NJBPU Adopts New Program For SREC-Based Financing of Solar Generation Projects
The New Jersey Board of Public Utilities ("NJBPU") recently adopted an SREC-based financing program ("Program") to be implemented by Atlantic City Electric Company ("ACE") and Jersey Central Power & Light Company ("JCP&L"). Order, Docket Nos. EO8100875 and EO08100875 (March 27, 2009). The Program is designed to provide additional financial support to solar projects through long-term (10-15 year) utility contracts for the purchase of solar renewable energy certificates ("SRECS"). The Program is the latest step in the NJBPU's ongoing transition from a costly rebate-based solar financing system to a fully competitive system based on SRECs. (Additional incentives for solar development are provided by electricity savings through the State's net metering regulations and various tax credits).
The Program works with the NJBPU's Renewable Energy Portfolio Standards ("RPS") rules that require New Jersey electricity suppliers to provide a portion of their supply from solar generation systems. Electric suppliers can satisfy the RPS by acquiring and submitting SRECs. An SREC represents the solar renewable energy attributes of one megawatt-hour of generation from an eligible solar facility. Alternatively, a supplier can satisfy all or a portion of its RPS obligation by paying a NJBPU-established Solar Alternative Compliance Payment ("SACP"). The SACP level thus sends a price signal by setting the maximum market price of an SREC. The NJBPU has already established an eight-year fixed schedule of SACP prices (through May 31, 2016) at higher levels to provide certainty, promote the New Jersey solar market and enhance the availability of SRECs to suppliers.
The NJBPU later found that SREC-based financing also benefitted from greater certainty about the minimum cash flow a project can generate from the creation and sale of SRECs. After a stakeholder process, and to address this concern, the NJBPU directed ACE and JCP&L to file proposals for SREC-based financing of solar generation projects based on competitively procured long-term SREC purchase contracts. The NJBPU approved the Program set forth in a stipulation between ACE, JCP&L, NJBPU Staff, the NJ Division of Rate Counsel, and the Solar Alliance, and resolved certain contested issues.
Key aspects of the Program are:
- The utilities will solicit 61 MW in projects in their service territories during the three-year period from June 2009 through May 2012 through an RFP process. 33 MW will be solicited in the first year (23 MW for JCP&L and 10 MW for ACE). A goal is to obtain 25% of the MW from projects that are 50 kW or less.
- No one entity can obtain more than 20% of ACE's or JCP&L's long term contracts in any one year.
- Three solicitations will occur in the first year. The first round to solicit 50% of the first-year goal will begin no later than July 10, 2009.
- Proposed projects will bid to enter Purchase and Sale Agreements ("PSAs") with terms from 10 to 15 years to provide SRECs at a fixed price for the entire term. Bids will be ranked based on price (i.e., the Net Present Value of the payment stream for one SREC over the proposed term).
- The financial basis for the bidders' prices will not be reviewed. However, winning bidders must provide a cash deposit of $75 per kW, but not less than $500 or more than $20,000.
- Projects receiving rebates from the NJBPU's former "CORE" program from 2001-2009 are excluded from the Program.
- Construction of awarded projects must occur within 12 months after execution of the standard SREC PSA.
- ACE and JCP&L will install the meter to record SREC generation at the customer's or project developer's cost, read meters, and register SRECs.
- ACE and JCP&L will recover program costs through a per kWh rate rider to apply to all customers. Program costs include SREC purchase costs, administrative costs, and the loss in fixed cost recoveries from kWh sales reductions, offset by revenues from the auction of purchased SRECs.
- ACE and JCP&L intend to auction purchased SRECs in coordination with the PSE&G auction of SRECs acquired under its solar loan program.
The Program approval follows the issuance of the State's Energy Master Plan in October 2008 seeking to expand solar energy capacity, improve air quality, and fight global warming while minimizing costs to consumers. The Board is currently reviewing a similar SREC-based financing plan filed by Rockland Electric Company on January 31, 2009.
In addition, on March 31, 2009, Public Service Electric and Gas Company filed a proposed Solar II Program modeled on its existing solar loan program, with revisions, to provide loans for 40 MW of additional solar generating capacity. The major change from the Public Service's current loan program is the use of quarterly solicitations for loans to set the SREC floor price rather than relying on a fixed floor price of $475 per SREC. This is significant because the loans are repaid with the SRECs from the projects.