By Shawn Smith
McCarter & English, Hartford Office
The New Jersey Board of Public Utilities (BPU) recently proposed an amendment to its net metering rule that will create an even greater economic incentive for utility customers to develop on-site renewable energy, especially solar energy systems.
The proposed amendment would eliminate the 2 megawatt (MW) limit on the size of renewable energy systems eligible for net metering, which would lift an obstacle for large-scale solar projects. This gives customers the opportunity to develop larger renewable energy systems to generate renewable energy and offset their electric bills. By developing new systems or expanding upon existing ones, customers can take advantage of the economic and environmental benefits of net metering.
The net metering rules allow customers which generate on-site electricity using Class I renewable energy sources, such as solar, to connect with the local electric distribution company (EDC) and generate electricity on the customer’s side of (or “behind”) the meter. The net meter virtually “spins both ways,” meaning that the EDC will either charge the customer for electricity supplied in excess of that generated on site by the renewable project, or credit the customer for purchases resulting from excess energy generated by the renewable energy source. Under the existing net metering rules, a renewable energy system cannot (1) generate more than 2 MW of electricity, or (2) exceed the annual amount of “electricity supplied by the electric power supplier or basic generation service provider to the customer.” The 2 MW restriction created a ceiling that limited the ability for larger commercial customers to take advantage of net metering.
By proposing to lift the ceiling, the BPU is inviting customers (or third-party developers using power purchase agreements, for example) to invest in larger renewable energy systems that generate more than 2 MW of electricity. Such a policy shift helps the state to achieve its ambitious objectives set forth in the Energy Master Plan of achieving 22.5% of renewables, including a renewable portfolio standard target of 2.12% of all energy sold in NJ coming from solar generation.
Despite arguments from some owners of large warehouses and developers seeking to build utility-scale solar projects on vacant property sites, the BPU rejected calls to revise the second net metering condition, which requires that a renewable energy system’s generating capacity be equal to or less than the average amount of electricity consumed by that customer on site either from that supplied annually by an electric power supplier or the EDC in the form of basic generation service. Nevertheless, the potential economic payoff for customers investing in renewable energy projects is clear--the larger the renewable energy system, the lower their electric bill.
When the net metering rule is combined with other New Jersey regulatory incentives that promote solar projects, especially as the available federal investment tax credits and accelerated depreciation credits provide enhanced opportunities to support solar projects, the solar industry is expected to continue to focus its business development efforts on NJ and larger-scale sites can expect the solar industry to come knocking.
The proposed amendment provides a particularly significant opportunity for commercial customers to develop or expand upon solar energy systems to take advantage of the substantial market incentives for solar that exist in New Jersey. New Jersey has encouraged the development of solar energy through its Energy Master Plan (EMP) and the market for Solar Renewable Energy Certificates (SRECs). New Jersey’s solar market, which is the second-largest in the United States (second only to California), continues to grow as a result of these efforts.
The BPU is soliciting comments on the proposed amendment to the net metering rule through March 5. Anyone interested in submitting comments is free to do so.
Another notable proposal of the BPU concerns New Jersey’s “Prevailing Wage Law,” which requires the BPU to adopt regulations to ensure that the prevailing wage rate be paid to workers “employed in the performance of certain contracts for construction undertaken in connection with board [BPU] financial assistance.” Renewable energy projects constructed with BPU’s financial assistance will soon be subject to the prevailing wage requirements if the BPU proposal is adopted. The BPU is soliciting comments on the prevailing wage law through March 5. Anyone interested in submitting comments is free to do so.
Finally, in yet another effort to expand renewables, the BPU opened the door for renewable energy projects located outside of New Jersey, other than solar, to qualify for New Jersey RECs. Previously, only on-site renewable energy facilities directly connected to a New Jersey EDC’s distribution system could qualify for RECs. Now, pursuant to the new regulation adopted recently, the BPU is allowing qualifying renewable projects located outside of New Jersey, except solar, to obtain New Jersey RECs provided these projects are connected to the PJM Interconnection, L.L.C.’s (PJM) generator information system for tracking renewable energy. PJM is a non-profit regional transmission organization that coordinates the movement of wholesale electricity in all or parts of 13 states and the District of Columbia, including Pennsylvania, New Jersey and Maryland.