What Should Landowners Know About Solar Farm Development in New Jersey?
As of July 2024, New Jersey is making significant strides in the solar energy sector with 5,362 MW of installed solar capacity, making it the 10th largest state in terms of solar capacity generated. The state has seen a substantial investment of $15 billion in solar energy which has spurred further investments. Over the next five years, New Jersey is projected to add another 2,650 MW of solar capacity.
Solar energy in New Jersey currently powers approximately 915,211 homes. Notable policies such as the Renewable Portfolio Standard and various state and federal incentives support the growth of solar manufacturing and installations across the state. Companies like CEP Renewables and Atlantic City Energy are playing a pivotal role, with significant investments in solar manufacturing facilities, enhancing the state's renewable energy infrastructure.
Landowners in New Jersey are receiving offers from developers to lease their land for solar farms. They often wonder how much their land is worth for solar farm leasing and if they are receiving a good offer. Leasing land for solar farms helps landowners provide their future generations with long-term financial stability. Several factors go into solar farm valuations that landowners and realtors should consider.
LandGate is a marketplace that provides data intelligence to landowners while also providing them the opportunity to connect with New Jersey solar developers. Traditionally, developers would knock on landowners' doors or cold-call them. This old-fashioned way is not easy for landowners. It can be perceived as unwanted solicitation at a time when the landowner is not ready and doesn’t have enough information to feel comfortable talking about a solar farm on their land.
LandGate provides useful data to landowners or to their agents to inform them for free about the value of their land for solar farm leasing. Equipped with more information, landowners can make good and fast decisions about pursuing a solar lease.
What is the Process for Leasing Land for a Solar Farm in New Jersey?
Step 1: Solar Lease Negotiation Period in New Jersey
The solar lease negotiation process is the first step landowners take when interested in having a solar farm on their property. Land professionals can assist landowners during this period to make sure they are receiving the best deal possible but also understand the time between signing the lease and having an active solar farm on their land.
During the negotiations, landowners can negotiate solar lease payments, the length of the lease for the solar farm, and the percentage of the escalator to combat inflation.
Step 2: Solar Lease Option Agreement in New Jersey
The next step is for the landowner to get a solar farm option agreement. At that point, the solar developer has done a preliminary study, also called a feasibility study, to know if the site is potentially suitable for solar farm development.
Why Can’t I Get a Solar Lease Agreement Directly?
The process of a solar farm project in New Jersey begins with optioning the land, which is called “site control” by developers. The reason solar developers cannot go straight to a solar lease is that they have to evaluate the land thoroughly.
Typically the initial screening study is good enough that this first due diligence process is all that is needed. Another larger uncertainty for solar developers is to know if the solar project will be accepted by the utility on the electrical infrastructure (or electrical network). We refer to this phase as “utility’s application” in the graph above and developers refer to this phase as “queue submission”. This means that the solar project enters the interconnection queue of that region waiting for regulatory approval.
These queues are known as Independent Systems Operator (ISO) or Regional Transmission Organization (RTO).
During this period, the analysis of possible engineering and land factors is conducted to determine the feasibility of the project to be constructed and connected to the grid. This is the reason why the solar developer starts with an option, as not all solar projects are approved by the ISO/RTO.
How Likely Will My New Jersey Solar Option Become a Solar Lease?
At the moment, about 20% of solar options become a solar lease and are built into a solar farm. Currently, the electrical infrastructure network is a big bottleneck. There are more applications of solar projects to get on transmission lines than available capacity.
However, governments are aware of this situation and are working to ease it, to foster more solar development. This means that it will likely get resolved in the next few years. The problem of available capacity applies only to utility-scale solar farm projects, which are typically greater than 5 MW capacity.
Where Can a Landowner Get More Information About the Solar Lease / Option Period in New Jersey?
LandGate assists landowners with determining the value of their land for a solar farm. We do this by taking into account the proximity of substations, transmission lines, and state incentives - each of which plays a role in site control.
Am I Getting Paid During the Solar Option Period?
Yes. Solar payments start during the option period but are usually smaller compared to the solar payments during the lease or construction phase of the solar farm.
Step 3: Solar Lease Agreement in New Jersey
Once the availability of grid capacity is confirmed, the solar project is moved to a “planned” phase. During this time, the developers will exercise the solar farm option agreement to become a solar farm lease agreement. Typically larger solar rent payments start at this time.
Step 4: Solar Farm Construction in New Jersey
Solar payments are phased as the project progresses. It starts with small solar lease payments during the option phase. Then it increases during the solar lease phase, it increases again during the construction phase of the solar farm, and the largest solar payment occurs when the solar farm is active and generating electricity.
How Long Does It Take to Build a Solar Farm in New Jersey?
Usually, it will take between 1 to 2 years to build a utility-scale solar farm. It takes less time to build a community solar farm since they are usually smaller in size.
Step 5: Active Solar Farm in New Jersey
After the construction has been completed, the solar farm is now considered ‘active.’ For landowners, this phase is called ‘production,’ as it signifies that their land is currently producing energy for the electrical grid that it is interconnected with. The production phase lasts anywhere from 25 to 50 years depending on what was negotiated on the lease.
What Can a Solar Farm Power In New Jersey?
In New Jersey, the average solar farm size is 37.26 acres generating approximately 3.5 megawatts (MW) of electricity when operating under optimal conditions. This output has the potential to cater to the energy needs of around 3,410 households as the typical electricity consumption of an average household in New Jersey stands at 8,902 kilowatt-hours per year.
What is the Impact of the IRA and Other Factors in New Jersey?
There are several federal and state incentives available for solar development in New Jersey, intended to encourage the use of solar energy by making solar power more affordable for businesses and organizations that install solar systems. These incentives can improve the financial viability of solar projects since they lower the initial costs and increase the return on investment.
