new jersey trec program

NJ TRECs: the Garden State’s transition solar incentive

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New Jersey has always been one of the best states for solar: higher-than-average electricity rates and strong solar incentives have helped thousands of New Jerseyans achieve quick payback periods on their solar investments. Above all, the state’s renewable portfolio standard and associated solar renewable energy certificate (SREC) market have been instrumental towards growing solar throughout the state. However, in June 2018, the state decided to phase out SRECs in favor of a new, yet-to-be-established successor solar program. In an effort to bridge the gap between SRECs and the next phase of solar incentives, the Garden State decided to implement an intermediate transition solar incentive, known as TRECs.


A quick background of solar incentives in New Jersey

New Jersey has a renewable portfolio standard (RPS) that requires electric utility companies within the state to source 50 percent of its electricity from renewable technologies by 2030. Many states have an RPS, but New Jersey is among the few that also has a solar carve-out; this requires a set portion of this renewable electricity to come specifically from solar technologies. The Garden State set its solar carve-out to 5.1 percent of electricity sales by 2021.

To meet past RPS and solar carve-out targets, New Jersey implemented a solar renewable energy certificate (SREC) market. SRECs are performance-based incentives awarded to people generating solar electricity. Utilities buy SRECs from solar panel system owners to meet the state RPS requirements. If they don’t meet the requirements, utilities are required to pay a compliance fee (which costs more than what they would pay for an SREC).

In June 2018, the New Jersey legislature passed an ambitious clean energy bill: aside from increasing the state’s RPS and solar carve-out to the targets stated above, the bill also set a plan to overhaul the state’s SREC program. Importantly, they agreed to phase out the SREC program by June 2021 at the latest and develop an entirely new framework to support solar development throughout the state.

However, the state reached its 5.1 percent solar carve-out role faster than anticipated, and the New Jersey Board of Public Utilities (NJ BPU) could not implement SREC’s replacement program before meeting that target. In an effort to ease the transition between NJ’s SREC market and its successor solar incentive, the state announced a temporary intermediate incentive: Transition Renewable Energy Certificates (TRECs). New Jersey officially closed its SREC program in June 2020.

What are TRECs and how do they work?

In December 2019, the NJ BPU approved a transition incentive for solar projects that go live after the solar carve-out is reached, known as Transition Renewable Energy Certificates (TRECs), which it implemented in April 2020 when the state reached its 5.1 percent solar carve-out role.

At their core, TRECs are very similar to SRECs: both incentives are based on the production of your solar panel system, and you receive certificates based on megawatt-hour (MWh) of solar production. However, SRECs and TRECs vary in two important ways: fixed versus variable pricing, and factorization.

Fixed vs. variable pricing

The primary difference between the two credits is their pricing structure: SREC prices are variable, and the value of the incentive depends on supply and demand in the market at the time you sell it. TRECs, on the other hand, will have set pricing for the duration of the program, making it easier to predict exactly how much incentive money you’ll receive from the program.

Factorization

Another big difference between SRECs and TRECs is factorization. With SRECs, the value you receive for a single SREC is the same regardless of the type of solar panel system you install: an SREC generated by a residential rooftop system is worth the same as an SREC generated on a large carport installation, so long as they’re sold at the same time. However, with TRECs, the value of your incentive varies depending on the type of installation.

The NJ BPU has assigned varying factors for individual solar projects; solar projects located on landfills have a higher TREC factor than a residential solar installation.

Below are various project types and the factor assigned to each:

Project typeFactor
Landfill or brownfield installations1
Net metered, non-residential rooftop or carport1
Community solar0.85
Net metered, residential: ground mount, rooftop, or carport0.6
Net metered, non-residential ground mount0.6

What do these factors mean in regards to TRECs? Projects with a factor of 1 receive the full TREC value, while those with less than 1 receive a specified fraction of it; for lower-factor projects, you need to generate more solar electricity to earn the full value TREC.

For every 1,000 kWh you generate with a residential rooftop solar panel system, you only generate 60 percent of a TREC’s price value. In other words, to earn the same amount as 1 full-value TREC, you need to generate 1,667 kWh worth of solar electricity.

