The New Jersey Board of Public Utilities (BPU) recently published a straw proposal intended to aid in the transition from the current Solar Renewable Energy Certificate (SREC) Program to a new system that is yet to be determined. While the straw proposal provides a basic roadmap for the transition process, it still leaves many questions that must be hashed out as the process continues.

Clean Energy Act Mandate

In May, Gov. Phil Murphy signed the Clean Energy Act into law (Assembly Bill 3723). The new law sets the target of the state's renewable portfolio standard at 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 BPU to wind down New Jersey’s existing solar program and establish a new one. It also accelerates 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 percentage until 1.1 percent in 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.

Under the Clean Energy Law, 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.

BPU Solar Transition Straw Proposal

Following the enactment of the Clean Energy Law, there has been much speculation regarding how the solar industry would fare without an interim system for incentivizing solar development while the new program is put in place. Some solar advocates even warned that the New Jersey solar industry could be headed for collapse. In December, the BPU adopted a rule beginning the process of phasing out the current SREC program and developing a new one.

To help guide the transition process, the BPU’s straw proposal establishes the following key principles:

• Provide maximum benefit to ratepayers at the lowest cost;
• Support the continued growth of the solar industry;
• Ensure that prior investments retain value;
• Meet the Governor’s commitment of 50 percent Class I Renewable Energy Certificates (RECs) by 2030 and 100 percent clean energy by 2050;
• Provide insight and information to stakeholders through a transparent process for developing the Solar Transition and Successor Program;
• Comply fully with the statute, including the implications of the cost cap; and
• Provide disclosure and notification to developers that certain projects may not be guaranteed participation in the current SREC program, and continue updates on market conditions via the NJCEP SRP Solar Activity Reports.

In its proposal, the BPU notes that the Clean Energy Act defines the transition point as “the attainment of 5.1 percent of the kilowatt-hours sold in the State by each electric power supplier and each basic generation provider from solar electric power generators connected to the distribution system.” For purposes of its straw proposal, “attainment” means that 5.1 percent of the actual kilowatt-hours sold in the state are being generated by solar electric power generators.

As the transition process unfolds, Board staff is proposing that SRECs be divided into three categories: legacy SRECs created by projects that filed an SRP Registration and entered into operation prior to the time when the 5.1 percent threshold is reached; pipeline SRECs created by projects that filed an SRP Registration, but which have not begun operation prior to the attainment of the 5.1 percent threshold; and the SREC Successor Program for projects that filed an SRP Registration after the 5.1 percent threshold is reached.

In announcing the straw proposal, the BPU also noted that a “robust public engagement process” will occur as it works to develop a new solar program. The public stakeholder process will take place in the first half of 2019, with the first meeting scheduled for Friday, January 18, 2019, at Rutgers University, College Avenue Student Center, Multipurpose Room, 2nd Floor, 126 College Avenue, New Brunswick, at 10:00 a.m.

While many of the details are still uncertain, big changes are on the horizon for 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. We also encourage entities with a vested interest in New Jersey’s solar industry to participate in the BPU’s public stakeholder process.

If you have any questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, William Sullivan, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.