New Jersey is the fastest growing market for solar photovoltaics in the U.S. and one of the largest in terms of installations, second only to California, which has four times the population and energy usage. Our success is due to New Jersey’s Solar Financing Model which relies on strong renewable energy standards, smart regulations and attractive incentives and rebates.

New Jersey’s Clean Energy Program was established in 2001. That year there were only 6 solar installations. Since that time we have established a model program and integrated approach to solar development that includes:

• A strong Renewable Portfolio Standard with a solar electric set aside that has helped create demand and investor confidence in the market;
• Excellent interconnection and net metering standards that have made it much easier for systems to connect to the distribution system and be compensated for its contribution;
• A Solar Rebate Program that has helped finance 50% or more of the cost of installation;
• Solar Renewable Energy Certificate Trading Program that provides energy credits and additional long term financing for solar installation.

All designed to foster a vibrant and competitive marketplace for solar energy in New Jersey.

Today, five years after initiation New Jersey has more than 1,840 solar installations and 26 MW of installed solar capacity. By the end of 2006, the Office of Clean Energy expects to have approximately 2000 installations and 30 MW of aggregate solar capacity. This is largely due NJ’s Solar Financing Model which builds on our integrated approach to help finance solar development.

New Jersey’s Solar Financing Model relies on five sources of revenue that work together to drive investment in solar and provide a payback within ten years:

• Societal Benefits Charge
• Fed Tax Credits
• Electric Cost Savings thru Net Metering
• Renewable Energy Certificates sold to RPS & Voluntary Markets
• Out of Pocket Equity

Together these revenue streams provide for an average payback period and return on investment within 10 yrs!

SREC stands for Solar Renewable Energy Certificate and is a type of clean energy credit in the form of a tradable certificate. An SREC is issued once a solar facility has generated 1000kWh (1MWh), through either estimated or actual metered production, and represents all the clean energy benefits of electricity generated from a solar electric system. SRECs can sold or traded separately from the power thus providing solar systems owners a source of revenue to help offset the cost of installation.

If you consider our current financing model without Solar Renewable Energy Certificates (SRECs) – just the rebate, tax credits, electric cost savings – you are looking at a payback period of about 25 yrs for an average 10 kw system.

However add in the SRECs - which are paid out over the life of the system and provide about $2,400 a year for a 10kw system – and the payback period is reduces from 25 yrs down to 10 yrs.

This is critical – and suggests a source for long term financing that can pick up where the rebates leave off.

SRECs can provide an additional source of revenue and long term financing necessary to drive investment in solar. By increasing the value of SRECs, the rebate amount can be significantly reduced or eliminated thereby reducing the annual impact of the Program on rate payers.

New Jersey’s Solar Program has seen triple digit growth over the last 3 years putting us well within reach our 2008 RPS goals to install 90 MW of solar capacity. We are well positioned to continue to grow and expand. In April 2006 New Jersey expanded this commitment by adopting a goal of 20 Percent Renewable by 2020 with 2% or 1500 MW of SOLAR ! This is the Nation's largest solar commitment relative to population and electricity consumption.

New Jersey’s 20 % by 2020 Renewable Energy Portfolio Standards (RPS) will require at minimum approximately 4,400 MW of renewable energy capacity and 1500 MW of Solar capacity. To meet these goals, we will need to expand New Jersey’s renewable capacity and foster a strong regional market for renewables like wind, biomass and landfill gas

More importantly, we will have to substantially grow and expand New Jersey’s solar capacity from 90 MW in 2008 to 1500 MW by 2020! In just 12 years we will need to add over 1400 MW of solar capacity or approximately 117 MW a year!

No. If we did, this cost would be in the billions of dollars and would require an annual funding level of approximately $500,000,000. The rate impact of this funding level could be approximately 5 to 7 percent. Clearly it is not an option to simply “buy” our way to the RPS goals by relying only on rebates or grants to construct this capacity.

We must consider other models and sources of capital. New Jersey’s Clean Energy Program is vital to this effort in that it provides both the financial incentives and market-based tools necessary to fuel growth and help drive investment.

The NJBPU has directed that the solar incentive program in NJ make a transition from a rebate dependent program funded through the Societal Benefits Charge (SBC) to a market-based incentive program relying predominantly on the value of Solar Renewable Energy Certificates (SRECs). Stakeholders including representatives from the solar industry are working to develop recommended policy models for this transition.

A number of models or approaches to solar financing are being considered based on other market experiences:

1. Standard Contract Model - A Standard Contract Model would feature standard contracts issued for the purchase of RECs and a market based price set at a price established through annual REC auctions. A feature of this model includes a 5-year REC life which can also be combined with other models.
2. Commodity Market Model – A Commodity Market Model includes market based pricing and contract terms would not mandate long term REC contracts or pre-determined REC pricing, but might rely on other incentives to induce REC market traders to enter into long term contracts. No legislative changes may be required however, this approach would require BPU implementation of modified ACP schedule.
3. “Feed in tariff” Model - “Feed in tariff” Model similar to programs in Germany, Spain, Ontario and elsewhere, whereby the State would provide long term guaranteed payments/kWh for energy and/or renewable attributes. This approach would be a departure from the current RPS. Current thinking among advocates is that the best approach for this type of a model would be to introduce a long term tariff schedule for energy production only (“super net metering”), not for SREC’s.
4. “Underwriter” Model - Underwriter Model, whereby the State would provide security to SREC sellers by offering a 15 year put option guarantee with a strike price set at a fraction of the ACP, to be funded by actual ACP payments. Note that this option could be combined with Model 2 or Model 3 above.

The New Jersey Board Of Public Utilities (NJBPU) is establishing a strategy to evolve from an market dominated by up-front rebates to a market with greater focus and reliance on the sale of Renewable Energy Certificates (RECs). This transition allows a more market-oriented approach to foster economic development, and reduce dependence on the programs needed to provide rebates. The resulting REC-based financing will result in performance based economics, enhanced market growth and elimination of current growth barriers, and cost improvements through scale.

The NJBPU has launched a Pilot Voluntary REC Program to finance 17 MW of installed solar capacity. This will provide a test of market response to REC based financing for solar in New Jersey. The NJBPU expects to begin a rulemaking and public comment period in January 2007 with a goal to begin transition to a new financing program in June 2007 and to complete implementation by January 2008.

New Jersey was one of the first states to streamline its interconnection rules to ensure that customers with small on-site renewable energy systems could easily connect to the grid and receive compensation from the utility...

Where as before, each utility had a different interconnection standard and procedure, New Jersey now requires utilities follow a standardized process – making it easy to connect to the grid. This is critical to getting the full value of those small generation systems – for both the customer and for New Jersey.

One of the key benefits of solar for example is that it can off set peak demand – so during summer when the ac is running full tilt, the grid can take advantage of those small solar systems which happen to be producing at near peak capacity.

In New Jersey, net metering is a metering option that credits customers with solar systems or other renewable energy generators for each kilowatt-hour produced over the course of a year.

The customer is compensated at the end of the year for any remaining credits or excess power it will have provided to the grid.

In New Jersey, all Electric Distribution Companies and suppliers/providers offer net metering to their residential and small commercial customers that generate electricity, on the customer’s side of the meter, using Class 1 renewable energy sources, provided that the generating capacity of thecustomer-generator’s facility does not exceed 2 MW, and does not exceed the customer’s peak electric needs.

Together, our interconnection and net metering rules ensure solar generators are compensated for the clean, renewable energy they are generating and that New Jersey’s ratepayers share in the benefits of solar and other small renewable energy generation.