New Jersey Establishes REC-Only Market for Solar

After more than a year of dialogue about how to restructure the New Jersey solar market, the state’s Board of Public Utilities (BPU) unanimously approved the transition of New Jersey’s solar program from an up-front rebate system to a commodity market based upon Solar Renewable Energy Credits (SRECs).

In order to meet the state’s RPS goals, which require utilities to generate 22.5 percent of their electricity from renewable resources by 2020, the BPU established a solar market that focuses on the sale of SRECs. Two percent of that renewable energy procurement obligation must come from solar energy.

Under the new program, solar system owners earn SRECs for solar electricity production, which are registered and traded among electricity suppliers and other buyers within an established infrastructure. Electricity suppliers are required to buy the SRECs, or pay a Solar Alternative Compliance Payment (SACP) in lieu of purchasing SRECs. Earlier this week, the Board set an 8-year schedule for the SACP. Full implementation of the SREC program will begin around March of 2009 after a hearing process, comment period and final approval by the Board.

Because of delays in application approvals associated with the popularity of up-front rebates, the BPU has decided that the SREC-only system is the best way to ensure rapid adoption of solar in New Jersey. And because the system is not tied to a budget, said Mike Winka, Director of the BPU’s Office of Clean Energy, there will be no chance that the budget will run out or that it will be diverted to another program.

“There is no one pot of dollars for this program. Here, you’re setting a structure that’s going to put the money into the financial market and is never going to be touched by a state regulator,” said Winka.

The Board also said that the SREC program will safeguard against prohibitive electricity costs by including a limit on the total cost to ratepayers of meeting the solar RPS.

“In making today’s decision on the future of solar in New Jersey, we are taking steps to align solar capacity and costs to be consistent with the priorities of the Governor’s energy vision,” said BPU President Jeanne M. Fox. “We believe this strategy will spur both private and public investment in the solar market in New Jersey.”

In related news, New Jersey’s Pubic Service Electric and Gas Company (PSE&G) announced support for the plan. In April, the company made a proposal to invest up to $100 million to help finance the installation of solar systems on homes, businesses and municipal buildings throughout its service area. Under its proposal, PSE&G’s loans would be repaid with SRECs, which will soon have more value in New Jersey’s energy marketplace.

If approved by the Board, PSE&G believes the funding would provide a source of stable, secure capital to spur additional investment in solar energy.

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