New Jersey affirms commitment to developing renewable energy resources with new legislation

by Saul Ewing Arnstein & Lehr LLP


On July 23, 2012, New Jersey Gov. Chris Christie signed into law a bill that is intended to both stabilize and reinvigorate the state's green energy market and support development for renewable sources of energy. In addition, the law is designed to spur economic growth and position the state as a national leader in the solar energy industry.

New Jersey Governor Chris Christie has signed into law a bill intended to breath life back in to the New Jersey green energy market by providing economic incentives to both solar and off-shore wind initiatives.

The legislation is intended to stabilize the state's solar market, which has seen huge swings in the value of solar renewable energy certificates (SRECS), from highs near $700 to lows of $85. New Jersey's Renewable Energy Portfolio Standards obligate energy companies to purchase SRECS, which represent electricity generated from a solar installation. As the supply of SRECs has increased, the price has plummeted. This new law will mitigate this free market impact by requiring energy companies to purchase more SRECS or develop their own solar installations, while placing a ceiling on the price of SRECs in order to protect rate payers. The ceiling will go in to effect in 2014 commencing at $339 per certificate.

Siting of solar installations will be anything but green under the new law. Incentives are built in to the legislation that encourage the use of closed landfills, brownfields and asphalt parking lots, and in turn discourage the conversion of farmland and greenfields into solar farms. No BPU approval is required for solar installations built on brownfield sites and landfills. Among the other economic enticements for development on environmentally challenged properties is an exemption from New Jersey Spill Act liability. Potential federal claims are not addressed.

Another key provision of the legislation is its implications for public entities. It allows state agencies, school districts, counties and municipalities to aggregate net metering. A net metered site refers to a location that generates electricity via solar equipment for its own use, while feeding surplus electricity into the electric grid. A non net metered site, such as a power station or large scale solar farm, produces electricity exclusively for distribution to the grid. By allowing for aggregation of net metering, public entities which historically were limited to producing energy for their own consumption at the building to which the panels were attached and then obtaining SRECs for any additional energy generated, will receive direct credit that can be applied to the cost of providing electricity to other non connected buildings under their jurisdiction.

In order to continue to receive SRECs, non net-metered sites will now be subject to an oversight provision in the law.

As a further economic inducement, the law provides that the first 80 megawatts of grid supplied solar projects to be installed during each of energy years 2014 to 2016 (June 2013 to May 2016) will avoid BPU oversight. Any non-metered projects over the first 80 megawatts or commencing in June 2016 will require BPU approval to be determined based on the project's effect on the statewide SREC market, the environmental impact of building and the benefit to electric rates and economic development.

Proponents of the legislation, state Senator Bob Smith and state Senate President Steve Sweeney, report that it will help sustain jobs and will assist local governments in reducing energy costs which will affect their overall budgets and potentially avert property tax increases.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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