New Jersey Board Approves Solar Transition Program, Begins Cost Cap Proceeding

The New Jersey Board of Public Utilities approved a new solar incentive program to facilitate the transition from the current Solar Renewable Energy Certificate, or SREC, program to a yet-to-be-determined successor incentive program, according to a December 6 press release.

The Transition Incentive will serve as a bridge between the legacy SREC and the new program and will consist of factorized, fixed-price, 15-year Transition Renewable Energy Certificates (TREC). TRECs will be available to projects that are in the SREC pipeline after October 29, 2018 but have not yet reached commercial operation at the time the board determines the 5.1 percent milestone under the state’s Clean Energy Act has been reached.

The board also announced its intention to hold a cost-cap proceeding in early 2020 to determine the annual value of the TREC, specifically if there is sufficient headroom for a flat 15-year TREC price of $152, or if the board will maintain a lower price of $65 for the first three years and $189 for the remaining 12 years. Over the course of 15 years, the total project incentive will be the same under both scenarios. The price of the TREC, multiplied by the project’s factor (defined below), will be the ultimate value of each TREC. The value of each TREC will also be dependent upon the factor assigned to each individual solar project. The regulator set the value of each TREC in order to “right-size” the incentive value needed for different types of projects in order to reduce costs to ratepayers.

The Clean Energy Act, signed by Democratic Governor Phil Murphy in May 2018, required the board of public utilities to adopt regulations that close the SREC program to new applications when 5.1 percent of the electricity sold in New Jersey comes from solar or by June 2021, whichever comes first. At its December 18, 2018 board meeting, the regulator adopted a rule beginning the process of phasing out the current SREC program and developing a new initiative that will build upon the success of the state’s current solar process.