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The Economics of Residential Solar Electricity in New Jersey, New York and Connecticut

The economics of investing in a solar electric system for your home or business varies depending on a number of factors, including:
  • Solar system performance - a function of orientation, pitch (slope) and shading issues
  • Electric rates - depends on your individual utility rates (note that rates in NJ, NY and CT have all increased from as little as 7.7% to nearly 40% for some rate payers -- the economics below assume these new rates)
  • Utility or state subsidies (usually referred to as rebates)
  • 30% federal investment tax credit, with a cap of $2,000 for residences
  • 25% state income tax credit for NY residents, with a cap of $5,000 (none in NJ or CT)
  • Annual Sale of Solar Renewable Energy Certificates (SRECs) in New Jersey (sometimes called "Green Tags")
Below are the economics for typical 5000-watt residential solar systems in New Jersey, New York, and Connecticut, on fully-sunny, south-facing roofs. The calculations include an assumed 5% average annual escalation in electric rates, which is approximately the historical average for the region over the last 30 years. If rates go up more quickly, then annual rates of return will be higher and payback periods will be shorter.

The opportunity to sell SRECs in New Jersey comes about from the passage of Renewable Portfolio Standards (see Renewable Portfolio Standards). (New York and Connecticut may have SRECs in the future - such programs are under evaluation -- but there's no guarantee that they will or what their value will be.)

New Jersey Homeowner

Initial Investment
5000 Watt Solar Electric System: $41,750
Federal Tax Credit: - $2,000
Net Investment After Tax Credit: = $39,750



Annual Value
Yearly Electricity Produced:
(6,100 kWh at $0.185)
$1,128
Sale of RECs Per Year:*
(6,100 kWh Estimated at $0.425/kWh)
+ $2,592
Total Annual Value of Solar Production: = $3,720



Return on Investment
Annual Rate of Return:
($3,720 / $39,750)

Comparable to a 14-16% return from a taxable investment
10%



Years Until Payback
Payback of Net Investment from Value of Annual Production: 9-10 years

* Note this is an estimated value


New York Homeowner (Con Edison Customer)

Initial Investment
5,000 Watt Solar Electric System: $42,000
NYSERDA Rebate (click for details):
($4.00 Per Watt)
- $20,000
Net Investment: = $22,000
NYS Solar Income Tax Credit: - $5,000
Federal Tax Credit: - $2,000
Net Investment After Tax Credits: = $15,000



Annual Value
Yearly Electricity Produced:
(6,350 kWh at $0.215/kWh)
= $1,365



Return on Investment
Annual Rate of Return:
($1,365/$15,000)

Comparable to a 11-13% return from a taxable investment
9.1%



Years Until Payback
Payback of Net Investment from Value of Annual Production: 8-9 years

* Note this is an estimated value and average annual rate escalation
of 5.5% -- what rates have done in NY over the last 30 years.


Long Island Homeowner

Initial Investment
5000 Watt Solar Electric System: $41,750
LIPA Rebate:
($3.50 Per Watt)
- $17,500
Net Investment: = $24,250
NYS Solar Income Tax Credit: - $5,000
Federal Tax Credit: - $2,000
Net Investment After Tax Credits: = $17,250



Annual Value
Yearly Electricity Produced:
(6,436 kWh at $0.21/kWh)
$1,352
Total Annual Value of Solar Production: = $1,352



Return on Investment
Rate of Return:
($1,352/$17,250)

Comparable to a 11-13% return from a taxable investment
10.1%



Years Until Payback
Payback of Net Investment from Value of Annual Production: 9.98 years


Connecticut Homeowner (CL&P Customer)

Initial Investment
5000 Watt* Solar Electric System: $45,000*
CCEF Rebate:
($5.00 Per Watt*)
- $25,000
Net Investment: = $20,000
Federal Tax Credit: - $2,000
Net Investment After Tax Credits: = $18,000



Annual Value
Yearly Electricity Produced:
(5,670 kWh* at $0.19/kWh)
$1,077
Total Annual Value of Solar Production: = $1,077



Return on Investment
Rate of Return:
($1,077/$18,000)

Comparable to a 8-10% return from a taxable investment
6%



Years Until Payback
Payback of Net Investment from Value of Annual Production: 13 years

* CCEF measures solar in PTC watts rather than the industry-standard STC watts.
What CCEF calls a 5,000 watt system would be considered approximately a 5,600 watt
system elsewhere. Also, CCEF's $5.00/watt (PTC) rebate may be lower in installations
that are less than ideal.

 
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