December 2019

New Jersey Board of Public Utilities Orders Creation of Solar Transition Incentive Program

On December 6, 2019, the New Jersey Board of Public Utilities (“BPU”) issued an order (“Order”), effective December 16, 2019, establishing a Solar Transition Incentive Program (the “TREC Program”). The key provisions of the Order are as follows:

• The TREC Program will be available to all solar projects that submitted complete SREC Registration (“SRP”) Applications after October 29, 2018 that have yet to commence operations but otherwise remain in good standing in the SRP pipeline at the time the BPU determines that 5.1% of all electricity sold in New Jersey comes from solar generation (the “5.1% Milestone”). Any project that has not been accepted into the SRP queue by the time the BPU announces the achievement of the 5.1% Milestone will not be eligible for the TREC Program. The BPU has committed to establishing a successor incentive program for those projects that don’t qualify for the TREC Program.
• All projects in the TREC Program will generate a factored Transition Renewable Energy Certificate (“TREC”) for each megawatt hour of electricity generated. The factors are as follows (1 being 1 TREC):
  • Subsection (t), landfill, brownfields and areas of historic fill 1.0
  • Grid supply subsection (r) rooftops 1.0
  • Net metered non-residential rooftop and carport 1.0
  • Community Solar 0.85
  • Grid Supply subsection (r) ground mount 0.6
  • Net metered residential 0.6
  • Net metered non-residential ground mount 0.6
• TRECs will be generated for 15 years. Once generated, TRECs will be purchased by a TREC Administrator to be appointed for a fixed price, which TREC Administrator will allocate the TRECs amongst the load serving entities.
• The Clean Energy Act of 2018 established a cap that prohibits the cost of Class 1 RECs (excluding the cost of offshore wind RECs), which includes the TREC, from amounting to more than 9% of the total electric sales during Energy Years 2020 and 2021, and amounting to more than 7% of total electric sales during subsequent energy years (the “Cost Cap”). As a result of concerns surrounding the cost of the TREC Program exceeding the Cost Cap, the order directs BPU staff to initiate a proceeding on the calculation of the Cost Cap (the “Cost Cap Proceedings”).
• The value of the TREC is $65 for energy years 2021, 2022 and 2023, and $189 for each remaining energy year of the projects’ 15 year TREC eligibility.
• Following the Cost Cap Proceedings the BPU will provide further guidance as to whether the TREC value will remain as set forth above or will be changed to a flat $152 for all 15 years of generation eligibility.
• TRECs may be sold in the energy year (June 1 – May 31) in which they are generated and the following energy year. If the TREC is not sold within the applicable window, they may be sold as Class 1 RECs.

The order now provides some certainty to solar developers and, pending the outcome of the Cost Cap Proceeding, will provide a transition program until the BPU establishes a new long-term incentive program.