New Jersey Solar Rebates and Incentives

How Much Can You Save on Solar in New Jersey?

Key Details

• New Jersey is one of the fastest-growing markets for solar systems in the US.
• Solar energy is the largest source of renewable energy in New Jersey, accounting for 80% of the clean energy generated.
• New Jersey's Energy Master Plan aims to make the Garden state energy clean by 2050, with 2,000 megawatts of energy storage installed by 2030.

New Jersey Energy Profile

New Jersey is one of the fastest-growing markets for solar systems in the United States, thanks in part to the state's aggressive Renewable Portfolio Standards (RPS) program.

Compared to other states in the U.S., New Jersey ranked ninth in installed solar system generating capacity, eighth in solar power generation, and third in small-scale solar power systems generation.

Below is the list of solar programs that provide lower energy bills to homeowners and business owners in New Jersey:

New Jersey Solar Tax and Incentives at a Glance

New Jersey started operating a solar farm with 21 megawatts generating capacity in 2021. In mid-2022, New Jersey's solar power capacity was almost 3,300 megawatts.

About two-thirds of these megawatts were from small-scale generating systems.

Federal Solar Tax Credit in New Jersey

The federal solar tax credit is an initiative that allows New Jersey taxpayers to deduct a percentage of solar energy system costs from federal income tax. This credit applies to both commercial and residential solar systems. Businesses enjoy two federal tax credits:

• Investment Tax Credit (ITC): It reduces tax liability for a percentage of a solar system installation cost during the tax year.
• Production Tax Credit (PTC): This is a per kilowatt-hour (kWh) tax credit for businesses based on the electrical output generated from solar systems. This incentive is only available for the first 10 years of the solar system’s operation.

The Internal Revenue Service (IRS) does not permit businesses to claim ITC and the PTC for the same property. However, different credits can be claimed for co-located systems.

Solar PV systems installation can attract up to 30% federal solar tax credit depending on the installation year. The table below shows the value of the federal solar tax credit by installation year:

Federal tax credit covers the following expenses:

• Solar panels and equipment costs like inverters, wiring, and mounting equipment
• Labor costs for installation, including permitting, inspections, and developer fees
• Cost of residential energy storage equipment with a capacity rating of at least 3 kilowatt-hours and commercial energy storage with a capacity rating of 5-kilowatt hours or greater
• Sales taxes paid on eligible expenses
• CSP equipment cost for commercial properties
• Cost of circuit breakers, step-up transformers, and surge arrestors for commercial properties

Federal tax credits for installing solar systems do not affect New Jersey solar panel tax credit. Common New Jersey tax credits for solar panels that homeowners and businesses can enjoy include solar sales tax exemption and property tax exemption.

Eligibility

There are specific eligibility criteria New Jersey homeowners and businesses must meet to qualify for the Federal solar tax credit. New Jersey homeowners must ensure that their solar systems are:

• Installed between 2017 and 2034
• Located at their residence in the United States
• Have never been used before

Also, a New Jersey resident must meet one of these requirements to claim the credit:

• Own a solar system purchased with cash or through financing. However, the resident must not be leasing the system or paying a solar company for electricity generated by the system.
• Purchased an interest in an off-site community solar project, separate from the residential property. The electricity generated is credited against the home’s electricity but does not exceed it.

For a solar system to be eligible for business ITC or PTC, it must:

• Be located in the United States or U.S. territories
• Be new and the equipment must have been used for a limited period
• Not be leased to tax-exempt entities

How do I claim the Federal Solar Tax Credit in New Jersey?

New Jersey residents can claim federal solar tax credit by following the steps below:

Seek Professional Tax Advice

Before claiming a federal solar tax credit, residents should speak to licensed tax professionals. These professionals are experts in taxation and can educate them on the processes involved in claiming federal taxes.

Determine Eligibility

A licensed tax professional can help determine federal solar tax credit eligibility. However, individuals are only eligible for this tax reduction if they own their own solar systems and when it is leased to them. Also, the property must be located in the United States and occupied a few times a year.

Complete the Necessary Documentation

After determining eligibility, fill out IRS Form 5695. Remember to review the Instructions for Form 5695 to learn how to fill out the federal solar tax credit form. Then attach IRS Form 5695 to the federal tax return form (Form 1040 or Form 1040NR). Speak to a licensed tax professional in New Jersey who can help complete and file the appropriate form.

