TREC: New Jersey’s New Solar Incentive
The Transitional Renewable Energy Certificate (TREC) program will compensate new commercial solar installations in NJ at a fixed rate for the next 15 years, providing businesses with price certainty.
Solar incentives are popular mechanisms for encouraging solar adoption in the United States. Various incentives are available at federal and state levels, serving to reduce the upfront cost of installing a commercial solar photovoltaic (PV) system – or even generate a revenue stream through the clean electricity that the solar PV system generates.
New Jersey has historically been an ideal state for implementing solar and is known for its excellent solar incentive offerings. A strong Renewable Portfolio Standard (RPS) with a dedicated carve-out for solar, plus the state’s solar renewable energy certificate (SREC) market, have helped create demand and investor confidence in solar. This favorable solar market, in combination with high electricity rates in the state, has yielded a short solar payback period for businesses across the Garden State.
New Jersey kicked off the SREC program in 2004, which was successful in encouraging many local homes and businesses to install solar. However, the Clean Energy Act of 2018 required the SREC program to close once 5.1% of the state’s power came from solar, which was predicted to occur in early 2021.
The SREC program was due to be replaced by a major overhaul referred to as the “Successor Program”. The successor program, which may borrow some elements from New York’s Value of DER (VDER), should be ready in 2021, but the state hit the 5.1% solar target in April, 2020 – faster than expected. As a result, TREC has been launched to serve as a bridge program until the successor is ready.
What are TRECs?
TRECs are very similar to SRECs in the sense that both incentives are based on the production of your solar PV system. Similar to an SREC, a TREC is a certificate that is generated every time a qualifying solar PV system generates one MWh (1,000 kWh) of energy.
The main difference between an SREC and a TREC is the pricing structure. With SRECs, the value of those certificates varied based on a market price (up to a cap), but with a TREC, the price is fixed for 15 years after installation. So, if you install a solar PV system in late 2020, you can know exactly what you’ll earn for each MWh through late 2035, ensuring peace of mind through price certainty and accurate forecasting of revenue through this incentive.
How much are TRECs worth?
The price per TREC varies by the type of solar PV installation. Businesses that install solar PV systems on their rooftop or carport will receive $152 per MWh; if installed on the ground it will earn $91.20 per MWh. To give a very rough estimate – if a business installed a 500 kW system on their roof, it might generate around 550,000 kWh per year, which is 550 certificates. At $152 per certificate, the TREC program would generate a revenue stream of $83,600 per year for that business.
The final compensation will vary based on a number of factors, including solar PV panel design, shading and equipment degradation. It also only refers to the TREC compensation – the same solar PV system would also be eligible for other incentives, such as the federal-level Business Investment Tax Credit (ITC) at 26% of the solar PV system purchase price. For an estimate specific to your business, please contact us.
How long will the TREC program be open?
The TREC program will be open until the Successor Program is designed and ready to launch. That date is not yet set, but there’s a good chance TRECs will no longer be open to new projects at the end of 2020.
What are the next steps?
Installing commercial solar allows New Jersey businesses to control their energy costs and insulate themselves from inevitable increases in utility pricing for electricity – while improving their carbon footprint.
The TREC program offers high and predictable compensation for new solar PV installations, which is likely to be more lucrative than the Successor Program which eventually replaces TRECs. It can also be combined with the ITC, which provides a 26% tax credit for systems installed in 2020 (falls to 22% in 2021 and 10% in 2022).
Like all solar incentive programs, there is a limited time for businesses to act before incentives expire or sunset. Therefore, now is an excellent time for your business to lock in the benefits of solar. To learn more and for a customized quote, please contact us below.