Note: The solar portion of New Jersey’s RPS was restructured by A.B. 3520 in January 2010, effective on “the first day of the sixth month following enactment”. This summary has been updated to reflect these soon to be effective changes, with explanatory descriptions of the current law and what has been changed where necessary. Administrative rule making will be necessary to actually implement the specific details and timing of these changes.
New Jersey's renewable portfolio standard (RPS) -- one of the most aggressive in the United States -- requires each supplier/provider serving retail customers in the state to procure 22.5% of the electricity it sells in New Jersey from qualifying renewables by 2021 (“energy year” 2021 runs from June 2020 – May 2021). In addition, the standard also contains a separate solar specific provision which requires suppliers and providers to procure at least 2,518 gigawatt-hours (GWh) from in-state solar electric generators during energy year 2021, and 5,316 GWh during energy year 2026 and each year thereafter.
Prior to A.B. 3520 enacted in January 2010, the solar standard was a percentage-based target that required suppliers to procure 2.12% of electricity sales from solar electric generators by 2021. When combined with other resource targets, this resulted in a total renewable energy standard of 22.5% by 2021 (see table below). The 2010 legislation adjusted only the solar portion of the standard. It is not yet clear how this revision may affect the other components of the standard, which are still stated in percentage terms in the administrative rules.
The mandate sets different requirements for different types of renewable energy resources, termed “classes”. "Class I" renewable energy is defined as electricity derived from solar energy, wind energy, wave or tidal action, geothermal energy, landfill gas, anaerobic digestion, fuel cells using renewable fuels, and -- with written permission of the New Jersey Department of Environmental Protection (DEP) -- certain other forms of sustainable biomass. "Class II" renewable energy is defined as electricity generated by hydropower facilities no greater than 30 megawatts (MW), and resource-recovery facilities approved by the DEP and located in New Jersey. Electricity generated by a resource-recovery facility outside New Jersey qualifies as "Class II" renewable energy if the facility is located in a state with retail electric competition and the facility is approved by the DEP. Solar energy, while it remains an eligible Class I technology, occupies a special place as the only resource eligible for the solar electric component of the standard.
The required percentages of each category and the total renewables percentage required are listed in the table below. The term EY refers to compliance period or “energy year” for the standard, which runs from June - May and is defined by the year in which an energy year ends.
| Energy Year | Solar Carve-Out (A.B. 3520) | Pre-A.B. 3520 Solar Carve-Out* | Class I* | Class II* | Total Renewables* |
|---|
| EY 2005 | -- | 0.0100% | 0.740% | 2.5% | 3.25% |
| EY 2006 | -- | 0.0170% | 0.983% | 2.5% | 3.5% |
| EY 2007 | -- | 0.0393% | 2.037% | 2.5% | 4.5763% |
| EY 2008 | -- | 0.0817% | 2.924% | 2.5% | 5.5057% |
| EY 2009 | -- | 0.1600% | 3.840% | 2.5% | 6.500% |
| EY 2010 | -- | 0.2210% | 4.685% | 2.5% | 7.406% |
| EY 2011 | 306 GWh | 0.3050% | 5.492% | 2.5% | 8.297% |
| EY 2012 | 442 GWh | 0.3940% | 6.320% | 2.5% | 9.214% |
| EY 2013 | 596 GWh | 0.4970% | 7.143% | 2.5% | 10.14% |
| EY 2014 | 772 GWh | 0.6210% | 7.977% | 2.5% | 11.098% |
| EY 2015 | 965 GWh | 0.7650% | 8.807% | 2.5% | 12.072% |
| EY 2016 | 1,150 GWh | 0.9280% | 9.649% | 2.5% | 13.077% |
| EY 2017 | 1,357 GWh | 1.1180% | 10.485% | 2.5% | 14.103% |
| EY 2018 | 1,591 GWh | 1.3330% | 12.325% | 2.5% | 16.158% |
| EY 2019 | 1,858 GWh | 1.5720% | 14.175% | 2.5% | 18.247% |
| EY 2020 | 2,164 GWh | 1.8360% | 16.029% | 2.5% | 20.365% |
| EY 2021 | 2,518 GWh | 2.1200% | 17.880% | 2.5% | 22.500% |
| EY 2022 | 2,928 GWh | -- | -- | -- | -- |
| EY 2023 | 3,433 GWh | -- | -- | -- | -- |
| EY 2024 | 3,989 GWh | -- | -- | -- | -- |
| EY 2025 | 4,610 GWh | -- | -- | -- | -- |
| EY 2026 | 5,316 GWh | -- | -- | -- | -- |
As shown above, the general compliance schedule ends in 2021; however, the BPU will adopt rules to determine the minimum percentages for energy year 2022 and beyond. The requirements must be equal to or greater than the minimum percentages required for reporting year 2021. The revised solar schedule is similarly intended to extend beyond 2026 target “to reflect an increasing number of kilowatt-hours to be purchased by suppliers or providers from solar electric power generators” in the state. The A.B. 3520 revisions also establish a mechanism that automatically increases the solar requirement under certain conditions related to excess solar generation and declining prices for solar renewable energy certificates. By definition, it is not possible for such an increase to occur before energy year 2016.
