New Jersey AB 3723 Passage and its Effect on New Jersey SREC Prices

September 2018

In May 2018 New Jersey AB 3723 was passed which instituted major changes to the New Jersey solar incentive market revolving around SRECs.


New Jersey was one of the early leaders in providing ratepayer incentives through SRECs to solar owners. Flett Exchange launched its’ New Jersey SREC market in June of 2007 to help facilitate an open and competitive market. The SREC program was created to provide a long-term 15 year pay-back as opposed to the large up-front incentive program that existed in New Jersey. Solar installation costs dropped quicker than expected during the last decade. As of the fall of 2018 New Jersey has close to 100,000 solar installations and produces over 3% of its electricity from solar. A major market reform was instituted in 2012 which increased demand for solar. This increase in demand averted a collapse in in SREC prices which kept solar investors whole and provided demand for a few more years of new solar development which satisfied solar developers. This same change slashed the cost cap by more than 50% to protect ratepayers. By 2016 it was apparent that once again costs to install new solar dropped quicker than expected. AB 3723 was passed in May 2018.


AB 3723 major changes:

  1. Closes the current SREC program to new applicants by June 2021

  2. Mathematically attempts to close the SREC program by timing the curtailment of supply of new solar while increasing demand at the same time thus “pinning” high SREC prices for the next 10 – 15 years.

  3. Adds a 7% cost cap by 2022 that is complicated/impossible to model and relies on BPU action and will most likely not kick in for years. The cost cap favors the wind development portion of the RPS by protecting it from this cap. The solar portion will be most likely be ratcheted down through reduced solar compliance costs.

(Plain English: Bail-out legislation for current solar owners (Attempts to keep SREC prices above $200 for years) that at the same time gives solar developers 2 to 3 years to cash in on projects before a new incentive program is created. Ratepayers who pay for it will never understand it which limits/reduces political risk for passing it. Provides for costs shifting 5+ years out from solar compliance to wind compliance thus potentially reducing SREC prices at that time)

Price Projection and Risks for Sellers of New Jersey SRECs:

AB 3723 prevented the New Jersey SREC market from a collapse which was inevitable by 2019-2021 due to the pace of solar development in New Jersey which was significantly more than what the legislation called for. In all SREC markets that experienced similar events – PA, MD, OH, SREC prices dropped to $10 or less for years. It appears that SREC prices will remain at the $180 to $250 range for the next 3 to 5 years (2018 to 2020/22) Analysis for prices and hedging strategies going out 3+ years are available to our registered and active customers.

DISCLAIMER: New Jersey SREC prices are volatile. Buyers and sellers of SRECs must do their own research. The above projections are subject to change as market dynamics change.

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