On July 28, 2021, the New Jersey Board of Public Utilities (NJBPU) voted unanimously to implement the Successor Solar Incentive (SuSI) Program, the state’s new solar incentive program required by the New Jersey Clean Energy Act of 2018 and the Solar Act of 2021.1 The SuSI Program will allow New Jersey to increase its solar generation by up to 3,750 MW by 2026. The SuSI Program replaces the Transition Incentive Renewable Energy Certificate (TREC) and the Solar Renewable Energy Certificate (SREC) programs. Like the TREC, the renewable energy certificates to be issued under the SuSI Program are fixed-value credits, although the SuSI credits are of a lower value than the current TREC credits. However, the NJBPU believes that the SuSI Program incentives, along with the continuing decrease in solar installation and development costs, are adequate to support the continued development of solar energy projects in New Jersey. Despite the challenges of the past year due to the COVID-19 pandemic and the decrease in solar incentive levels, New Jersey has more solar generation scheduled to come online in the next 12 months than in almost any previous year. The NJPBU’s belief that this trend will continue with the support of the SuSI Program is reflected in the SuSI Program’s annual goal of installing 750 MW of new solar capacity.
The SuSI Program’s incentives will support the achievement of the New Jersey Energy Master Plan (EMP) goal for the state to achieve 100 percent renewable energy by 2050, 34 percent of which will come from solar projects. Currently, 5 percent of the state’s energy comes from solar generation, and the NJBPU projects that upon full implementation of the SuSI Program, approximately 10 percent of the state’s electricity will be supplied by solar generation. To achieve these goals, 5.2 GW of solar will need to be installed by 2025, 12.2 GW by 2030, and 17.2 GW by 2035.
The SuSI Program, which takes effect on August 28, 2021, consists of two sub-parts: 1) the Administratively Determined Incentive (ADI), and 2) the Competitive Solar Incentive (CSI).
ADI
The ADI is a fixed incentive payment for net metered solar projects of 5 MW or less and includes net metered projects serving residential customers; net metered projects serving commercial and industrial projects of 5 MW or less; all community solar projects; and, on an interim basis, grid supply projects located on properly closed sanitary landfills, brownfields, and areas of historic fill. The program will provide one New Jersey Solar Renewable Energy Certificate-II (NJ SREC-II) for every megawatt-hour (MWh) of solar electricity produced by a qualifying facility, with an additional $20 per MWh adder for public entities – such as school districts, municipalities, and public colleges and universities – as well as a temporary incentive for projects built on contaminated lands. The NJ SREC-II value will vary based on the market segment (i.e., project type, size, and classification) and will have a term of 15 years. As noted below, the corresponding value of the incentives for each project type is based on the expected development and construction costs for these projects and public policy preferences for projects on already developed sites, such as rooftops and parking lots, and for contaminated sites and landfills (subsection (t)). The corresponding values per market segment are shown in the table below:
CSI
The CSI is a new program designed for grid supply projects and net metered commercial and industrial projects larger than 5 MW. The CSI program is intended to incentivize the lowest financial contribution from ratepayers for these large installations through a competitive solicitation process that will award capacity to projects that submit the lowest cost bids. The NJBPU has stated that it hopes that the process will allow for a reduction in the burden on ratepayers while continuing to ensure larger solar projects receive the incentives they need to successfully build and operate. Grid supply projects have traditionally been disfavored by state statute, but they are poised to grow under this section of the SuSI Program. Following additional stakeholder engagement, the first competitive process is anticipated to launch in early-to-mid 2022 and will be conducted on an annual basis.
Highlights
One potential point of tension stemming from the Order announcing the SuSI Program is that the NJBPU recommends encouraging the development of solar facilities on the built environment and marginal lands, while avoiding open space, flood zones, forested lands, and high-value agricultural lands. As developers seek to build larger projects, as will be necessary for New Jersey to achieve its renewable energy goals, the opportunities to site such large-scale projects on the built environment will decline. Relative to the amount of open space and farmland, there is a small number of buildings and brownfields that can accommodate new solar facilities greater than 5 MW. When the NJBPU finalizes the CSI program, it will need to create a solution that allows for the siting of large-scale facilities on open space and farmland in certain instances if it wants to achieve the clean energy goals established by the EMP. The CSI program is still in process, and the NJBPU has time to strike a more even balance between the conflicting goals of achieving 100 percent renewable energy and preserving open space and farmland before the CSI program launches in early-to-mid 2022.
The Order also reflects an NJBPU recommendation that would prohibit co-located projects from the ADI program, unless granted special dispensation by the NJBPU. The recommended prohibition is to prevent developers from accessing higher incentive levels than they would receive if the project were only a single facility (e.g., two projects under 1 MW would receive a higher incentive level than one project just under 2 MW). An important caveat, however, is that in the case of net metered projects, facilities eligible for the SuSI Program will not be deemed co-located if they serve separate net metered customers. This carve-out of the definition of co-located projects could allow developers to build separate facilities on the same or contiguous properties and receive heightened incentives if they are able to structure their sales such that each project serves a different net metered customer. Developers planning projects over 1 MW that are intended to participate in the ADI program should consider whether or not a structure with multiple net metered customers would be financially beneficial.
The NJBPU hosted a webinar on August 12, 2021 that discussed the transition further, and a recording of the webinar is listed on njcleanenergy.com.
- NJBPU Docket No. Q020020184, In the Matter of a Solar Successor Incentive Program Pursuant To P.L. 2018, C.17, Order dated July 28, 2021.
Client Alert 2021-221
