Solar Renewable Energy Certificates (SRECs)

Summary

NOTE: On May, 2014, the Board of Public Utilities (BPU) published a report addressing methods to mitigate SREC price volatility in the market. The report can be accessed here.

New Jersey’s Renewable Portfolio Standard (RPS) includes a carve-out for solar, requiring the each electricity Load Serving Entities (LSEs) to provide at least 4.1% of the electricity through in-state solar installations by 2028. This solar carve-out, in addition to other supporting incentives has established NJ as one of the largest and dynamic solar market in the US.

Solar projects installed in New Jersey that are registered with the SREC Registration Program are qualified to generate Solar Renewable Energy Certificates (SRECs). SRECs represent the renewable attributes of solar generation, bundled in minimum denominations of one megawatt-hour (MWh) of production. New Jersey’s SREC program provides a means for SRECs to be created and verified, and allows electric suppliers to buy and retire these certificates in order to meet their solar RPS requirements. All electric suppliers must use the SREC program to demonstrate compliance with the RPS. New Jersey’s on-line marketplace for trading SRECs, launched in June 2004, is the first such operation in the world. The price of SRECs is determined primarily by their market availability and the price of the Solar Alternative Compliance Payment (SACP) for the state RPS. The SACP is effectively a ceiling on the value of SRECs because it is the per MWh payment that electricity suppliers must make if they fail to obtain enough SRECs to cover their RPS obligation.

Prior to 2008 the SACP was set at $300 per MWh. This was amended in 2007, and an eight-year schedule was established by the BPU for Energy Year (EY) 2009 - 2016. In 2012 S.B. 1925 established a 15-year schedule for EY 2014 - 2028. Past and current SACP levels are as follows:

SREC prices vary according to supply and demand in the market. The wide fluctuations in the SREC prices in the NJ market have been a significant concern to the regulators and the solar industry. To address this issue, on May, 2014, the Board of Public Utilities (BPU) published a report addressing methods to mitigate SREC price volatility in the market. The report can be accessed here

Eligibility

Participants must register their solar project with the SREC Registration Program prior to the start of the construction in order to establish eligibility to earn SRECs.

With respect to solar-electric systems, S.B. 1925 defines the term to include: (1) net metered facilities, (2) facilities that meet the definition of "on-site generation"; (3) facilities eligible for aggregated net metering; (4) facilities owned or operated by a public utility approved by the BPU; (5) facilities connected to the distribution system at 69 kilovolts (kV) or less and approved by the BPU; and (6) facilities certified by the BPU and DEP as being located on a brownfield, an area of historic fill, or a closed landfill. The definition does not include any facility connected to the grid at a voltage of higher than 69 kV, unless the facility is a net metering facility.

Solar facilities have a 15-year "qualification life", meaning that they are eligible to generate SRECs for 15 years after they are connected to the grid. The qualification life ends on the first May 31 (the end of the RPS compliance year) that is at least 15 years after the interconnection date. If a generator has accumulated a fraction of an MWh by the end of a reporting year (May 31), the fraction may be carried over and combined with energy generated in one or more subsequent reporting years in order to make a full MWh that is eligible for sale.

SREC Tracking

SRECs accrue from participating solar-electric facilities beginning March 1, 2004. Generators must register with the BPU through the SREC Registration Program (see program web site above) in order to participate.

SRECs generated prior to June 1, 2009 could only be used for compliance during the compliance year in which they were generated. Effective June 1, 2009 SRECs had a trading lifetime of two years, meaning that an SREC could be used for by an electric supplier for RPS compliance during the year it is issued or during the next compliance year. This lifetime was extended to three years -- the year of generation plus the following two compliance years -- by A.B. 3520 (2010), effective in July 2010. It has now been further extended to 5 years -- the year of generation plus the following four compliance years -- by S.B. 1925 effective July 23, 2012.

Pricing information for SRECs originating within New Jersey is available from the PJM Generation Attribute Tracking System (GATS) through the Public Reports section of the web site.

SREC based Financing Programs

In April 2008, Public Service Electric and Gas (PSE&G) received approval from the BPU to offer a loan program to help its customers finance PV systems. The PSE&G Solar Loan Program allows customers to take a loan from the utility for up to 40-60% of the cost of the PV system. Customers may then repay the loan using SRECs produced by their system at a basement price initially set at $475 per SREC. The initial $105 million program was scheduled to last two years. An extension of the program, Solar Loan II, was approved by the BPU in December 2009 to provide additional financing amounting to $143 million through 2011 under similar though not identical terms. Click here for further information on this program.

In July 2008 the BPU issued an order requiring the state's other electric distribution utilities (Jersey Central Power and Light, Atlantic City Electric, and Rockland Electric) to submit plans for purchasing SRECs from solar facilities through long-term contracts. The order contains several mandatory design requirements, including: (1) contract terms of 10-15 years; (2) separate market segments for projects of 50 kW or less and those between 50 and 500 kW (the upper limit); and, (3) an initial 3-year program period ending with the May 31, 2012 compliance year. The upper limit was subsequently raised to 2 MW in December 2010. So called "legacy" projects that received rebates through 2008 under the CORE program are not eligible for long-term contracts.

PSE&G is permitted to continue to offer its Solar Loan Program through its close. Atlantic City Electric and New Jersey Central Power and Light issued their first request for bids on July 30, 2009 and Rockland Electric began participating in the second solicitation issued October 1, 2009. Click here for further details on the individual utility programs and an FAQ on how the programs operate.