Solar Finance


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Solar Fun Facts

Photovoltaic cells are the basic building blocks of solar electric systems. They are composed of ultra-thin layers of silicon. When sunlight strikes the surface of the cell, an electrical field is created resulting in a flow of electricity.

Installing a solar power system makes sound financial sense for many businesses, schools, and property owners in New Jersey. Owners of solar systems get financial benefits from the following:

  • Reduced electric costs
  • State rebates and incentives, including the sale of “SREC’s”
  • Federal tax credit (if the owner is a tax paying entity).
  • Tax benefits from accelerated depreciation (if the owner is a tax paying entity).

Federal and State rebates and incentives

Solar system installations are currently heavily subsidized by government rebates and incentives. New Jersey is a national leader in solar rebates and credits. Rebates and credits include:

  1. The owner gets the benefit of the electricity provided by the system. Electricity costs are forecasted to continue to increase. The higher utility rates rise, the more you save, and the more valuable your system becomes.
  2. New Jersey Solar Renewable Energy Credit (SREC) Program:
    The owner of a solar system is entitled to one Solar Renewable Energy Credit (SREC) for each 1,000 kilowatt hours (kWh) the system produces. These credits are traded on an open market, based on the demand by NJ electric companies. The SREC market is driven by the Solar Alternative Compliance Payments (SACP’s) set by the NJ Board of Public Utilities. NJ electric companies buy the SREC’s to avoid having to pay the Compliance Payments, if they are not meeting their target production of clean energy. NJ’s SREC prices are currently the highest in the U.S., due to an aggressive clean energy policy established by the NJ Board of Public Utilities.
  3. In New Jersey, rebates are available for some residential and public and non-profit commercial projects under NJ’s Renewable Energy Incentive Program (REIP). These rebates change periodically and are subject to availability of funds.
  4. A Federal tax credit is available for 30% of the system cost, with no limit on the amount of the credit (available for owners who pay taxes). Alternatively, Federal Grants are available to fund the 30% credit shortly after system completion.
  5. The IRS allows five year, accelerated depreciation of system costs to tax paying owners, which provides a substantial tax savings.

Financing options

There are various options for financing the cost of a solar system. Loan programs are available from PSE&G (for systems in its service area), the NJ Economic Development Authority, and banks. Typically, a loan will cover 40% to 60% of the cost of the system. With the 30% federal tax credit, an owner can install a system with very little up front investment.

Atlantic City Electric (ACE), Rockland Electric, and Jersey Central Power and Light (JCP&L) also offer financial incentives.

Return on investment

With the rebates and incentives, solar systems offer a good return on investment. Most businesses and property owners see returns of at least 7% on their solar investments. The cost of a solar installation can usually be recovered within 5 to 10 years; depending on where you are located and how much electricity you use.