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New Solar Energy Law Seeks To Stabilize SREC Market

Aug 09, 2012

The New Jersey Legislature passed and Governor Chris Christie signed into law S-1925/A-2966, (P.L. 2012, c.24) a bipartisan bill that is intended to increase the demand for Solar Renewable Energy Credits (SRECs) and spark continued growth of solar energy development in New Jersey. A dramatic increase in the quantity of installed solar capacity throughout the State over the past several years brought a flood of SRECs into the market. This dramatic increase in supply caused the value of an SREC to drop from a high of nearly $700 to below $100. This has diminished the financial return-on-investment necessary to drive new solar construction. The new law, which amends certain provisions of the 2010 Solar Energy and Fair Competition Act, addresses the SREC “problem” in a variety of ways. The law changes the New Jersey solar renewable portfolio standard (RPS) requirement from a fixed statewide gigawatt-hour requirement to a percentage of the electricity sold in the State. The required percentage of solar power to be included in the electric power portfolios of New Jersey suppliers and providers will increase incrementally from 2.050% in energy year 2014 to 4.100% in energy year 2028. This new structure is intended to shield the value of SRECs from wide market fluctuations and absorb the current over-supply of SRECs in the marketplace. The law also lengthens the life span of SRECs from three to five years. In a further effort to control the influx of SRECs into the market, the law provides for the Board of Public Utilities (BPU) to serve as the “gatekeeper” of entry by large non-net metered and non-on-site generation systems. In order to implement this added control, the BPU will establish an approval process requirement for such systems to qualify for SRECs. The law also provides for the BPU to establish a program to provide SRECs and additional financial incentives “super SRECs” to owners of solar projects constructed on a brownfield or closed sanitary landfill facility, as well as to consider the establishment of additional financial incentives for 3MW or greater solar projects. The passage of S-1925/A-2966 into law is welcome news for property owners who were considering a solar energy system to lower their electricity costs. Many dealers have considered investing in solar energy systems, but few have pulled the trigger. The new law creates a more stable environment that may lead dealers to take the plunge and go solar.