By Eva Kurilova and Kelsey Tollefson

This is the first part of a three article series about making the most of home solar in New Jersey. This article describes the different ways in which homeowners can go solar in New Jersey. For information on the financial perks of New Jersey solar power, check out the second article in our series here. If you’re interested in learning more about New Jersey’s solar programs, the third article in the series can be found here.


New Jersey has one of the highest amounts of installed solar capacity in the country. With over 2 gigawatts installed,1 that’s enough clean energy to power nearly 1.5 million households.2 Fittingly enough, this power is actually being generated by the households themselves: more than 60% of New Jersey’s solar power comes from home solar panel systems.3

New Jersey residents curious about a home solar installation can rest assured that they are at the forefront of America’s solar revolution. If you’re looking to join the ranks of New Jersey home solar customers, there are a few different ways to do so. This article will cover the basics of buying a home solar system in New Jersey. We’ll also discuss third party ownership agreements; namely,  solar leases and power purchase agreements (PPAs).

There are currently more than 60,000 solar-powered homes across the state of New Jersey.4

Households in Metuchen are saving an average of $780 per year on their electric bills.

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New Jersey Home Solar: Is Buying a Solar Power System the Best Bet?

Average size and price: 5kW – $11,400 after federal tax credit.5

Investing in a home solar setup is the most direct route to energy savings. Buying a system outright means that the homeowner owns the panels and all other components for the life of the system. In short, buying solar panels ensures that the homeowner and their family will have access to clean electricity for decades to come.

  • Qualifies for federal tax credit and other incentive programs.
  • Major boost to property values.
  • Higher upfront cost.
  • Homeowner must handle maintenance if needed.

How big does the system need to be?

In New Jersey—and around the country—the average size of a home solar system is 5 kilowatts (kW). This means that all of the panels in the array are capable of generating a combined 5 kW of power under ideal conditions. Of course, real-life factors impact the actual output of a solar panel system, no matter what the rated sizeKey factors in actual system output include the amount (and quality) of sun exposure, and conversion efficiencies of the system components.

  • Average Peak Sun Hours

What does actual output mean for monthly savings?

A 5kW system that receives 4.5 daily peak sun hours can be expected to generate about 18 kWh of electricity every day. Since most homes in New Jersey use around 23 kWh of electricity a day,6 a 5 kilowatt system is enough to offset a significant portion of the monthly electric bill. Given that the average monthly payment is about $110 for grid-supplied electricity in New Jersey,7 a modest 5 kW system could cut that payment down to around $24 a month.

How am I supposed to pay for a solar power system?

Of course, many people who choose to buy solar panels do not pay for the system out of pocket. This means that homeowners who install solar panels are usually paying an additional monthly amount towards their solar loan. New Jersey home solar is made easy by a wide variety of solar loan providers with very competitive rates. Credible loan providers will work with the applicant in order to ensure that the solar installation makes sound financial sense in their particular situation. 

Even with this additional monthly payment, solar panels still net out to savings for the homeowner. In the vast majority of cases, the combined amount paid monthly for the solar loan and the reduced monthly utility bill is still well below a non-solar household’s electricity payments.

  • Residential Installed Price of Solar (Dollars Per Watt)

Just how much will solar panels cost?

The average installed price of solar power is currently about $3.26/watt—this number varies over the course of a year, and includes equipment and installation costs. A 5kW system, therefore, could be expected to cost a little over $16,000  before applicable incentives. Note: This figure is an estimate, and represents full price of the system before the federal Solar Investment Tax Credit—the ITC saves solar customers 30% off the cost of their solar installation.

Doing the Math: Annual Solar Savings and Payback Period in New Jersey

  • A 5kW solar panel array in New Jersey is realistically capable of producing 18 kWh of electricity per day. This multiplies out to 6,570 kWh produced every year.
  • Electricity costs in New Jersey average about $0.15/kWh. When multiplied by the kWH produced by the solar panels, a 5kW array can save the average New Jersey homeowner over $985 a year in electricity bills

We can take this one step further to find out how quickly a solar panel system pays for itself in New Jersey. If the solar setup costs $16,300 upfront, the homeowners would pay $11,410 after the federal solar ITC. If the system saves the homeowners $985 annually, that means it would take about 11 years for the solar panels to make up their value. However, this doesn’t take additional financial incentives into account: Through net metering and the sale of Solar Renewable Energy Credits, a solar system in New Jersey could be paid off in seven short years. After that, every watt of power that’s produced is, in essence, free electricity. Since solar panels function efficiently for decades, that’s decades of clean residential power at no monthly cost.

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New Jersey Home Solar: What about Third Party Ownership Arrangements?

While most experts agree that buying solar panels is the best bet for homeowners in New Jersey, not everyone wants to invest in a solar power system. For homeowners who want to go solar without taking ownership of solar panels, there are two options: Solar leases and power purchase agreements (PPAs).

