Net metering helps customers maximize their renewable energy investments. It enables customers to obtain full retail credits on their utility bill for each kWh of electricity their system produces up to 100% of their electricity usage over the course of a year.
When a renewable energy system produces more electricity than the customer actually uses, the customer will be compensated with credits at the full retail value of the electricity for the production over and above what they use. For example, on a typical sunny day at moderate temperatures, a customer with a solar system may use less electricity than the system actually generates. When electricity production exceeds usage, the utility meter will spin backwards and provide the customer with credits for the excess energy produced. These credits can be used by customers as needed.
With net metering, your electric meter spins forward when electricity flows from the utility into the home, and backwards when power flows from the home to the utility. If at the end of a year, you still have credits on your bill, those kWhs are "netted," or paid back, on an annual basis.
The below video will explain in great detail how net-metering works. While it is prepared for utility customers in New York, the principles are the same.
NJ Property Tax Exemption
New Jersey offers a property tax exemption for installing a solar system, installing a solar system will not increase your tax liability. Forms for this exemption are available from your local municipaility.
26% Federal Income Tax Credit
The federal government provides a one-time 26-percent renewable energy tax credit to individuals who install a solar photovoltaic (PV) system. Unlike a tax deduction, this tax credit offsets your taxes on a dollar-for-dollar basis and can be carried forward into future years. The new Federal tax bill reduces this tax credit to 22% in 2021 and then eliminates it entirely after 2021.
Solar Renewable Energy Credits (SRECs)
Each time a solar installation generates 1,000 kilowatt-hours (kWh) of electricity, an SREC is earned. Solar project owners report the energy production to the SREC Tracking System. This reporting allows SREC’s to be placed in the customer's electronic account. SRECs can then be sold on the SREC Tracking System, providing revenue for the first 10 years of the project's life.
Electricity suppliers, the primary purchasers of SRECs, are required to pay a Solar Alternative Compliance Payment (SACP) if they do not meet the requirements of New Jersey’s Solar RPS. One way they can meet the RPS requirements is by purchasing SRECs. As SRECs are traded in a competitive market, the price may vary significantly. The actual price of an SREC during a trading period can and will fluctuate depending on supply and demand.
Once your solar project has been installed and your online SREC Tracking System account has been established, SRECs will be deposited in your account. The SREC Tracking System also records the sale of SRECs from generators to purchasers.
New Jersey Governor Phil Murphy recently signed clean energy legislation that closes the door to new SREC applicants no later than June 1, 2021.
The bill, passed by the State Senate in April and signed on May 23, 2018, directs the New Jersey Board of Public Utilities (BPU) to adopt regulations closing the program to new applicants within 180 days of its effective date. It also calls for immediate program closure when each of the state’s energy providers reaches a 5.1 percent benchmark for sold kilowatt hours (KWh) sourced from solar electric power generators before the 2021 deadline.
For new applicants, the bill also reduces the standard SREC eligibility term from 15 to 10 years, though previously grid-connected solar facilities are still eligible to earn Renewable Energy Certificates (RECs) beyond the 10-year SREC limitation.
While Bill A-3723 will effectively end New Jersey’s current SREC program, it also requires that the BPU conduct a study to determine ways to modify or replace the SREC program to “encourage the continued efficient and orderly development of solar renewable generating sources.”
The bill, while promoting renewable energy in NJ, shifts the focus of incentives away from solar towards investment in wind and nuclear.