Trade your solar credits

It is common knowledge about how Germany’s feed-in-tariff has helped spur solar power in a big way. With about one-fourth the United States’ population, it has six times more solar installed, including more than 300,000 residential rooftop systems, along with multi-megawatt commercial systems. That amounts to half the world’s total solar capacity.

New Jersey is emerging a close second. Solar panels are not only appearing on residential rooftops, but on schools, churches, convention centers, and gyms, and as electricity-generating roofs over stretches of paved parking lots.

In both New Jersey and Germany, it was incentives that did the trick. Early adopters were provided with solid guarantees of economic returns on their investments. Taxes were not raised to accomplish this. Instead, utilities were allowed to raise rates minimally on all rate payers in order to subsidize those who were ready to move on installing solar systems.

New Jersey has turned to a different approach, issuing credits that can be traded like stocks or bonds on a free-floating market. Direct subsidy on every kilowatt hour of power fed into the grid or feed in tariff was what first made a dent. Since then various cities have adopted different approaches.

When the state kicked off its solar program in 2002, it relied on a small “societal benefits” charge on all ratepayers’ bills to provide a simple, straightforward rebate that amounted to about 60 percent on solar installations, combined with a full retail net metering (backwards-meter) mandate. But by 2007, the program had become so popular that it was overwhelming available funds. The state has turned not to a tariff-style guarantee, but to a complex approach that relies on a floating, market for tradable solar renewable energy credits (SRECs).

The credits are actually sold by brokers on an electronic market, like stocks or bonds, at whatever price the market will bear. At the moment, the market is bearing a fabulous price. SRECs are expected to decline in value over time, but could still be worth multiple thousands of dollars annually to the owner of a residential solar system.

That looks like a win-win situation for all. Write in to us on what you think.