New Jersey Board Proposes Transition Incentive to Streamline Solar Program Phase-Out

The New Jersey Board of Public Utilities on Aug. 22 proposed a transition incentive program as part of its process to close the current Solar Renewable Energy Certificate, or SREC, program and design a successor mechanism. The proposal seeks to bridge the gap between the legacy and successor programs as the state phases out the SREC program following legislation enacted last May, which  closes the program when 5.1 percent of electricity sold in the state comes from distributed solar.

Last December, the agency recommended a three-phase process for the transition. The process includes closing the legacy SREC market to new registrations upon attainment of the 5.1 percent threshold, providing a transition incentive for projects in the pipeline but have not started operations at the time the milestone is attained, and establishing a successor program for projects that seek registration after that point.

The transition incentive would be structured as a “factorized renewable energy certificate,” which aims to provide a financial incentive tied to the estimated costs of building solar facilities and revenue expectations under basic retail rate tariffs or wholesale market revenues for various installation types. The factorization program intends to ensure that ratepayers provide the incentive necessary to encourage diverse project types to foster the solar industry growth.

The proposal would allow projects qualifying for the transition incentive to generate Transition Renewable Energy Certificates, or TRECs, based upon metered generation supplied to PJM EIS GATS by facility owners or agents. The agency seeks input on “factorization,” a policy designed to assign different values to electricity generated by various categories of solar facility. The policy provides differing levels of subsidy support to solar installations “with the aim of tailoring the size of the subsidy to the amount of revenue needed by each project type.” Therefore, one megawatt-hour generated from solar energy would produce one TREC with a value depending on the project type.

The staff proposed two options to determine which projects qualify for the transition incentive. The first option would allow projects that remain in the SREC queue at the time the agency determines that the retail market has attained the 5.1 percent milestone. The alternative strategy would close the registration to new applicants and immediately begin a “transition incentive registration pipeline,” so as to cover projects registered in the SREC that are under development and new projects registered in the incentive program when the milestone is reached.

The board staff is working toward having a successor program ready to follow the legacy SREC and transition incentive when it determines that the milestone has been attained.

Stakeholder meetings are scheduled for Aug. 28 and Sept. 4. Written comments are due by Sept. 6.