New Jersey Examines Incentive Framework for Solar Successor Program

The New Jersey Board of Public Utilities on August 11 released a draft report concerning the incentive levels required to support continued solar development while lowering costs to the state’s four million ratepayers. To attain incentive values that better align with the project types and maximize ratepayer savings, the report recommends transitioning away from the competitive “market-style” model adopted by the legacy solar program to a hybrid approach. The hybrid program would use competitive solicitations for large-scale solar projects and fixed incentives for smaller installations.

The draft Capstone Report, prepared by Cadmus Group LLC, was based on an extensive stakeholder-driven review of the state’s solar policies. Among the key recommendations, the draft report calls for implementing the fixed incentive on an “always on” basis, comparable to the current Transition Incentive program, in an effort to provide certainty and finance-ability. This incentive would complement net metering in the near-term and evolve toward a “Total Compensation” paradigm if conditions favor in the future. A total compensation incentive refers to a performance-based incentive that utilizes a tariff payment structure, where the total revenue of a generator is combined into a single value instead of separate incentives from market revenues.

The 2019 Energy Master Plan established ambitious targets for solar, suggesting in-state solar represent 34 percent of the generation mix to meet New Jersey’s goal of achieving 100 percent clean energy by 2050. The “Integrated Energy Plan” modeling shows that the state should target 32 gigawatts of in-state solar by 2050 with interim goals. The transition aims to achieve these goals efficiently and at the least cost to ratepayers.

The board ordered the closure of the legacy Solar Renewable Energy Certificate, or SREC, program effective April 30, declaring that the state has attained the milestone set by the 2018 Clean Energy Act to phase out the initiative. The law directed the closure of the program upon the state’s attainment of 5.1 percent of retail electricity sales from solar generation.

In April, the board  proposed amendments to create a Transition Incentive Program to replace the SREC program. The amendment is designed to bridge the gap between the legacy and successor programs. Since its launch in 2014, the SREC program has provided over $3.3 billion in incentives, leveraging over $10 billion in private sector investment, which facilitated the installation of more than 3 gigawatts of solar in the state.

The transition incentive is expected to spur an estimated $980 million in investment through the installation of about 430 megawatts of new solar generating capacity. The board anticipates 20 percent of this capacity to be installed on residential rooftops, 60 percent on non-residential rooftops or adjacent land, and the remainder on landfills or brownfields. The installations are expected to occur over the next year and a half, resulting in average annual direct expenditures of about $60 million for 15 years, following an initial ramp up period.

This month, two further stakeholder meetings convened by Cadmus will take place on Aug. 17 and Aug. 20. Feedback and comments in these meetings will inform future modifications surrounding the design of the successor program.