New Jersey leads the Eastern United States in the amount and number of solar electric generating systems installed.
Today, with over 11,500 solar electric systems installed across the state, New Jersey is second only to the state of California. New Jersey’s favorable net metering and interconnection rules have allowed for this impressive solar growth by allowing PV systems to connect to the electricity distribution system (the grid) and be compensated for the generation of clean, emission-free electricity that is fed back into the grid.
New Jersey’s early success was accomplished through the New Jersey Clean Energy Program, administered by the NJ Board of Public Utilities, that provided over $300 million dollars in funds to promote solar energy through rebates on the cost of installations of PV systems.
SRECs represent the renewable attributes (clean energy benefits) of solar power generated from a solar electric system, and they can be bought or sold separately from the electricity. The generation of SRECs provide the PV system owner with a source of revenue to help offset the cost of the system installation. One SREC is issued to a solar facility for each 1000kWh (1 MWh) of solar energy it generates.
PV system owners can choose to sell their SRECs to a broker, aggregator or Load Serving Entity (an electric supplier or provider in New Jersey’s restructured electric industry, not a regulated distribution utility) that must buy SRECs to meet its RPS obligation. Most SREC’s to date have been sold on a spot basis, rather than under a long term SREC purchase agreement.
The value of an SREC is determined by the market with supply of SRECs a function of installed solar capacity and demand, determined by the RPS percentages required each year. The price is effectively capped by the level established for Solar Alternative Compliance Payments (SACP) in a particular Energy Year. The SACP is essentially a penalty payment that is paid by Load Serving Entities required to supply either SRECs or SACPs in proportion to their retail sales.
The SACP level was initially set at $300 per MWH when it was established in 2004. In September 2007, the Board of Public Utilities approved an increase in the SACP for Energy Year 2009 to $711 per MWH as part of our state ‘s effort to transition the solar subsidy delivery system away from the reliance upon rebates. The Board also established a schedule for the SACP level for eight years and a process for setting the level for the “new” eighth SACP amount annually. The current schedule for eight years of SACP decreases by 3% from $711 per MWH.
PV systems are qualified to generate SREC revenues for a period of 15 years, after which the system will be considered eligible for Class I RECs in NJ’s RPS. Each SREC has a three-year vintage, meaning that an unused SREC may be carried forward for up to two years in the market. By transitioning to the Solar REC-based financing program, NJ will use market forces to achieve its clean energy goals by shifting away form up-front rebates and toward a performance-based SREC revenue stream.
In order to provide more certainty to the value of the SRECs to be produced over the fifteen year production period, PSE&G is providing loans for part of the cost of installing solar systems, with the loans secured by and repaid from the production of SRECs. The other Electric Distribution Companies (EDCs) are soliciting SRECs through a periodic bidding proceed for ten to fifteen year contract terms.