This week, the New Jersey Board of Public Utilities announced they are suspending their popular solar incentive program. The rebate paid $1.00 per watt to commercial systems upto 50,000 watts and as high as $1.75 to residential systems.

New Jersey’s actions parallel those the cuts to solar incentives in Spain and the reduction of feed-in tariffs (FiT) in Germany. Fixed rebate programs and feed-in tariffs lack a market mechanism and don’t have the feedback mechanism inherent in a REC or SREC trading program. If legislators set the solar incentives too low, they don’t inspire any development. But when legislators set incentives too high, there is a gold rush — developer overwhelm the rebate or FiT programs that was engendering the frenzy.

These dramatic cuts highlight difference between rebates and feed-in tariffs and an SREC program. SRECs prices move according to supply and demand and are not subject to on-again, off-again whim of legislators and have proven to be a stable, long-term incentive that has been very effective stimulating solar development.

In New Jersey, SRECs are now an even bigger determinant of the economics of a project. With clear, transparent long-term contracts, solar investors and developers have clarity in the cash flows associated with solar. And for smaller systems looking to offset the high upfront costs of installation, prepaid SREC contracts are an interesting alternative to rebate programs – the current bids in New Jersey prepaid SRECs equivalent to approx. $2.27 per installed watt.

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