Over the past few years, when many states have been plagued by economic woes, New Jersey has embarked on a mission to create one of the most comprehensive renewable energy programs in the country. The success of the program is fueled by a strong commitment and support from Governor James McGreevey and Jeanne Fox, President of the New Jersey Board of Public Utilities (BPU). The administration’s vision is to make New Jersey a national leader in the promotion and use of renewable energy and it has formulated policies to achieve that goal.
Setting the Stage for Renewables
The state began to lay foundations for the program in 1999, when it adopted legislation to restructure its utilities. At that time, environmentalists and renewable energy advocates were concerned that deregulation would result in the state’s utilities opting for the cheapest and dirtiest sources of energy in a "race to the bottom" that would harm the environment. These concerned parties formed a renewable energy coalition to lobby state legislators to include support for renewable energy in the deregulation bill.
After an arduous battle, the group’s efforts were successful. When the legislature adopted the Electric Discount and Energy Competition Act (EDECA) in 1999, the bill established funding for the implementation of the New Jersey Clean Energy Program. The funding is created through a social benefits charge, a fee assessed by utilities at the point of use for electricity and natural gas. EDECA established funding for the program for a minimum of eight years. The fund is protected so that other government offices cannot raid it to cover their budget shortfalls, a predicament that has recently undermined renewable energy funds in other states.
In March 2001, the BPU issued an order establishing funding for the Clean Energy Program for three years and identifying the types of programs to be funded. The BPU determined that 75% of the money would finance energy efficiency programs and 25% of the money would support renewable energy programs. It also established funding levels starting with $115 million in 2001 and increasing annually to approximately $124 million in 2003.
The 2001 order authorized the utilities to administer the Clean Energy Program for one year. Since the utilities appeared to have little incentive to promote renewable energy, putting the utilities in charge of administration of the fund appeared tantamount to asking the fox to guard the hen house. As a result, the BPU retained consultants to evaluate how the renewable energy and energy efficiency programs should be administered after the initial year. Following a series of public hearings and meetings in 2002, administration of the program was shifted from the utilities to the Office of Clean Energy at the BPU. In 2003, the BPU established the New Jersey Energy Council to act as an advisor regarding the administration and management of the Clean Energy Program.
Renewable Energy Incentives
The New Jersey Clean Energy Program provides financial incentives to owners who wish to install renewable energy systems in their homes or businesses through subsidies for solar, small wind, and sustainable biomass systems. Installers of renewable energy systems up to 10kW can receive incentives worth up to 70% of the total purchase and installation of the system. Systems greater than 10kW are eligible for incentives worth up to 60% of the purchase and installation of the system. The financial incentives are based on the size of the system. For example, during 2003, solar electric systems up to 10kW received incentives of $5.50 per watt. Systems greater than 10kW received the following incentives: 10 to 100kW systems received $4.00 per watt; 100kW to 500kW systems received $3.75 per watt; and 500kW to 1,000kW systems received $.30 per watt. Wind and sustainable biomass systems are eligible for similar, but somewhat smaller, incentives. Buyers can reduce the cost of purchasing a renewable system even further through an exemption from the 6% New Jersey state sales tax for all equipment purchases directly associated with electric systems. Net metering laws result in additional financial benefits.
Cassandra Kling, Alternative Energy Specialist in the BPU’s Office of Clean Energy, reports that the number of participants in the program are overwhelmingly residential, although corporations account for greater capacity due to the larger size of their systems. One of the companies that has taken advantage of the Clean Energy Program’s incentives is Cordis Corporation, a Johnson & Johnson company. Cordis made the decision to install a 72kW solar system as a result of the Clean Energy Program rebate, which covered approximately 60% of the purchase and installation costs. The company expects that the solar system, which can provide 8% to 10% of its total power, will result in $7,000 to $8,000 annual savings in electric costs, as well as help reduce its greenhouse gas emissions.
Renewable Portfolio Standard
New Jersey Governor James E. McGreevey has been a strong supporter of renewable energy. On January 28, 2003, he issued an executive order establishing the Renewable Energy Task Force. The Task Force’s mandate was to recommend how to increase the use and development of renewable energy in the state specifically through changes to New Jersey’s Renewable Portfolio Standard (RPS) for Class 1 renewable energy (solar, wind, fuel cells, wave, geothermal, methane gas, and biomass). Initially adopted in 1999, the RPS requires energy suppliers to include a minimum percentage of renewable energy in their mix of energy sources. The Task Force concluded that although New Jersey was already providing strong support for the development of renewable energy, the state could do even more to become a national leader in renewable energy.
At the end of 2003, the BPU proposed amendments to the RPS rules incorporating recommendations from the governor’s Renewable Energy Task Force. The rules are expected to be adopted in early 2004. The amendments propose raising the RPS requirement from 4.5% to 6.5% in 2008, which will result in an increase in Class 1 renewable energy from 2% to 4%. The BPU proposed that existing RPS requirements for years beyond 2008 should be revised, and indicated that it was studying the Task Force’s recommendation of an RPS of 20% for Class 1 renewable energy by 2020. The proposed RPS rules also contain a solar electric generation requirement that was not part of the existing RPS requirements. Pursuant to this provision, all electricity suppliers must include solar energy in their energy mix.
In addition to increasing the amount of renewable energy that suppliers must purchase, the rule includes provisions for creating Renewable Energy Certificates (RECs). Electric power suppliers will be able to meet their RPS requirements by purchasing RECs through a renewable energy trading program. The trading program will provide a mechanism for tracking RECs from their generation to retail suppliers, facilitating verification that suppliers are in fact meeting RPS requirements. The proposed rules provide an Alternative Compliance Payment (ACP) scheme, which will allow energy suppliers to satisfy RPS requirements by making ACP payments in lieu of purchasing and supplying renewable energy.
These new proposals are the latest actions that reflect the governor’s commitment to developing renewable energy in New Jersey. Individuals working in the state’s government and private industry credit the administration for playing a positive role in the development of the Clean Energy program. Cassandra Kling has found that "the administration has been a joy to work with." Dolores Phillips of Energy Photovoltaics, Inc, who previously helped push through the legislation that created funding for the Clean Energy Fund, has high praise for Governor McGreevey and Jean Fox, President of the BPU: "[They are] the best thing to happen to renewable energy." Phillips believes that New Jersey’s policies are "stepping into new territory. What is happening [in New Jersey] is really remarkable." Lyle Rawlings, President of Advanced Solar Products, Inc. and co-chair of the Renewable Energy Subcommittee of the Clean Energy Council, also finds that the "level of enthusiasm and support from BPU is extremely high."
The major concern about the Clean Energy Program seems to be that the program is expanding so rapidly that that BPU may have difficulty keeping up with the increased demand for renewable energy. Kling claims that "applications are flying in the door." Rawlins, who has worked in the solar industry since 1981, commented that the current environment and demand for renewable energy in New Jersey is "definitely the best by far" during the twenty years that he has worked in the state.
Janet McGarry recently graduated from the Yale School of Forestry and Environmental Studies, where she studied climate change and renewable energy.
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