Suppliers/providers may meet these requirements by submitting "Class I" renewable-energy certificates (Class I RECs), "Class II" RECs and Solar RECs (SRECs), all of which represent the environmental attributes of one megawatt-hour (MWh) of generation from an eligible facility. All RPS compliance must be submitted in the form of RECs, which will be issued by the PJM-Environmental Information Services (EIS), through PJM's Generation Attribute Tracking System (GATS). Under the current administrative rules RECs may only be used for compliance during the energy year in which they were generated, while SRECs may be used for compliance during the energy year in which they were generated or the immediately subsequent energy year if the SREC is based on energy generated on or after June 1, 2009. This provision has been revised by A.B. 3520 to allow both RECs and SRECs to be used for compliance during the energy year in which they were generated or the following two energy years. Based on the effective date of A.B. 3520, this revision will presumably not take effect until at least energy year 2011. RECs submitted for RPS compliance must be permanently retired.
Additional solar electricity may be used to fulfill any of the three required categories, while additional "Class I" electricity may be used to fulfill the "Class II" requirement. To qualify as "Class I" or "Class II" renewable energy, electricity must be generated within or delivered into the PJM region. "Class I" or "Class II" renewable energy delivered into the PJM region must be generated at a facility that began construction on or after January 1, 2003, in order to qualify. Solar facilities are eligible to produce SRECs for 15 years, termed the “qualification life”, and thereafter may be issued Class I RECs, but not SRECs. Under the former rules suppliers/providers could not use RECs or SRECs associated with electricity generated at a customer-generator's premises unless the facility was eligible for net metering. However, S.B. 2936 (2007) amended the law to allow all facilities connected to the distribution grid serving New Jersey, including but not limited to solar facilities, to generate RPS-eligible RECs or SRECs.
If a supplier/provider is not in compliance for a reporting year, the supplier/provider must remit an alternative compliance payment (ACP) and/or a solar alternative compliance payment (SACP) for the amount of RECs and solar RECs that were required but not submitted. The BPU determines prices for ACPs and SACPs, and reviews the prices at least once per year. The price of an ACP and an SACP is to be higher than the estimated competitive market cost of (1) the cost of meeting the requirement by purchasing a REC or solar REC, or (2) the cost of meeting the requirement by generating the required renewable energy.
The initial ACP and SACP levels were set by BPU order at $50 per MWh and $300 per MWh respectively in 2004. These levels were subsequently renewed several times without changes; however, a December 2007 BPU order revised the way the SACP level is determined, effective for the RPS reporting year beginning in June 2008. The ACP remains unchanged at $50 per MWh.
The SACP is currently determined according to rolling eight-year set schedule, where each year the BPU reviews the schedule and adds one additional year to the back end of the schedule. Under A.B. 3520 the BPU is required to extend this schedule to 15 years. The initial eight-year schedule for the SACP is as follows:
- EY 2009: $711 per MWh
- EY 2010: $693 per MWh
- EY 2011: $675 per MWh
- EY 2012 :$658 per MWh
- EY 2013: $641 per MWh
- EY 2014: $625 per MWh
- EY 2015: $609 per MWh
- EY 2016: $594 per MWh
According to the current administrative rules, revenue generated by payment of the ACP must be used to fund renewable-energy projects through the New Jersey Clean Energy Program and revenue generated by the payment of the SACP must be used to fund solar projects under the program. However, A.B. 3520 now requires that for future years all SACP payments must be refunded directly to ratepayers by New Jersey public utilities.
The BPU is required to freeze the solar energy requirement if it determines that the total cost of solar incentives during a reporting year exceed 2% of the total retail price of electricity during that reporting year. The "total cost of solar incentives" is defined to include the costs associated with the state solar rebate program, SREC purchases, SACP payments, and several other forms of assistance. The annual increases defined by the solar compliance schedule will resume when the BPU determines that the total cost of solar incentives did not exceed 2% during a reporting year. Freezing the requirements therefore has the effect of maintaining the percentage requirements, but pushing them back by a year(s).
Each supplier/provider is required to file an annual report with the BPU by September 1, demonstrating that the requirements for the preceding reporting year (ending May 31 of the same calendar year) have been met. Failure to comply with any provision of the RPS may result in suspension of the supplier's license, financial penalties, disallowance of recovery of costs in rates, and/or prohibition on accepting new customers.
History
New Jersey's RPS was originally adopted in 1999 as part of the state's electricity restructuring legislation with initial renewables targets of 4.0% Class I and 2.5% Class I or Class II resources by 2012. In 2004 the BPU amended the standard to require the renewable energy targets be met by May 2008, and to add a requirement that at least 0.16% of sales come from solar electricity as part of the overall Class I target of 4.0%.
The New Jersey Board of Public Utilities (BPU) made even more extensive revisions to the RPS in April 2006, significantly increasing the required percentages of Class I, Class II, and solar resources towards an ultimate requirement of 22.5% renewables, including 2.12% solar, by May 2021. In December 2007 the BPU issued a far-reaching order (
BPU Solar Transition Order) directing that further changes be made to many of the details of the RPS in an effort to increase the effectiveness and efficiency of New Jersey's solar energy policies. Formal rule amendments associated with many of these changes became effective in 2009, although the broader renewable energy targets were not affected.
*The table of compliance obligations combines the January 2010 amendments to the solar carve out with the previous schedule defined in the administrative rules. It remains to be seen whether the existing Class I, Class II, and total renewables percentage targets will change when revised rules are developed since the existing Class I and Class II targets total 20.38% by 2021 (plus the GWh solar target). The former solar carve-out percentages are included for informational purposes, although they will presumably be removed when the BPU revises the administrative rules.
