Is the NJ Solar Industry Headed for Collapse?

Is the NJ Solar Industry Headed for Collapse?

New Jersey is planning to overhaul the way it approaches solar energy and end the existing solar renewable energy certificate (SREC) program used in part to finance solar projects. The value of SRECs — awarded for each megawatt-hour of electricity generated from a solar energy installation — has fluctuated significantly in recent years. After crashing six years ago, the market is rebounding. However, without an interim system for incentivizing solar development while the new program is put in place, solar advocates are warning that the New Jersey solar industry could again be in trouble.

New Jersey’s New Renewable Energy Plan

In May, Gov. Phil Murphy signed environmental legislation into law (Assembly Bill 3723) that sets ambitious goals for renewable energy, increasing the target of the state’s renewable portfolio standard to 50 percent by 2030. It also includes cost caps that ensure energy costs to consumers don’t increase by more than 7 percent.

The new law also directs the Board of Public Utilities to wind down the existing solar program and establish a new one. Under current law, electric power suppliers and basic generation service providers must provide a certain percentage of their electricity from solar electric power generators. The new law speeds up the timeline for requiring electric power suppliers and basic generation service providers to provide a greater percentage of solar energy each year, culminating in 5.1 percent by energy year 2021 and then steadily reducing the schedule until energy year 2033.  The law also reduces the solar alternative compliance payments (SACP) beginning in energy year 2019 until energy year 2033.  For energy year 2019, the SACP is reduced to $268 and is gradually reduced by $10 per year until 2033.

The BPU is required to adopt rules and regulations to close the SREC program to new applications upon the attainment of 5.1 percent of the kilowatt-hours sold in the State by each electric power supplier and each basic generation service provider from solar electric power generators connected to the distribution system. The new law requires the closure of the SREC program no later than June 1, 2021. The renewable energy law also mandates that new solar projects over 25 kilowatts must satisfy an escrow requirement. The notice escrow amount will be reimbursed to the applicant in full upon either denial of the application by the board or upon commencement of commercial operation of the solar electric power generation facility. In addition, projects will only receive a maximum 10 years of SRECs, down from 15 years.

The BPU is also tasked with creating and implementing a new solar financing program. Under the new law, the Board must consult with public utilities, industry experts, regional grid operators, solar power providers and financiers, and other State agencies to determine whether the board can modify the SREC program to meet the following requirements, among others: 

• Continually reduce, where feasible, the cost of achieving the solar energy goals set forth in the law;
• Develop megawatt targets for grid-connected and distribution systems, including residential and small commercial rooftop systems, community solar systems, and large scale behind the meter systems, as a share of the overall solar energy requirement, which targets the board may modify periodically based on the cost, feasibility, or social impacts of different types of projects;
• Establish and update market-based maximum incentive payment caps periodically for each of the above categories of solar electric power generation facilities;
• Encourage and facilitate market-based cost recovery through long-term contracts and energy market sales; and
• Where cost recovery is needed for any portion of an efficient solar electric power generation facility when costs are not recoverable through wholesale market sales and direct payments from customers, utilize competitive processes such as competitive procurement and long-term contracts where possible to ensure such recovery, without exceeding the maximum incentive payment cap for that category of facility.

Bridging the Gap to NJ’s New Solar Program

The BPU is also tasked with designing an “orderly transition” from the SREC program to the new program. The short timeline to accomplish these tasks is causing concern in the solar industry.

“Despite once being a leader in the country for solar power, we are concerned that New Jersey’s solar market will collapse completely within the next year and no longer accept applications for solar projects,” said Jeff Tittel, Director of the New Jersey Sierra Club.

“This could lead to the bankrupting of countless renewable energy projects costing thousands of clean energy jobs since there are five times as many jobs in the solar sector than there are in the coal industry. This would be a disaster that will put a wrench in our plans to make New Jersey cleaner and greener by destroying the solar market altogether.”

To avoid market disruption, the New Jersey Sierra Club and other solar advocates are calling on the state to keep the interim program straightforward and cost-fixed. In a stakeholder meeting with the BPU, Larry Barth, Director of Corporate Strategy for New Jersey Resources, suggested, “Let’s keep that interim program as simple as possible.” Lyle Rawlings, Founder of Advanced Solar Products, agreed. “It is the lowest cost solution that can be implemented quickly,” he stated.

At this point, it is unclear how the BPU plans to handle the transition. However, big changes are likely coming to New Jersey’s solar industry. Given the importance of the issue to businesses and local entities, Scarinci Hollenbeck’s Environmental & Land Use practice will continue to provide updates as they become available.

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If you have any further questions, feel free to reach out to me, William C. Sullivan, Jr., at 201-806-3364.