[author: Roger M. Schwarz, Esq. ]
For clients who were contemplating a move to solar energy (either by direct investment in a solar energy system for your roof or via a purchase power agreement with a solar developer) only to step back as the subsidies began to vanish, help may be on the way.
First, some perspective. New Jersey’s solar energy program has been a huge success – second only to California’s in the number of solar installations – and it has become a victim of that success. The demand for solar is set by the state’s solar Renewable Portfolio Standard (RPS), a measure of the amount of solar power that energy providers must have in their supply mix. Those energy providers demonstrate compliance with the RPS by purchasing Solar Renewable Energy Certificates (SRECs) from the owners of solar power systems. New Jersey’s program has been so successful and so attractive to solar power developers and customers that the number of installations has far exceeded the RPS. As a result of supply and demand, the price of SRECs on the spot market has plummeted from $600 to less than $100.
With the price of SRECs limping along at that level, little solar is being built because lenders, understandably, have grown reluctant to finance projects. A solution to “accelerate” the RPS and increase the requirement for solar over the next three years was first proposed in the 2011 New Jersey Energy Master Plan and then in legislation late last year. A deal on that legislation fell apart in the final days of the session, when solar developers, trade unions and the Christie administration could not agree on certain key components.
There is nothing, however, like a few months of a moribund market to refocus attention. There is now new legislation in the state Senate and Assembly to increase the demand for solar by accelerating the RPS and making several other significant changes in the law.
On May 17, the Senate Environment and Energy Committee released a committee substitute for Senate Bill 1925 sponsored by Committee Chairman Bob Smith and Senate President Steve Sweeney. This new bill increases the RPS beginning next year, thus increasing the number of SRECs that energy providers will have to purchase. The schedule for the parallel solar alternative compliance payments (the “penalty” for not having enough SRECs) would be reduced in an effort to ease the financial burden on electric utility ratepayers, who, after all, are subsidizing the whole program.
The Board of Public Utilities (BPU) must approve all solar projects that are not net-metered (that is, sized to serve a host business) or built on brownfield sites or landfills. There will be an exception, however, to accommodate large projects that have been in the development pipeline, which will allow a total of 80 megawatts of grid-connected projects to proceed in each of the next three years, with no one project to exceed 10 megawatts. There is a provision in the bill that may effectively prohibit solar on farmland once grandfathering has been exhausted. Instead, the legislation promotes the development of solar projects on brownfields and landfills. Those projects will not be subject to BPU review and will receive an additional financial incentive designed to cover the additional cost of construction and operation.
The legislation includes a definition of what it means for a solar energy project to be connected to the electric distribution system, a change that may make it easier to site a project in the area of the state served by the Atlantic City Electric Company and, to a lesser extent, by Jersey Central Power & Light Company. There are also new provisions to permit school districts, counties and municipalities to purchase solar power through what is termed “virtual net metering aggregation,” which is intended to allow a school district, for example, to put all of its facilities “behind the meter” without connecting them with wires.
The legislation would establish a new solar registration program to require project developers to file periodic reports with the BPU in the hope of obtaining some greater transparency in the market. Finally, the bill requires that all projects built on brownfields or landfills and all projects of one megawatt or larger would be subject to the state’s prevailing wage law.
Following the vote in his committee, Senator Smith described the bill as still a work in progress. Similar but not identical legislation, Assembly Bill 2966, was introduced on May 21 by Assemblyman Upendra Chivukula, chairman of the Telecommunications and Utilities Committee, and referred to his committee. Both bills will be under consideration – and will have to be made identical – as the legislature rushes to complete the state’s fiscal year 2013 budget by the end of June.
If this legislation gets passed and signed into law, the outlook should be sunnier for New Jersey’s solar market. Stay tuned.
Roger M. Schwarz, a member of the Renewable Energy Group, is an attorney at Issues Management, the public affairs subsidiary of Lowenstein Sandler. He may be reached at 609-252-1300.
For information about the Lowenstein Sandler Renewable Energy Group, please contact any of our members:
Roger M. Schwarz
Jeffrey M. Shapiro
Mary J. Hildebrand
Robert J. Paradiso