Solar leases are essentially long-term solar system rentals.

A solar lease is essentially a long-term rental agreement.

A solar lease can be an attractive option for homeowners who don’t want the responsibility of owning a solar power system. A solar lease agreement allows the homeowner to host a solar array in return for flat monthly payment. This monthly payment entitles to homeowner to use all of the electricity that their rented array generates. Most solar leases have 20-year terms.

This presents a potential problem. What if there’s an extended period of cloud cover, and the solar array fails to produce enough electricity to power the home’s needs? In that case, the home will pull electricity from the utility grid, racking up a monthly bill. On top of that, the homeowner will still need to pay the full monthly amount for the solar lease, even if the panels didn’t generate the expected amount of power that month. This can drastically reduce the long-term savings potential of a leased solar installation.

Another consideration for prospective lessees is the question of solar panel maintenance. While the upkeep on a home solar system is not exhaustive by any means, the terms of a solar lease may specify who is responsible for maintaining the system and replacing components if needed. A solar lease may or may not cover these replacement costs, so it’s crucial for homeowners to establish this before any papers are signed.

Solar Power Purchase Agreements: Host an array for free, but pay for the electricity it generates.

Aside from leasing options, there is a third way for homeowners to go solar without purchasing a system: a Solar Power Purchase Agreement, or PPA. Typically, a solar PPA lasts between 10 and 25 years. A PPA is similar in many ways to a solar lease, but there are a few key distinctions.  

A solar PPA is another situation wherein the PPA distributor owns the solar equipment, and the homeowner plays host to the array. Rather than paying a flat cost for all electricity the array generates in a month (as in a lease agreement), homeowners instead pay a set rate per kilowatt hour of solar electricity used. Essentially, the PPA distributor becomes the home’s second utility provider—homeowners receive a monthly bill from the PPA company for the solar electricity consumed in a month.

New Jersey Home Solar customers ultimately save money by buying the panels outright.

Downsides to Third Party Ownership

Whereas homeowners who elect to buy a solar system get free electricity after the payback period, those with a third-party ownership agreement need to pay a monthly fee for the entire duration of the contract. What’s more, many solar leases and PPAs have something called an escalating price structure. In other words, while a new PPA may advertise a low cost-per-kWh of solar electricity, that price is going to increase incrementally over the years (usually by a factor of 2-4 percent a year).

The best way to save big with solar power in New Jersey is to invest in a home solar system.

While third party ownership agreements are a good option in certain situations, there’s no denying that buying solar panels is a sounder long-term investment. In New Jersey, an average home solar setup pays for itself in seven years. After that, homeowners can enjoy free clean energy for decades to come. The truth about home solar is that the best way to save money and ensure long-term access to clean energy is to purchase the solar panels outright.

If you found this article to be helpful, please share! And be sure to enter your zip code at the bottom of the screen to see if going solar is right for you.


Bibliography

  1. Johnson, Tom. “With 2 Gigawatts of Capacity Installed, NJ Solar Sector Shines.” NJ Spotlight. NJ Spotlight, 19 Jan. 2017. Web. 09 Mar. 2017.
  2. Shahan, Zachary. “California Now Has 1 Gigawatt of Solar Power Installed.” CleanTechnica. Sustainable Enterprises Media, Inc., 11 Nov. 2011. Web. 28 Feb. 2017.
  3. EIA. “New Jersey: State Profile and Energy Estimates.” U.S. Energy Information Administration (EIA). U.S. Department of Energy, n.d. Web. 01 Mar. 2017.
  4. Roselund, Christian. “New Jersey Reaches 2 GW of Installed Solar.” PV Magazine USA. PV Magazine, 19 Jan. 2017. Web. 06 Mar. 2017.
  5. Data from Energy Sage Solar Marketplace
  6. EIA. “2015 Average Monthly Bill- Residential.” www.EIA.gov. US Department of Energy, 2016. Web. 1 Mar. 2017.
  7. EIA. “2015 Average Monthly Bill- Residential.” www.EIA.gov. US Department of Energy, 2016. Web. 1 Mar. 2017.
  8. National average from Energy Sage Marketplace data trends
  9. “Permits, Agreements, and Warranties.” New Jersey Clean Energy Program. State of New Jersey, n.d. Web. 06 Mar. 2017.
  10. Reichel, Claudette Hanks. Solar Power for Your Home: A Consumer’s Guide. Louisiana State University, 2015. Web.
  11. Hausman, May 2015. (5)
  12. “Solar Power Purchase Agreements.” SEIA. Solar Energy Industries Association, n.d. Web. 15 Feb. 2017.
  13. Reichel, Claudette Hanks. Solar Power for Your Home: A Consumer’s Guide. Louisiana State University, 2015. Web.

Editor: Kelsey Tollefson

Executive Editor: John Lenker