Of the 1.4 gigawatts of community solar capacity online across the U.S. at the end of 2018, New Jersey lays claim to none, despite ranking sixth in the nation for total solar capacity installed.
But New Jersey's currently nonexistent market is about to blossom, thanks to a landmark clean energy law signed last year by Governor Phil Murphy. Murphy has connected the state's community solar pilot to environmental justice, which he described as a “cornerstone of [his] administration.”
Last week, the state’s Board of Public Utilities (BPU) opened up applications for a three-year community solar pilot program. Developers have through September to apply.
In its current form, the pilot calls for cumulative capacity of 75 megawatts in the first year — with individual projects capped at 5 megawatts — and at least 75 megawatts in both the second and third year. The program requires that 40 percent of the capacity go to projects that include at least 51 percent low- to moderate-income subscribers, the largest carve-out in the country for this group.
While initial reviews of the program are mostly positive, stakeholders have outlined some concerns with its design and implementation.
New Jersey is in the midst of changing its Solar Renewable Energy Credits program, which has created some financial uncertainty for developers. The program's size, at a minimum of 225 megawatts over three years, outranks some pilots, but is still likely to be overrun with demand. And community solar advocates are also pushing for more incentives to help support the program's carve-out for lower-income residents.
“Getting the details of the program right is the key” to its success, according to Jeff Cramer, executive director at the Coalition for Community Solar Access (CCSA).
Despite any industry concerns, analysts expect New Jersey's program to boost the national community solar market for years to come.
After a slow start in 2019, Wood Mackenzie Power & Renewables expects “early and rapid success” in New Jersey, with growth picking up in 2020. In a recent report, the energy research firm forecast 60 megawatts of community solar in the state in 2020 with an upside case of 83 megawatts. Analysts project consistent growth through the end of 2024.
New Jersey already has a permanent program ready to begin after the pilot expires in 2021, but the state still needs to refine what that program will look like.
“The prioritization of community solar from the governor’s office should be lauded," Cramer said. "They realize there is pent-up demand, that customers want access to clean energy and the vast majority don’t have the access or the means. Community solar offers that.”
Details of the three-year pilot
Many of the pilot program's particulars have been decided. The board will approve applications using a scoring process that assesses metrics including “environmental justice inclusion,” community engagement and whether a project provides local jobs or training.
Applications with the highest score will be awarded capacity first.
In addition to its landmark low- to moderate- income carve-out, New Jersey’s rules create standards for subscriber organizations, the groups that sign up and manage community solar participants, working in the state. That’s another unique move, said Richard Caperton, senior director of regulatory affairs and market development at Arcadia Power, one of those organizations.
And to help cope with the persistent two-bill problem in community solar, where subscribers receive a community solar bill and one from their utility, the board has asked for further comment on consolidated billing. That would put charges on the same bill.
Joseph Fiordaliso, president of the BPU, said he’s confident New Jersey has developed a program that “opens the door to a lot more people” to access solar.
“If there is a problem down the road we’re not anticipating right now, it’ll show itself and we can rectify it,” he said.
Stakeholders that Greentech Media spoke with largely applauded the BPU’s efforts. But they also pointed to some concerns as the program gets underway.
A few concerns
The first involves Solar Renewable Energy Credits (SRECs). The 2018 law that created the pilot program also mandated the end of the state’s previous program, and asked the BPU to develop a replacement.
That work is happening alongside the beginning of the pilot program, throwing some doubt into the process about what future solar compensation looks like.
“For developers that are operating in New Jersey right now, there’s, I’d say, a rather hobbling level of uncertainty with regards to how these projects are going to get financed,” said Will Fischer, vice president of business development at Virginia-based developer Summit Ridge Energy, which works on community solar projects.
“It has been difficult to...get our arms around what the economics of these programs are really going to look like knowing that the incentive program is going to shift materially.”
The BPU seems unfazed.
“I’ve been around here long enough to remember when we went into the SREC arena and the anxiety that the solar industry was suffering. There’s no reason to be anxious,” said Fiordaliso. “We gave birth to an industry almost 20 years ago, and this board is not going to allow that industry to die. We will work together, we will move forward and ultimately we’re going to come out with a better program.”
Fiordaliso was similarly nonchalant about another concern from project stakeholders: the size of the program, which is capped at 75 megawatts for the first year and at least 75 megawatts in both the second and third year of the pilot.
“I don’t have any concerns about that,” he said. “The nice thing...about a pilot program is we’re able to tweak it along the way if something is not working.”
Arcadia’s Caperton said the organization knows of hundreds of megawatts targeting the program. Because of pent-up demand and excitement about a new market, participants say the pilot has the possibility of serious oversubscription akin to what befell Illinois’ program when it opened.
“I think it’s certain that you’ll get more demand than supply in the short run,” said Cramer at CCSA.
"Low barrier to entry"
The program’s low barrier to entry is one reason for that likely rush of demand. Laurel Passera, a member of CCSA's policy team, said the threshold to submit an application is lower than that of other state community solar programs.
Illinois, by contrast, requires an interconnection agreement, proof of landowner consent and some permits. New Jersey’s program, Passera said, only requires that applicants have investigated permitting and determined there’s sufficient capacity on interconnection lines.
“In most states you’ll see a higher bar to entry into a program. You’ll have to have certain thresholds met for a project to make sure that project is viable to move forward in a timely fashion,” Passera said. “Otherwise, these projects can really get hung up in the permitting or interconnection phase.”
Under New Jersey’s rules, the BPU expects approved projects to begin construction within six months and achieve full operation in one year. Passera said that will be difficult if developers are still seeking early-stage approvals after submitting their applications. In its program rules, the board said it might consider increasing project maturity requirements as the pilot advances.
Analysts also contend that New Jersey could be at risk of missing its high carve-out for low- to moderate-income subscribers.
Austin Perea, senior solar analyst at Wood Mackenzie Power & Renewables, said the state should consider a purchase of receivables mechanism, which replaces the subscriber's credit with that of the utility and allows the utility to take on the perceived credit risk often associated with lower-income customers.
"To date, policymaking targeting low- to moderate-income (LMI) adoption has been an abject failure," said Perea.
"New Jersey has the most ambitious LMI carve-out in the nation, but they're at risk of missing that target if they don't adopt utility purchase of receivables to take the credit risk off LMI customers."
The need for workforce development
Community solar advocates would also like to see more stringent requirements for workforce development, entrepreneurship opportunities and public education.
“It’s great to see the BPU incorporate job training as an evaluation component of the application,” said Tom Figel, director of community solar at Grid Alternatives. “But that should be a much broader effort the state takes on to grow and expand the solar industry, particularly for folks who can most benefit from those jobs and opportunities.”
Pari Kasotia, Vote Solar's Mid-Atlantic director, said the organization is hosting online and in-person training sessions to inform the public about the program. It’s also advocating for a greater focus on workforce development and increased incentives for projects that serve low- to moderate-income subscribers.
Strengthening those types of incentives, advocates say, will allow New Jersey to fulfill the potential of its ambitious carve-out.
“For us to get to an equitable clean energy future, it is important to create targets to drive us toward these goals,” said Kasotia.
Ultimately, developers and advocates alike say they’re excited to see the program grow.
“The state has an opportunity here, through this program and through the success of the SREC program, to regain its foothold as the clean energy leader of the East Coast,” said Summit Renewable Energy's Fischer.