This article explores the solar resurgence in New Jersey based on SREC prices and increased financing opportunities. Special thanks to Keith Peltzman, President of Independence Solar for writing this article for Wolf Commercial Real Estate.
SOLAR RESURGENCE IN NJ: SRECS & FINANCING
The economic return for solar energy in NJ has experienced cycles of highs and lows. Currently, the NJ state incentive for solar (the SREC), is at a 4-year high – approaching almost $300. At this SREC value, the annual return on investment (ROI) for solar is 15 – 25%. In addition, sophisticated new financing structures allow for solar with no upfront cost that can generate $2 per square foot in incremental operating income. With high SREC values and financing, solar is experiencing a resurgence in NJ. If you own property or are a tenant, this would be the ideal time to review the numbers for solar energy at your property. There are now almost 50,000 solar installations in NJ and many of your neighbors are already reaping these financial benefits.
Top reasons for solar resurgence in New Jersey:
A) SREC Pricing
Due to an undersupply of solar projects in NJ in 2015, the SREC price has increased above $200 and has even recently approached $300. In addition, long-term SREC pricing can be secured via forward contracts for 3-10 years. This strategy removes long-term SREC pricing volatility from a solar investment and supports financing. This chart illustrates recent trends in NJ SREC pricing:
B) Financing Structures
There are now multiple financing structures that allow for solar with no upfront investment. With financing in place, solar generates net positive operating income from day one. In many cases, solar would create $2 per square foot in incremental operating income after debt repayment. Some of these financing structures are outlined below. The most appropriate structure will be a function of your:
1) tax position and 2) balance sheet and credit. I would recommend consulting with an experienced commercial solar company and your tax advisor to determine which approach would make the most sense.
1. Line of Credit
• Leverage existing banking relationship
• 3-5% interest rate
• Minimal fees
2. Project-Specific Loan
• Create new solar-specific LLC
• No recourse back to company
• Tax benefits accrue
• Cash flows of solar project support debt payments
• 5-8% interest rate
3. Operating / Tax Lease
• If unable to monetize tax credits
• Lender absorbs tax benefits
• Borrow 100%, but repay only 60 – 70%
4. 3rd-Party Ownership (“PPA”)
•Investor owns solar on your property
•In return, receive rent or discounted price for electricity
•10-20 year contract to purchase solar electricity (“PPA”)
For more information on the solar resurgence in New Jersey, please contact:
Keith Peltzman President & Founder
1008 Astoria Boulevard
Suite E
Cherry Hill, NJ 08003
856.393.1250
About Independence Solar
Keith Peltzman is president and founder of Independence Solar with offices in Cherry Hill, NJ and Boston, MA. Independence Solar is a turnkey installer of commercial solar energy. Since 2007, the team has developed and built over $200 million of solar projects, including the largest rooftop solar array (9 MW) in North America at the Gloucester Marine Terminal in NJ. Independence Solar forges long-term partnerships to maximize returns on our customers’ solar energy investments. Keith Peltzman President & Founder 1008 Astoria Boulevard Suite E Cherry Hill, NJ 08003 856.393.1250
