Second Quarter 2013 Edition of Progress – The Newsletter of the Building Owners & Managers of New Jersey
Volatility in New Jersey’s solar market has complicated the decision making process for commercial property owners evaluating solar for their portfolio. While trading prices in New Jersey’s key solar incentive program, known as the SREC market, have fallen approximately 80% since 2009, solar panel prices have declined by more than 50% in the same time period. These precipitous declines are attributed to the massive growth of the solar industry, both domestically and globally. Such significant market shifts understandably caused many commercial real estate owners and managers to reassess projects of this nature. However, recent changes to market conditions once again make solar an attractive proposition.
One of the largest solar markets in the world, the state of New Jersey, in conjunction with industry stakeholders and the electric utilities, implemented several measures that stabilized the solar market and set a foundation for robust future growth. These initiatives include adoption of new solar legislation in July 2012 to spur increased development in 2013 through 2015 and commitments from all of the state’s electric utilities for 180 megawatts of new solar development via long-term SREC financing contracts. Long-term SREC contracts provide revenue certainty that de-risks the investment considerably. With renewed market strength and the availability of mature and varied development structures, investing in New Jersey solar projects has become a compelling opportunity again.
Property owners continue to recognize that on-site solar generation reduces the cost to operate a facility by providing clean electricity at a rate lower than current utility pricing. In addition, the 25-year lifespan of a solar asset provides price certainty that far exceeds the short-term retail electric supply agreements available today. Commercial real estate owners and managers can incorporate solar into their portfolio by either investing directly in the project or by entering into a power purchase agreement (PPA) with an organization that will own and operate the solar asset at no cost to the site host. Both frameworks decrease the pressure on lease rents and allow property owners and mangers to market their assets as competitive, sustainable facilities. With the recent legislative and regulatory developments in New Jersey, on-site solar generation is an excellent property enhancement to consider, or reconsider, for your portfolio.