New Jersey Codifies Solar Renewable Portfolio Standards with The Solar Energy Advancement & Fair Competition Act

On January 17, 2010, former Governor Corzine signed The Solar Energy Advancement and Fair Competition Act (the Act), amending The Electric Discount and Energy Competition Act (EDECA). The Act could significantly expand the economic viability of solar energy projects throughout New Jersey.

Among other things, the Act (i) codifies minimum requirements for New Jersey’s Solar Renewable Portfolio Standards (RPS), requiring that electric power providers in the state of New Jersey purchase an annually increasing amount of solar electric power, (ii) compels the Board of Public Utilities (BPU) to adopt a 15-year Solar Alternative Compliance Penalty (SACP) schedule, (iii) provides that electric generation systems of any sized capacity are eligible for net metering, and (iv) codifies the life span of Renewable Energy Credits (RECs) (both Class I RECs and Solar RECs (SRECs)).

The most significant provision of the Act is the codification of a minimum RPS. The Act compels the BPU to adopt an RPS that requires no less than 306 GWhrs of solar power be generated in New Jersey in the energy year 2011, with the annual minimum increasing each year until energy year 2026, when at least 5,316 GWhrs of solar power must be generated. To put this in perspective, the current total generating power of all solar arrays registered in New Jersey’s SREC trading program is less than 40% of the minimum capacity required to be in place by May 2011. Further, the Act provides that the RPS shall automatically increase by 20% for the remainder of the schedule in the event that (i) the number of SRECs generated meets or exceeds the requirement for three consecutive reporting years starting with energy year 2013, and (ii) the average SREC price for all SRECs purchased by entities with RPS obligations has decreased in the same three consecutive reporting years.

It is important to note that the Act does not promulgate the actual RPS, but rather compels the BPU to adopt an RPS in compliance with the Act. The Act provides that once the RPS has been adopted by the BPU, it shall be effective for a period not to exceed 30 months, during which the RPS shall be amended or readopted in accordance with the Administrative Procedure Act. While the BPU is compelled to reexamine the RPS within the next 30 months, the Act forbids the BPU from reducing the previously adopted RPS or otherwise imposing constraints that reduce the requirements by any means.

In addition to codifying the minimum RPS, the Act also compels the BPU to establish a 15-year SACP schedule that permits each electric supplier to comply with the requirements of the RPS. It is important to note that the current SACP schedule expires in 2016 and the BPU has not yet established the 15-year schedule required by the Act. Once the 15-year SACP schedule is adopted, the Act forbids the BPU from reducing the previously established levels and from providing relief from the obligation of the payment of the SACP by electric power suppliers. Obviously, the amount of the SACP going forward will have a major effect on the financial viability of solar installations.

The Act also provides that systems of any sized capacity are eligible for net metering. This appears to eliminate the existing 2-megawatt net metering limitation and forbids the BPU from adopting any limitations on net metering based solely on the size of the system. Although unclear, this provision can also be read to remove historic usage limitation.1

Finally, the Act codifies the life span of Class I RECs and SRECs, making them effective for the energy year in which they are generated plus the following two energy years.

No state other than California has more solar energy generating capacity than New Jersey thanks to aggressive legislation such as the EDECA. The Act supports New Jersey’s solar energy goals by adding a measure of certainty to the income stream generated by the sale of SRECs, thereby encouraging long-term investments in solar installations. Notwithstanding the foregoing, the effectiveness of the framework established by the Act, and thereby the long-term economic viability of solar installations in New Jersey, is dependent on the BPU adopting a 15-year SACP schedule that generates a meaningful income stream.

1 It should be noted that the BPU recently proposed amending the regulations to remove the 2MW cap on net metering facilities, but left unchanged the historic usage limitation. 42 N.J.Reg. 53 (Jan. 4, 2010). However, this proposal has been frozen by Executive Order No. 1 (Jan. 20, 2010).

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