A Call for "Shovel Ready" Renewable Projects in New Jersey ...

A Call for "Shovel Ready" Renewable Projects in New Jersey ...

February 19, 2009 17:32
by Grace Kurdian
With the passage of the American Recovery and Reinvestment Tax Act of 2009, the States will be receiving money targeted toward the encouragement of, among other things, growth of the renewable energy industry and job preservation/creation.  I heard just yesterday from New Jersey's Board of Public Utilities ("BPU") how it is planning to allocate the funds targeted toward encouragement of projects within its sphere.  If you've got a "shovel ready" project, turn your attention to the BPU next week, when Staff will propose parameters for the allocation of approximately $30 million expected to come to New Jersey in the first batch of federal funding, to be distributed in the form of rebates or grants.  
Details - including the parameters of the program, size constraints, what exactly constitutes "shovel ready," and whether penalties reducing the rebates will apply to those who fail to implement the renewable projects on schedule - have not yet been determined.  Solar, wind, and perhaps sustainable biomass will be the focus of this funding.  It is expected that the initial batch will support (a) already-approved solar projects in the New Jersey Customer On-Site Renewable Energy ("CORE") queue; (b) new solar, wind, and/or biomass projects of undetermined size; or (c) a combination of these options. 
While the first batch of funds will not be allocated directly toward energy efficiency due to conditions imposed on the states for use of such funds, allocation of the federal funding may provide for "freeing" of other clean energy resources and the re-allocation of other state clean energy program funding toward energy efficiency initiatives.  It is expected that the projects encouraged through this new funding will be financed through a combination of: the Investment Tax Credit, the rebate (whatever dollar amount per kw is ultimately established for distribution of the dollars received from the federal government), and the value of the electricity.
While other parameters are not clear, one critical fact is not open to negotiation: unlike the projects in the current CORE program, New Jersey will retain ownership of the Solar Renewable Energy Certificates ("SRECs") and Renewable Energy Certificates ("RECs") generated by the projects that are funded through the use of the money New Jersey receives from the federal government.  The BPU (or a designee) is then expected to auction or otherwise sell the RECs and SRECs, and apply the money generated by the sale of this commodity to other renewable energy and energy efficiency programs. 
Given the Renewable Portfolio Standards currently in place in many states including New Jersey (which ramp up annually to meet the aggressive 2020 targets of carbon emission reduction), this could raise some interesting interrelated questions:  How will moving ownership of the SRECs/RECs to the State for projects implemented with this grant/rebate impact the negotiation of the other terms of the deal over which the parties to the transaction maintain control, including the price of the renewable energy?  How will the BPU set the amount of the rebate to create a sufficient trade-off for the loss of ownership of the SRECs/RECs? 
Even without details yet available, we know the BPU is providing one more option for those who want to implement renewable projects, providing financial incentives to get projects up and running quickly - especially if you can preserve or create a job while implementing the renewable energy project.  When the Staff proposes a program for the BPU's approval next week, those with "shovel ready" projects should take another look at New Jersey.  Is your shovel ready?

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The business case for the development of renewable energy projects, from biodiesel and ethanol to wind, solar, and distributed generation, is more compelling than ever as tax and regulatory incentives combine to attract investments. Emerging issues in environmental law and increasingly recognized principles of corporate social responsibility are encouraging public companies to voluntarily reduce greenhouse gas emissions, install clean energy alternatives, and invest overseas in projects under the Kyoto Protocol to respond to climate change concerns.

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