The number of new solar energy systems generating electricity in New Jersey more than doubled last year.

That’s good news, right?  Yes, but, as usual, there’s a catch.

New Jersey uses a market-based, supply-and-demand system to subsidize the cost of solar panel installations. It has helped to propel the state into the #2 spot nationally (only California has more solar panels). Read below how the system works and you’ll understand the ‘catch.’

A simplified version of how New Jersey’s SREC system works 

1. When a business, town, school or individual homeowner has solar panels installed, they receive a certain number of Solar Renewable Energy Certificates (SRECs) based on the amount of energy the system will generate.
2. The owners of energy plants that emit greenhouse-gas-producing carbon dioxide (CO2) are required by the state to buy enough SRECs each year to offset the amount of CO2 that their plants release to  the atmosphere.
3. The price of the SRECs depends on the number of solar systems in operation. With fewer systems, the demand for available certificates pushes the price that power plant operators are willing to pay for the credits higher. Similarly, as the number of systems increase, the demand (and price) for individual SRECs decreases.