW system. Such a large one would be about $30,000 with the current rebates. That leaves about $66,000 in cash profit over the next 15 years. You can lock in your rate for 15 years.
Now, before you think of rushing to New Jersey to retire on a passive income from solar farming, (which is exactly what I thought of!) – there is a drawback. You are not allowed to install a larger system than you need, based on past usage. So this is not like a Feed-in Tariff that directly encourages solar farming, like in Germany or Spain.
And it is probable that eventually the SREC income will be taxable (it isn’t currently), once you have passed your first four years and are in the pure profit portion of your 15 year trading partnership for your SRECs.
And it is possible that New Jersey SRECs will eventually go lower because so many New Jersey homeowners and businesses jumped at this chance to make clean power for the grid, which gave utilities more options for SRECs on the market to buy. (Already, tiny New Jersey is second only to California, because of this legislation.) Neighboring states’ auction prices are around $300, although Massachusetts offers between $500 to possibly $600, with a floor of $300.
For example, if you get your system on the grid this year, you’ll earn precisely $664.99 per SREC. Next year? $600. The longer you wait, the more of your neighbors you’ll be competing against.
Don’t have $30,000 to invest? Just get free $0 down solar through a leasing program or a power purchase agreement like SunRun‘s PPA (power purchase agreement) and get rock bottom neighborhood discounting through 1Block off the Grid. You’ll still get to sell your SRECs, and use the solar power as well. You won’t make as huge of a profit with a PPA (after 4 years) but to have your cake and eat it too, that is a pretty good deal.
(I have in the past helped people who want to get into a SunRun residential PPA, and have helped organize neighborhoods for 1 Block off the Grid in the San Francisco Bay Area.)
Susan Kraemer writes at CleanTechnica, CSP-Today, PV-Insider , SmartGridUpdate and GreenProphet and has been published at Ecoseed, NRDC OnEarth, MatterNetwork, Celsius, EnergyNow and Scientific American. As a former serial entrepreneur in product design she brings an innovator's perspective on inventing a carbon-constrained civilization: If necessity is the mother of invention: solving climate change is the mother of all necessities! As a lover of history and sci fi, she enjoys chronicling the strange future we are creating in these interesting times. Follow Susan @dotcommodity on twitter.