TRECs: Powering New Jersey's Solar Future

Learn about TRECs and how to monetize your rooftop solar in New Jersey.

Last updated
June 30, 2024
Author: Matt from Currents
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New Jersey has long been at the forefront of solar energy adoption in the United States.

In 2020, the state introduced a new solar incentive program called Transition Renewable Energy Certificates (TRECs) to replace the previous Solar Renewable Energy Certificate (SREC) system.

What are TRECs?

TRECs are performance-based incentives awarded to solar system owners for the clean energy they produce.

For every megawatt-hour (MWh), or 1,000 kWh, of electricity generated by an eligible solar installation, one TREC is created. These certificates provide a financial benefit to solar owners, encouraging the adoption of solar energy across the state.

How do TRECs work?

Unlike the previous SREC system, which had a fluctuating market price through brokers like SRECTrade, TRECs offer a fixed incentive price for a 15-year period.

This stability provides long-term certainty for solar project owners, making solar investments more attractive and predictable.

The TREC program uses a factorized system, where different types of solar projects receive different incentive rates. For instance, net-metered residential rooftop systems have a factor of 0.6, meaning they receive 60% of the full TREC value.

TREC price chart for NJ solar

TREC Values and Earnings

The full value of a TREC is set at $152.

For residential rooftop solar projects, which have a factor of 0.6, this translates to $91.20 per MWh generated.

Let's break down what this means for an average New Jersey household:

  • A typical 6kW solar system in New Jersey produces about 7,008 kWh (or 7.008 MWh) annually.
  • This would generate approximately 7 TRECs per year.
  • At $91.20 per TREC, this amounts to about $638.40 in annual earnings.
  • Over the 15-year lifespan of the TREC program, a homeowner could earn around $9,576.

Different factor ratings for project types

Advantages of TRECs

  1. Stability: Unlike the volatile SREC market, TRECs offer a fixed price for 15 years, providing long-term financial certainty.
  2. Longer Duration: TRECs are available for 15 years, compared to the 10-year period of SRECs.
  3. Immediate Benefits: While other incentives like the federal Investment Tax Credit (ITC) provide upfront savings, TRECs offer ongoing benefits throughout the system's lifespan.
  4. Boosting ROI: TRECs significantly enhance the return on investment for solar installations, making solar more accessible and attractive to a broader range of property owners.

TRECs vs. Other Incentives

While TRECs are a valuable incentive, they're not the only benefit available to solar adopters in New Jersey.

The federal Investment Tax Credit (ITC) is another significant incentive. Currently set at 26% of the system cost, the ITC provides immediate tax relief.

For example, a $20,000 solar installation would qualify for a $5,200 tax credit. While this upfront saving is substantial, the long-term benefits of TRECs often surpass the ITC.

Over 15 years, a typical residential system could earn over $9,500 in TREC payments.

Impact on Commercial Enterprises

TRECs are particularly advantageous for commercial enterprises in New Jersey.

The fixed price of $152 per MWh for roof-mounted commercial solar projects provides a stable, long-term revenue stream.

This certainty makes it easier for businesses to forecast their energy costs and ROI, encouraging more commercial entities to invest in solar.

Large-scale commercial enterprises with ample unused space on rooftops or parking lots can leverage the TREC program to significantly offset their energy costs while contributing to New Jersey's clean energy goals.

The Future of Solar Incentives in New Jersey

The TREC program is designed as a transitional measure, bridging the gap between the old SREC system and a future, yet-to-be-determined successor program. While the exact details of the successor program are not yet known, the success of TRECs in stimulating solar adoption will likely inform its structure.

TRECs represent a significant step forward in New Jersey's commitment to renewable energy. By providing a stable, long-term incentive, they make solar energy more accessible and financially attractive to both residential and commercial property owners. Now is an opportune time to take advantage of the TREC program. With its fixed rates and 15-year duration, TRECs offer a predictable return on investment that can significantly offset the costs of going solar.

Earn passive income selling your solar credits.

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