New Jersey: New Jersey Board of Public Utilities - Solar Renewable Energy Certificates (SRECs)

Note: The Solar Energy Advancement and Fair Competition Act (A.B. 3520) enacted in January 2010 makes certain changes to the New Jersey renewable portfolio standard and the accompanying renewable energy credit system. Among the changes made by the new legislation are: (1) a restructuring of the solar carve-out target from a percentage-based (%) goal to an energy-based (MWh) goal; (2) the extension of both renewable energy credit and solar renewable energy credit lifetimes to the year of generation and the following two years; and (3) a requirement that the Board of Public Utilities (BPU) extend the solar alternative compliance payment (SACP) schedule from 8 years to 15 years. While some these changes were addressed under a Special Rule Adoption in March 2011, others, such as the establishment of a 15-year SACP schedule, will require further administrative action.

New Jersey's renewable portfolio standard (RPS) -- one of the most aggressive in the United States -- requires each electricity supplier/provider serving retail customers in the state to include in the electricity it sells 22.5% qualifying renewables by 2021. The New Jersey Board of Public Utilities (BPU) made extensive revisions to the RPS in April 2006, significantly increasing the required percentages of "Class I" and "Class II" renewable energy, as well as the required separate percentage of solar electricity (2.12% by 2021). The solar portion of the standard has since been revised again by A.B. 3520 enacted in January 2010 to have an ultimate goal of 5,316 gigawatt-hours (GWh) of solar generation in 2026.

Solar Renewable Energy Certificates (SRECs) represent the renewable attributes of solar generation, bundled in minimum denominations of one megawatt-hour (MWh) of production. New Jersey’s SREC program provides a means for SRECs to be created and verified, and allows electric suppliers to buy and retire these certificates in order to meet their solar RPS requirements. All electric suppliers must use the SREC program to demonstrate compliance with the RPS. New Jersey’s on-line marketplace for trading SRECs, launched in June 2004, is the first such operation in the world. The price of SRECs is determined primarily by their market availability and the price of the Solar Alternative Compliance Payment (SACP) for the state RPS. The SACP is effectively a ceiling on the value of SRECs because it is the per MWh payment that electricity suppliers must make if they fail to obtain enough SRECs to cover their RPS obligation.

SRECs accrue from participating solar-electric facilities beginning March 1, 2004. Generators must register with the BPU through the SREC Registration Program (see program web site above) in order to participate. Ambiguous wording in the administrative rules initially appeared to limit the creation of SRECs for compliance with the state RPS to net-metered systems located on a customer-generator's premises. In January 2008, S.B. 2936 specifically extended the right to generate RPS-eligible SRECs to non-net metered systems and in May 2008 the BPU adopted temporary amendments consistent with the change (subsequently replaced by permanent amendments).

Solar facilities have a 15-year "qualification life", meaning that they are eligible to generate SRECs for 15 years after they are connected to the grid. The qualification life ends on the first May 31 (the end of the RPS compliance year) that is at least 15 years after the interconnection date. If a generator has accumulated a fraction of an MWh by the end of a reporting year (May 31), the fraction may be carried over and combined with energy generated in one or more subsequent reporting years in order to make a full MWh that is eligible for sale.

SRECs generated prior to June 1, 2009 could only be used for compliance during the compliance year in which they were generated. Effective June 1, 2009 SRECs have a trading lifetime of two years, meaning that an SREC can be used for by an electric supplier for RPS compliance during the year it is issued or during the next compliance year. This lifetime has been further extended to 3 years -- the year of generation plus the following two compliance years -- by A.B. 3520 (2010). The effective date of this law ("the first day of the sixth month following enactment") would seem to preclude the amendment having any effect on SRECs generated prior to compliance year 2010-2011. The necessary clarification should be addressed in BPU rule making.

Under current rules the SACP is determined according to an eight-year schedule, although the BPU may soon be adopting a 15-year schedule as a result of the A.B. 3520 requirements enacted in January 2010. Each year the BPU reviews the SACP and adds one additional year to the back end of the schedule. The initial eight year schedule (June - May energy year) is as follows:

Reporting Year	SACP($/MWh)
2008-2009	$711
2009-2010	$693
2010-2011	$675
2011-2012	$658
2012-2013	$641
2013-2014	$625
2014-2015	$609
2015-2016	$594

The price for an SREC is expected to average approximately $100 per MWh lower than the SACP during a given year, although actual prices will vary with market demand. According to the New Jersey Office of Clean Energy (OCE), in the latter half of 2010 the weighted average price of Energy Year (EY) 2011 SRECs was approximately $600/MWh ($0.60/kWh), with some trades approaching $700/MWh.

SREC-based Financing Programs

In July 2008 the BPU issued an order requiring the state's other electric distribution utilities (Jersey Central Power and Light, Atlantic City Electric, and Rockland Electric) to submit plans for purchasing SRECs from solar facilities through long-term contracts. The order contains several mandatory design requirements, including: (1) contract terms of 10-15 years; (2) separate market segments for projects of 50 kW or less and those between 50 and 500 kW (the upper limit); and, (3) an initial 3-year program period ending with the May 31, 2012 compliance year. The upper limit was subsequently raised to 2 MW in December 2010. So called "legacy" projects that received rebates through 2008 under the CORE program are not eligible for long-term contracts.

PSE&G is permitted to continue to offer its Solar Loan Program through its close. Atlantic City Electric and New Jersey Central Power and Light issued their first request for bids on July 30, 2009 and Rockland Electric began participating in the second solicitation issued October 1, 2009. Click here for further details on the individual utility programs and an FAQ on how the programs operate.