Coverage Tweaks Will Immediate Increase in New Jersey Solar Growth

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New Jersey is entering a new era of incentives that promises to revitalize its solar industry.

The New Jersey Board of Public Utilities (BPU) has introduced a new transition incentive program that provides security and makes it easier to fund projects. With an enthusiastic Phil Murphy administration continuing to drive the transition to carbon-free energy, the transition program, along with New Jersey’s new Community Solar Energy Pilot program and the obstructive succession incentive program, provides a promising environment for solar project development in New Jersey .

New Jersey has been a leader in the solar industry for 15 years. Although New Jersey is one of the smallest territorial states and a state with below-average solar radiation, New Jersey ranks seventh in the country in terms of installed solar capacity, accounting for more than 3% of total installed solar capacity.

The state’s solar success has been largely driven by a lucrative loan program for renewable solar energy. A Renewable Portfolio Standard (RPS) that mandates the use of renewable energy (especially solar) combined with the “stock” of alternative compliance payments required by utility companies that do not meet these standards has caused an explosion in solar energy development run in New Jersey. New Jersey was once the fastest growing solar market in the country.

Regardless of New Jersey’s solar success, the solar program has not been without criticism, particularly from New Jersey’s Ratepayer Advocate and stakeholders who support the development of solar but are also concerned about the rising costs being borne by tariff payers. Additionally, the requirements of any supplier meeting their RPS and fears that New Jersey lawmakers would change the RPS created uncertainty about the future value of SRECs.

In May 2018, Murphy signed the Clean Energy Act (CEA), which ordered the BPU to close the SREC program once 5.1% of the energy sold in New Jersey was generated by solar projects, and to assess whether or not the existing one was modified or The SREC program should be replaced at this milestone.

The CEA also acknowledged concerns about the cost of the programs, so the law also set a cost cap. The CEA limits the tariff costs for class I renewable energy (including solar energy) to 9% of the total costs paid by electricity customers for the energy year 2021 (June 1, 2020 – May 30, 2021). The upper limit will be reduced to 7% in the energy year 2022 (June 1, 2021 – May 30, 2022) and thereafter in each energy year.

In 2019, the BPU carried out a stakeholder process to work out the details of the implementation of the CEA. As a result, the BPU completed the SREC program and implemented the transition program that allows new projects to continue receiving renewable energy credits (now referred to as “TRECs”) while at the same time BPU employees can develop the permanent successor program of solar incentives and at the same time react sensitively to the costs for the tariff payer.

In December 2019, the BPU issued a transitional ordinance in which the recommendations of its employees for the preparation of the transitional program on the basis of the issuing of TRECs were accepted. Over the course of several months as the 5.1% milestone approached, the transition program continued to be discussed and refined. The process culminated in a series of BPU orders and a declaration that the 5.1% milestone would be reached on or around April 30, 2020, as well as a proposal for formal arrangements for the transition program due May 18 in the New Jersey Register, 2020. Via the BPU regulation, the SREC program was officially closed on April 30, 2020 and the TREC program officially opened on May 1, 2020.

Advantages of the TREC program

The transition program has some key differences from the SREC program that have been well received by the solar industry. Unlike the SREC program, which is based on a fluctuating market-based SREC, the TREC has a fixed value of $ 152. Each project in the transition program generates one TREC for every megawatt hour of electricity generated in the first 15 years of operation. Additionally, TRECs are simply sold to a specific administrator rather than the SREC, which is why the solar developer had to find a buyer for their SRECs.

Each TREC created is assigned a factor based on the type of project from which it was generated. Projects on landfills, fallow land and areas with historical filling; grid supply projects erected on roofs; and net metered roof and canopy installations outside of the residential area receive the full value of $ 152 per megawatt hour.

John Valeri. Photo by Steve Hockstein / HarvardStudio.com

Community solar projects receive a value of 85% of the full TREC value. Grounding for mains supply; net metered floor mount for residential buildings; Roof and canopy of a network measuring device; and grid-metered ground-mounting projects outside of the residential area are assigned a value of 60% of the full TREC value.

TRECs can be used in the created energy year or in the following energy year. Solar projects that are considered to be connected to the distribution system and have not received an operating permit (PTO) as of April 30, 2020, can participate in the transition program.

Recently, the BPU recognized the need to keep the successful New Jersey solar market safe during both the transition required by the CEA and the COVID-19 crisis. On July 29, 2020, the BPU passed a resolution in which it waived its rules and granted the projects registered in the transition program before October 20, 2020 a flat-rate extension so that such projects could receive PTO until October 20, 2021.

Solar projects on fallow land, historic filling areas and properly closed landfills will retain their statutory conditional approval for two years, which may extend beyond October 21, 2021, depending on the date of the conditional approval. Solar projects registered in the TREC program after October 20, 2020 have one year from registration to achieve PTO.

Although the transition program represents a short-term bridge to the successor program that has yet to be determined, it brings the solar industry the security it urgently needs. The SREC program is widely viewed as a success, but the value of SREC has declined in recent years. The downward trend as well as the uncertainty of the SREC value became problematic for new investments.

Stephen Kisker. Photo by Steve Hockstein / HarvardStudio.com

However, the transition program provides for a defined cash flow for 15 years. While the TREC scores are currently lower than the SREC scores, the value of safety cannot be overemphasized during this period of both the transition to the successor program and the COVID-19 pandemic. By providing a fixed TREC value for 15 years, the BPU has provided solar developers with a guaranteed source of income that is convenient for their investors and lenders. By granting a blanket extension until October 20, 2021, the BPU expressly recognized the need for security when it tried to structure and implement the successor program during the COVID-19 pandemic.

The transition program also gives the solar industry valuable insights into the successor program. We saw that the BPU recognized that security is an important factor in the business decisions of solar investors and developers. The pandemic only emphasized the importance of certainty. The BPU’s recent actions gave hope to the solar industry as the BPU developed the successor program.

Community Solar is due

In addition to the transition program and the optimism associated with the upcoming successor program, the community solar program offers a new opportunity for the solar industry in New Jersey. With community solar projects, several customers at several locations can obtain electricity from a single solar system using a virtual grid measurement.

The CEA asked the BPU to set up a program to encourage the development of solar energy through the community subscription system market. The collaborative solar program prioritizes the pooling of solar energy end-users, especially in low and middle income areas (LMI) and communities for environmental justice, which has been a focus of the Murphy administration.

The first year of the program was limited to 75 MW, of which 30 MW was dedicated to projects that sell at least 51% of the project generation to LMI customers. Program years two and three, which will take place in 2021 and 2022 respectively, must be at least 75 MW, but can be longer. Projects under the Community Solar program may receive SRECs or TRECs depending on the application date and conditional approval.

The response to the first year of the community solar program has been overwhelming. The BPU received 252 applications and issued 45 conditional approvals. Applications for the second year of the program will be accepted this fall and an even greater response is expected.

Despite the success so far of the New Jersey solar energy program, it has had two major drawbacks: uncertainty about the value of the SREC and the lack of community solar opportunities. The CEA and its related regulations have provided the solar industry with a solution to both problems, which has created renewed excitement in the future of solar development in New Jersey.

John G. Valeri Jr. serves as the practice group leader for the environmental group at Chiesa Shahinian & Giantomasi PC law firm based in West Orange, New Jersey. He can be reached at jvaleri@csglaw.com. Stephen A. Kisker is chairman of the company’s renewable energy and sustainability group and can be reached at skisker@csglaw.com.

Photo: DSM North America’s 20.2 MW project in Belvidere, NJ

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