As released in the “U.S. Solar Market Insight: Q1 2012” report, New Jersey tops the list of installed capacity per state with 174 MW installed in Q1 2012 alone.  Compared to the 313 MW installed for the entire year of 2011, New Jersey continues to maintain a robust market for solar.  However, New Jersey will not remain atop this list for long, due to the dramatically declining SREC prices. As the SREC market becomes less attractive, future customers will have less and less incentive to build solar due to a longer return on investment. In future months, SREC markets will continue to decline unless the New Jersey legislature takes the initiative to pass the legislation before them.

Recently, the New Jersey legislature has provided some hope for the future of this volatile market. On May 31, 2012, the New Jersey Senate passed the substitute version of S1925 with a vote of 23-9. The bill was then reported to the Assembly, where it was introduced as Assembly Bill 2966. Most recently, on June 7, 2012, the Assembly Telecommunications and Utilities (ATU) Committee heard and passed A2966 with amendments by a unanimous vote.  A2966 will soon be considered for a second reading.

It should be noted that A2966 and S1925 are not identical bills.  Since the ATU Committee has now amended the Senate version, these two bills must be compromised, meaning the Senate and Assembly must agree and pass identical bills before the final version goes off to the Governor for a vote.

In order to bring the SREC market to a viable level, the three defining influences in the market must be addressed – supply (i.e. installed capacity), demand (i.e. solar RPS requirements), and SACP (i.e. the Solar Alternative Compliance Penalty, which acts as a price ceiling). Both A2966 and S1925 have language to increase the SREC requirement under the Renewable Portfolio Standard (RPS) as well as lower the Solar Alternative Compliance Payment (SACP). However, the difficulty emerging for this bill surrounds the inability to determine the most appropriate and aggressive percentage requirements, and the most incentivizing SACP levels to avoid potential costs to ratepayers. Due to these difficulties, the percentage (%) requirements for the solar carve-out and the SACP values have faced major changes. The Senate version provides a more aggressive percentage requirement and lower SACP values than the Assembly version. Regardless, the bottom line for each provision remains the same – the RPS requirements will be increased and changed to a percentage (%) requirement, and the SACP will decrease as compared to the original values. (See charts below for updated values)

Although the increased demand and decreased SACP will help to alleviate the oversupply and potentially increase SREC prices, agreeing on the appropriate values for these requirements seems to be the most daunting task in this legislative process. Increasing the RPS requirements will require utilities to procure a larger amount of SRECs per year. The more aggressive demand schedule in S1925 may work more quickly to alleviate the already developed oversupply. At the same time, failing to meet these higher demands forces utilities to consider payment of the SACP. However, with the reduction in the SACP, in case of an undersupply, utilities will not be forced to pay the significantly higher original values. A reduction in the SACP will cushion the potential impact of a higher SACP and also reduce the impact on the ratepayer, as utilities will tend to pass this higher cost onto the ratepayers. The SACP for S1925 is, on average, $14 lower than the SACP listed in A2966, thus creating more of a cushion for utilities and ratepayers if S1925 were to be passed.

Table 1. Comparison of SACP Values

Table 2. Comparison of solar carve-out requirements

Ideally, the reduced SACP and increased solar requirements would work to stabilize the falling SREC market and create a more viable incentive for new solar installations. However, even with more aggressive requirements in S1925, it may still take  a few years before the market is undersupplied again and prices truly begin to rise. Furthermore, although solar installations continued to increase in Q1 of 2012, there is still a concern that the declining SREC prices will cause a half or slowing of installations in the near future, thus impacting the solar economy, and solar jobs specifically. With a more viable SREC market and higher SREC prices, the solar economy and solar jobs would not experience the potential decline that they are facing with the current market.

On a more positive note: the New Jersey market has experienced an uptick in SREC prices due to this legislation. The recent support and promise in the New Jersey legislature is a welcomed relief, although it is not clear if these higher prices are sustainable. For now, it is a wait and see story.

Sol Systems will continue to track the process of this bill.  Please check out our blog for further updates.

Sol Systems currently offers three types of SREC agreements for NJ solar systems: Sol Annuity, Sol Brokerage, and Sol Upfront.  Please email

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