Governor Murphy Signs Sweeping Renewable Energy Bill

On May 23, 2018, Governor Murphy signed S-2314 (the “Law”), a sweeping renewable energy bill that touches on many of the issues that have been the subject of discussion throughout New Jersey’s renewable energy sector for years. The Law addresses, among other things, solar energy, energy efficiency, offshore wind and energy storage. The Law is effective immediately.

The key components of the Law are as follows:

1. The Board of Public Utilities (the “BPU”) is directed to conduct an energy storage analysis and submit a report to the Governor and Legislature concerning energy storage needs and opportunities in the State of New Jersey. The BPU is further directed to, no later than 6 months following completion of the report, initiate a proceeding to establish a process and mechanism for achieving the goal of 600 megawatts (“MW”) of energy storage by 2021, and 2,000 MW of storage by 2030.

2. Beginning on January 1, 2020, 21% of the kilowatt hours sold in New Jersey must be from Class 1 renewable sources. That percentage increases to 35% in 2025 and 50% in 2030. The foregoing requirement shall be capped so that the cost to customers of satisfying the requirements does not exceed 9% of the total paid for electricity consumption in New Jersey for Energy Years 2019, 2020 and 2021, respectively, and shall not exceed 7% of the total paid for electricity consumption in New Jersey in each Energy Year thereafter. The mechanism for the BPU to control the cost is to adjust the Class 1 Renewable Portfolio Standard, which is the amount of Renewable Energy Credits generated from Class 1 renewable sources that the energy suppliers in New Jersey must retire each year. Class 1 renewable sources are solar, wind, geothermal, tidal, wave, hydroelectric facilities of 3 MW or less, biomass and methane gas.

3. The Solar Renewable Portfolio Standard (“SRPS”) is increased to 4.3% of retail sales in Energy Year 2019, 4.9% of retail sales in Energy Year 2020, and 5.1% of retail sales in Energy Year 2021. The increases are projected to add approximately 650 megawatts of new capacity to the SRPS.

4. The BPU is directed to adopt rules and regulations to close the current Solar Renewable Energy Certificate (“SREC”) program to new applications upon the earlier of the date 5.1% of electricity sold in New Jersey is generated by solar facilities, or June 1, 2021. The SRPS decreases to 9% of electric sales in in Energy Year 2024, gradually decreases to 1.10% in Energy Year 2033, and is eliminated in Energy Year 2034.

5. The BPU is directed to complete a study that evaluates how to modify or replace the existing SREC program to encourage continued efficient and orderly development of solar energy. The BPU is directed to provide an orderly transition from the current SREC program to the new or modified program.

6.The BPU is directed to approve, conditionally approve or disapprove any application for a solar facility to be deemed eligible to generate SRECs within 90 days after receipt of a completed application. All applicants for projects in excess of 25 kilowatts DC are required to post an escrow with the BPU in an amount equal to $40 per kilowatt of DC nameplate capacity, not to exceed $40,000. The escrow will be reimbursed in full upon denial of the application, or if the application is approved, upon commencement of commercial operation of the solar project. The escrow will be forfeited to the State if the solar project does not achieve commercial operation within 2 years of the date of designation by the BPU.

7. The Bill increases the net metering cap to 5.8% of retail sales.

8. All new solar projects approved for the generation of SRECs will have their SREC generation life reduced from 15 to 10 years.

9. The goal of the existing directive to the BPU to create an Offshore Wind Renewable Energy Credit (“OREC”) program has been increased from 1,100 MW to 3,500 MW. The OREC requirement will offset a corresponding portion of the Class 1 Renewable Energy Certificate requirement.

10. The Solar Alternative Compliance Payment (“SACP”) is reduced as follows:

EY 2019 $268
EY 2020 $258
EY 2021 $248
EY 2022 $238
EY 2023 $228
EY 2024 $218
EY 2025 $208
EY 2026 $198
EY 2027 $188
EY 2028 $178
EY 2029 $168
EY 2030 $158
EY 2031 $148
EY 3032 $138
EY 2033 $128

11. The BPU may approve projects totaling 100 MW of non-net metered systems to be eligible to generate SRECs under Subsection “r” during Energy Years 2019 and 2020. No more than 50 MWs may be approved in Energy Year 2019. If the BPU approves less than 50 MWs of systems in each of Energy Year 2019 or 2020, the difference in each year shall be carried over into the successive energy years until a total of 100 MWs has been approved.

12. The BPU is directed to adopt electric energy efficiency and gas energy efficiency programs in order to ensure investment in cost effective energy efficiency measures and shall implement gas and electric energy efficiency measures that reduce electricity and gas usage in New Jersey.

13. Within 1 year each electric and gas public utility shall be required to achieve annual reductions in the use of electricity and gas in their respective territories.

14. Within 5 years of implementation of its efficiency program, each public electric utility shall be required to achieve annual reductions in the use of electricity equal to 2% of the average annual usage in the prior 3 years.

15. Within 5 years of implementation of its efficiency program, each public gas utility shall be required to achieve annual reductions in the use of natural gas equal to 0.75% of the average annual usage in the prior 3 years.

16. Within 1 year the BPU shall conduct and complete a study to determine the energy savings targets for full economic, cost effective reduction of the use of electricity and natural gas, as well as the potential for peak demand reduction in the service territory of each utility.

17. Within 210 days the BPU shall establish a Community Solar Energy Pilot Program to permit utility customers to participate in a solar energy project that is remotely located from their properties (the “Community Solar Pilot Program”). The Community Solar Pilot Program will allow customers to obtain a credit to its utility bill equal to the electricity generated by the project that is attributed to the customer’s participation, provided the project is approved by the BPU as being connected to the distribution system and located in the in the service territory of the utility which is serving the customer. The BPU may restrict qualified solar energy projects to those located on brownfields, landfills, areas designated in need of redevelopment, in underserved communities or on commercial rooftops.

No later than 36 months following the adoption of the rules for the Community Solar Pilot Program the program shall be converted to a permanent program, establishing a goal for the development of at least 50 MW of projects annually.

18. Within 120 days the BPU shall establish an application and approval process to certify public entities to act as a host customer for remote net metering. A public entity certified to act as a host customer may allocate credits to the other public entities within the same service territory. The owner of the project shall pay a certified public entity a pro-rated public sponsor fee of $10,000 per MW, up to a 10 MW allowance for each public entity. Each participating customer shall pay at least 50% of the societal benefits charge.

From a solar perspective, the Law provides an orderly closure of the existing SREC program over the next 2 years with little risk of another market crash. During the next 2 years all stakeholders and the BPU will examine the various programs being used across the country and work to devise a successor program that will keep the New Jersey solar energy market robust with as minimal impact on rate payers as possible.

Regarding the remainder of the Law, it is evidence of New Jersey’s continued support of energy efficiency and renewable energy and mandates the further examination of all aspects of New Jersey’s renewable energy sector in an attempt to keep New Jersey’s renewable energy sector on the cutting edge, while reducing its impact on ratepayers.

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