This is not the first time that the solar industry has seen a 1603 driven end-of-year rush to go solar. The program was set to expire on 12/31/10, but was extended at the last minute after heavy industry pressure. Visit SEIA for more information on the 1603 Program and how you can support its extension.

The impressive growth is partially attributed to the somewhat unpredictable schedule of the federal 1603 cash-grant, which covers 30% of project costs for commercial solar systems. Toward the end of 2010, project developers scrambled to get as many projects in the pipeline as quickly as possible over concerns that the grant would expire at the end of the year. Q4 in 2010 installed over 360 MW of capacity, up from roughly 187 MW in Q3 2010.

A carry-over from last year’s late rush to get projects underway contributed to the impressive numbers posted in Q1 2011. Though the grant program was extended through 2011, there is yet again a rising fear that the grant’s expiration is imminent. The US Congressional Join Select Committee (JSC), which was created to cut at least $1.2 trillion in federal spending, will likely eliminate the grant program upon its scheduled expiration at the end of the year. Though the program has been successful, awarding $8.5 billion overall (three times the projected amount of $3 billion), continuing the government-funded program is simply counter to JSC’s goal of reducing the current budget deficit.

A repeat of last year’s late surge is expected going into the last few months of 2011. In order to qualify for a grant, a system must begin construction by the end of the year. Similar to last year, a project is deemed to have begun construction based on the program’s “5% safe harbor” rule, which requires at least 5% of the total cost of the property or system to be paid by December 31, 2011. Projects only then need to be completed by the end of 2016 to qualify for the grant.

New Jersey’s actions parallel those the cuts to solar incentives in Spain and the reduction of feed-in tariffs (FiT) in Germany. Fixed rebate programs and feed-in tariffs lack a market mechanism and don’t have the feedback mechanism inherent in a REC or SREC trading program. If legislators set the solar incentives too low, they don’t inspire any development. But when legislators set incentives too high, there is a gold rush — developer overwhelm the rebate or FiT programs that was engendering the frenzy.

These dramatic cuts highlight difference between rebates and feed-in tariffs and an SREC program. SRECs prices move according to supply and demand and are not subject to on-again, off-again whim of legislators and have proven to be a stable, long-term incentive that has been very effective stimulating solar development.

In New Jersey, SRECs are now an even bigger determinant of the economics of a project. With clear, transparent long-term contracts, solar investors and developers have clarity in the cash flows associated with solar. And for smaller systems looking to offset the high upfront costs of installation, prepaid SREC contracts are an interesting alternative to rebate programs – the current bids in New Jersey prepaid SRECs equivalent to approx. $2.27 per installed watt.

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To view the entire program qualifications and eligiblilty, or to download an application, please visit www.thesef.org.