By Michael Babakitis, Legal Intern
Governor Chris Christie signed a bill on Monday, July 23rd, that will require New Jersey’s utilities to procure 2.05% of their electricity from solar projects in 2014 (.5% more than would have otherwise been required) and to procure 4.1% of their electricity from solar projects by 2028. The bill is designed to offset the effects that oversupply of solar credits has had on the credits’ prices.
During the first quarter of 2012, New Jersey led the nation in newly installed photovoltaic capacity, installing 173.8 megwatts of capacity. This was the first time that New Jersey installed more capacity than California, which added 148.4 MW of capacity over the same period. Due to this expanding supply, solar credits in New Jersey have recently plummeted in price, from $600 per megawatt-hour (MWH) last year, to below $100 in April. These credits can drastically affect the solar industry because large scale solar projects take solar credit prices into account when deciding whether or not to move forward with construction. When prices fall too far, companies have no incentive to continue adding solar capacity, since they will see very little return when they sell credits to utilities attempting to meet their energy portfolio requirements.
Along with requiring an increased amount of solar to be procured, the bill also reduces the penalty for utilities who fail to meet the increased requirement, to $339 per MWH in 2014, down to $239 per MWH in 2028. This decreased penalty will serve as a de facto price ceiling on solar credits. Combined with the mandated demand increase, the bill should serve to stabilize the solar credit market and re-incentivize investment in New Jersey solar projects while also preventing significant rate increases from falling on households.
The bill fits well within New Jersey’s broader goal of producing 22.5% of its electricity from renewable sources by 2020.