Value of TRECs

The value of a full TREC is fixed at $152 for 15 years. What do these prices mean for a standard residential solar panel system? On the EnergySage Marketplace, the average residential solar panel system size quoted in New Jersey was 12.1 kW in the second half of 2020. Given conservative production estimates, you can expect a system of that size to generate 13,310 kWh during its first year of production. If this is a traditional, net-metered rooftop system, it would generate about 13 TRECs a year:

13,310 kWh / 1,000 kWh = 13.3 = 13 TRECs

At a fixed rate of $152 per TREC for all 15 years, 13 TRECs at $152 each means an additional $1,976 in solar savings; however, since residential projects only receive a fraction of the incentive, you need to multiply that value by the residential project factor (0.6) to receive an estimated savings of $1,186:

$152 per TREC x 13 TRECs x 0.6 = $1,186

Importantly, these are rough estimates that don’t take into account the annual degradation of your system. Additionally, solar energy production varies from system to system, and how much you can earn with TRECs will depend on your system size, the quality of your solar equipment, how much sunlight hits your solar panels, and more. The best way to get an accurate estimate for estimated TREC benefit is to compare multiple options that are custom to your property. 

What’s the status of solar incentives in New Jersey?

All projects that were installed after October 29th, 2018 and didn’t begin receiving SREC payments before the program hit the 5.1 percent cap (in April 2020) were placed into the TRECs program.

Compare solar options on EnergySage

It’s never too soon to go solar. On EnergySage, you can compare multiple options side-by-side from local New Jersey installers that take into account the current incentives available. To start receiving free solar quotes, sign up on the EnergySage Solar Marketplace today. Alternatively, if you want to start out your process with an estimate for what solar would cost you, try our Solar Calculator.


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About Kerry Thoubboron

Kerry has worked in solar for more than 6 years, starting her career as an Energy Advisor dedicated to helping customers compare their options and make well-informed solar decisions. She graduated from Boston University with a degree in Environmental Analysis and Policy. Outside of work, you can find Kerry snowboarding, watching The Office, or having passionate debates about which New England state is best (spoiler: it's Vermont).

12 thoughts on “NJ TRECs: the Garden State’s transition solar incentive

  1. John Lanza

    Well it still seems pretty sweet because woth the TREC and Tax Credit the system pays for itself!!! We need electricity anyway!! Why not take advantage of what is offered?? Because theyre not giving us more free money??? Ill take it!!

    Reply
  2. mark J urso

    Thanks, Kerry. That is what I thought. These solar companies all promote getting 12 monthly trec payments every year and getting $92 every month so, very misleading. But, that js sales for you!

    Reply
  3. mark J urso

    I will be getting a net metered residential rooftop system soon. PTO should be around Sept. If my system size is 8.32 KWs and generates 11,857 annualized kwhs, what would my monthly T-REC be?

    Reply
    1. Kerry Thoubboron Post author

      Hi Mark,

      If you generate 11,857 kWh a year, you should get 11 TRECs each year. Given the factorization for residential rooftop systems, this would come out to $91.20 per TREC, or about $1003 a year. However, what you earn monthly will vary: because solar panels typically generate more electricity during the summer, you’ll likely produce more TRECs then compared to the winter months.

      Hope this helps!

      Reply
  4. Mina Evergreen

    I strongly believe TRECs are perfect incentives to go solar in New Jersey. I feel blessed to be working with solar panels, especially knowing that many people can count on programs like this one.

    Reply
  5. Carlos T

    Hey Keith, I run a solar company right here in Jackson, if you rent solar through a lease agreement or a PPA you wouldmt get either SREC or TRECs. It’s an incentive towards ownership

    Reply
  6. Keith Armstrong

    We are in the process of getting approved and deciding whether to purchase or “rent” solar. If we are hooked up before this transition occurs will we have a choice on SREC or TREC?

    Reply
  7. David Evans

    Just Curious about how this will affect residential systems that are already getting SREC’s. If a system got it’s PTO before October 2018 will it still get SREC’S will it be changed to the TREC’s.

    Reply

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