Solar project incentives aid in the switch to clean, renewable energy sources, which lower greenhouse gas emissions and slow climate change. Incentives aid in increasing the deployment of solar projects by making solar energy more financially appealing, replacing fossil fuel-based power, and lowering the environmental effects related to traditional energy sources.
NJ Solar Development Incentive | Type | About |
Renewable Portfolio Standard (RPS) | State | New Jersey's RPS requires that 50% of the state's electricity come from renewable sources by 2030, with a specific carve-out for solar energy. By 2050, 100% of electricity sold in the state must come from renewable sources. |
Federal Solar Tax Credit, Solar Tax Credit (ITC) | Federal | The ITC allows for a 30% tax credit on the cost of solar system installation, applicable through 2032. Furthermore, solar panel installations are exempt from sales tax and any value-added property tax that may be levied from it. |
Renewable Electricity Production Tax Credit (PTC) | Federal | The PTC is an inflation-adjusted per-kilowatt-hour (kWh) tax credit for electricity generated by qualified energy resources, which includes solar, and sold by the taxpayer to an unrelated person during the taxable year. The credit duration is 10 years after the facility is placed in service. |
Successor Solar Incentive (SuSI) Program | State | New Jersey's SuSI Program provides incentives for solar projects based on administratively determined incentives (ADIs) and competitive solicitation. This program supports both residential and commercial solar installations. |
Sales Tax Exemption for Renewable Energy Equipment | State | This exemption eliminates sales tax on the purchase of solar energy systems and components used in the production of renewable energy. |
Property Tax Exemption for Renewable Energy Systems | State | Solar energy systems installed on residential properties are exempt from property tax assessments, reducing the overall cost burden for homeowners. |
Net Metering | State | New Jersey mandates net metering for investor-owned utilities (IOUs), municipal utilities, and electric cooperatives. This allows solar energy system owners to receive credits on their utility bills for excess energy generated and returned to the grid, usually at the full retail electricity price. |
New Jersey Clean Energy Program (NJCEP) | State | The NJCEP offers various rebates and incentives for residential, commercial, and industrial solar installations. The program aims to increase energy efficiency and the use of renewable energy in New Jersey. |
Solar Loan Program | State | This program provides financing options for residential and commercial solar projects. The loans are designed to make solar installations more affordable and accessible. |
The combination of federal incentives, state-specific programs, and financing options make solar energy projects significantly more accessible and financially attractive in New Jersey. These incentives are designed to encourage the adoption of solar power, reduce greenhouse gas emissions, and support the transition to a more sustainable energy future.
The expected increase in LMP pricing (19% in 2025) has made solar energy an attractive option for electricity generation in New Jersey. LMP is a pricing method used in electricity markets to determine the cost of electricity at specific locations (called ‘nodes’) within the electrical grid.
A PPA (Power Purchase Agreement) is a contract between a renewable energy developer (such as a solar company) and a power purchaser (such as a utility). Over the last three years, New Jersey has experienced a marginal 1.8% increase in PPA pricing and an average LMP price decrease of 15.23% (this is expected to increase by 19% in 2025).
In the context of solar energy projects in New Jersey, the relationship between LMP and PPA pricing lies in how the PPA sets the pricing terms for the electricity being sold. The fixed price in the PPA provides certainty to the solar developer about the revenue they will receive for the electricity they produce.
Meanwhile, the LMP serves as the market price for electricity at a specific node. When the LMP at a particular node in the grid is higher than the contract price specified in the PPA, it benefits the solar company, as they will receive the contract price and sell the electricity at a higher market price (increasing their revenues). Although New Jersey has seen a decrease in LMP over the past three years, the expected increase in LMP by 2025, combined with stable PPA pricing, makes New Jersey an attractive option for consumers and developers of electricity. This combination has aided in the rise of solar projects in New Jersey.
Typically, landowners and land professionals think of solar farms as huge plots of land covered in solar panels out in the middle of nowhere. However, this usually is not the case! In New Jersey, solar farms are typically 37.26 acres, allowing about 3.5 MW of electricity to be produced per farm under ideal conditions.
Commercial, Community, & Behind-the-Meter Solar Farms
New Jersey has witnessed notable growth in community and distributed solar generation. The state is actively developing a pipeline for small-scale solar projects, and there has been significant discussion regarding community solar programs.
In 2018, the Clean Energy Act was passed, establishing the Community Solar Energy Pilot Program. Building on this, New Jersey's community solar programs, supported by the New Jersey Board of Public Utilities (NJBPU), allow residential, commercial, and industrial customers to benefit from solar energy collectively. Overseen by the NJBPU, these programs offer subscription models, enabling participants to share in energy credits, thus making renewable energy more accessible statewide.
Furthermore, Governor Phil Murphy’s recent move to expand the Community Solar Energy Program has simplified the application process for solar installations, ultimately ensuring greater capacity and financial savings for New Jersey residents.
Commercial solar projects are the commonly largest energy projects being about 40+ acres of land. These solar farms usually feed their energy into the grid and the surrounding area. Realistically these solar farms can be any size depending on the capacity available within the grid.
Discover Land’s Value For Solar Leasing in New Jersey
The solar energy industries within New Jersey are growing to achieve energy goals for clean energy development. This makes it easier for landowners and real estate agents to participate in solar development deals. Landowners in New Jersey can receive a free solar leasing estimate by identifying and claiming ownership of their parcel on our map.
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Realtors can assist their clients in learning about their property’s potential for solar energy by using LandGate. Land professionals can utilize LandGate’s data and analytics to provide their clients with information about the potential of their resources.
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