Net Energy Metering in New Jersey

Net metering is the policy that allows solar customers to get credit on their utility bill for each kWh of electricity they produce from their system annually. When the electricity produced by a solar system exceeds usage, the customer will receive credits at the full retail value of the electricity for the excess production.

For example, if a customer uses less energy than the solar system generates in a day, the utility meter will spin backwards and give the customer credit for the excess energy produced.

In net metering, a customer’s electric meter spins forward when electricity flows from the utility into the residence and backwards when electricity flows from the residence to the utility. The stored kWhs are "netted" or paid back annually.

Per N.J.A.C § 14:8-4.3, all electric distribution companies (EDCs) and electricity providers can provide net metering to customers that generate electricity on their meters via Class I renewable energy sources.

However, the energy generated by the customers’ facilities must not exceed their annual electricity consumption. The annualized period of a solar customer-generator remains the same until they switch electric suppliers or an EDC or electrical provider accepts a customer-generator request for a new annualized period.

How to Enroll for Net Energy metering in New Jersey

A customer-generator can enroll for net energy metering at an electric distribution company (EDC) in their locality. After the application has been approved, the customer-generator’s facility will be equipped with a single bi-directional meter (N.J.A.C § 14:8-4.4).

This meter helps to measure the flow of electricity from the facility to the EDC and the flow of electricity from the EDC to the facility. However, an existing electric revenue meter can be used if a customer-generator's meter:

• Is capable of a single bi-directional flow
• Is within the range of 5% during the measurement of electricity flow from the facility to the EDC

If the criteria above are not met by the customer-generator's existing meter, a new one will be installed by the EDC within 10 business days. This is typically at the expense of the EDC. Only one meter is required for every customer.

However, the EDC can install an additional meter if the customer agrees, or the customer can request an additional meter at their own expense.

What is the New Jersey Successor Solar Incentive Program?

The New Jersey Board of Public Utilities (NJBPU) introduced the Successor Solar Incentive Program (also called SuSI Program) in 2021. This program replaces the Solar Renewable Energy Certificate (SREC) and Transition Incentive Renewable Energy Certificate (TREC) programs.

The SuSI Program provides incentives to eligible solar facilities to increase solar generation by up to 3,750 MW in 2026. Per N.J.A.C. § 14:8-11.3, SuSI Program incentives are only paid when eligible solar facilities have received New Jersey State Certification Numbers in the form of NJ SREC-IIs.

Any solar facility in New Jersey seeking eligibility for the SuSI Program is required to submit a complete registration package to the NJBPU and pay the necessary registration fees.

The SuSI Program consists of two sub-programs:

• The Administratively Determined Incentive (ADI) Program: It provides fixed incentives for all community solar projects, net-metered residential projects, and net-metered non-residential projects of 5 MW or less.
• The Competitive Solar Incentive (CSI) Program: It provides incentives for the grid and net-metered commercial and industrial solar installations greater than 5 MW.

A qualifying solar facility under the ADI and CSI Programs earns one SREC-II for each megawatt-hour of solar electricity generated. The value of this SREC-II is set administratively under the ADI Program and via a competitive process under the CSI Program.

The table below outlines the incentives values per market segment for the ADI sub-program:

New Jersey Property Tax Exemption

New Jersey has a local property tax exemption for residential, commercial, and industrial property owners with solar installations. This exemption applies to newly installed or pre-existing solar systems.

To be eligible for tax exemption, the property owner must send Form CRES to the local enforcing agency. The local enforcing agency may inquire about the property owner’s right to the exemption and can inspect the property at any time.

The property will be certified if the local enforcing agency approves it as a qualifying renewable energy system. A copy of the certification will be sent to the municipal assessor. Per N.J.S.A. 54:4-3.113b, the certified property becomes exempt from paying tax. The exemption is the difference between the property’s total assessed value before and after the solar system installation.

For example, if a property’s assessed value is $400,000 and the new total assessment value becomes $450,000 after installing a renewable energy system. The increased amount ($50,000) will be exempted from property taxation.

Note: The property owner would have to pay taxes on the $400,000.

This property tax exemption for solar systems will become effective the tax year after the year the certification was granted. For instance, if the certification were granted in 2022, the property tax exemption would be effective in 2023.

What is the New Jersey Sales Tax Exemption?

The New Jersey solar energy sales tax exemption is a financial incentive of the Division of Taxation. It offers 100% sales tax exemption to eligible residential, commercial, and industrial customers. These customers must have energy-efficient improvements made with solar thermal electric, photovoltaic, passive solar space heat, solar space heat, solar pool heating, solar thermal process heat, and solar water heat.

To qualify for sales tax exemption, a purchaser of a solar energy system must give an Exempt Use Certificate (Form ST-4) or other approved form to the seller (N.J.A.C. § 18:24-26.4). The purchaser must write the address of the property where the solar system will be installed on the form.

Additionally, the purchaser must clearly indicate on the front of the certificate that the purchase qualifies for exemption. A purchaser not registered with the Division of Taxation is not required to provide a New Jersey tax ID number.

However, any of the following ID numbers must be written clearly on the certificate:

• A federal employer ID number
• Businesses can provide out-of-State tax ID numbers
• An Individual purchasing solar systems for personal use can provide a driver's license number

What are New Jersey Transition Renewable Energy Certificates (TRECs)

New Jersey transition renewable energy certificates (TRECs) were created to provide incentives for all solar systems certified under the transition incentive (TI) program.

TRECs was created in 2019 to bridge the gap between the solar renewable energy certificate (SREC) and the Successor Solar Incentive Program (SuSI Program).

The creation of the SuSI Program in 2021 replaced TREC and SREC. Per N.J.A.C. § 14:8-10.3, the TRECs allow eligible solar customers to obtain payments from the electric utilities for each megawatt-hour generated and metered to the generation attribute tracking system (GATS).

Per N.J.A.C. § 14:8-10.5, eligible solar facilities under the TI program were required to generate electricity throughout the 15-year TREC qualification life. The value of a TREC was $152.00 per megawatt-hour (MWh).

The New Jersey Board of Public Utilities closed the TI portal to new applications in 2021.

Renewable Energy in New Jersey

As of 2023, New Jersey’s major renewable sources are solar, biomass, wind, and hydropower.

Solar energy

The largest percentage of energy generation in New Jersey comes from solar power. New Jersey has about 143,555 solar installations resulting in 3,655 MW of clean energy. As of 2021, more than four-fifths of the electricity generated from renewable resources was from solar energy. Biomass

In 2021, about 15% of New Jersey's renewable electricity came from biomass. The majority of these biomass-generating capacities come from municipal solid wastes. New Jersey’s largest biomass-fueled facility is located near Newark-Liberty International Airport, with a capacity of 60 megawatts.

Wind Power

In 2021, about 0.4% of renewable energy generated within New Jersey came from wind power. New Jersey has two utility-scale onshore wind power facilities at the Atlantic Ocean coastline. These facilities include:

• The 1.5-megawatt single turbine located in the New York City area
• The 7.5-megawatt five-turbine wind farm in Atlantic City

New Jersey has more wind power potential offshore. The State plans to operate a massive 1,100-megawatt Ocean Wind 1 project in mid-2024.

In 2018, New Jersey planned to obtain an offshore wind power of 3,500 megawatts by 2030. The goal was to increase to 7,500 megawatts by 2035.

In 2022, the new wind power goal was increased to 11,000 megawatts by 2040. As of 2021, the New Jersey Board of Public Utilities approved 3,700 megawatts of offshore wind capacity and plans to solicit an additional 1,200 megawatts in 2023.

Hydropower

Nearly 0.4% of New Jersey's net generation in 2021 came from hydropower. New Jersey has a small 10-megawatt hydroelectric plant near New York City and a large 460-megawatt pumped storage facility near the border with Pennsylvania.

New Jersey officially launched their Energy Master Plan in the year 2019. The main aim is that by 2050 the totality of the energy in the state will be clean energy. To that effect, about 2,000 megawatts of battery energy storage should have been installed by 2030

New Jersey Household Profile

As of 2020, the total energy consumption per capita in New Jersey was 204.1 million BTU. From this number, about 60.3 million BTU of energy was consumed by residential facilities, and another 56.1 million BTU of energy was consumed by commercial establishments.

As of 2021, New Jersey was home to over 9.2 million people. These people lived in nearly 3.8 million housing units. About 63.8% of these housing units were owner-occupied, and the remaining 36.2% were available for rent. The median value of owner-occupied housing units was $355,700.

That same year, Municipal Building/Construction Departments issued about 37,094 building permits to New Jersey residents who constructed, altered, or renovated their buildings.