Renewables Portfolio Standard

NOTE: A.B. 3723 enacted in May 2018 included several updates to the state’s Renewable Energy Portfolio standard including i) increasing the RPS standard to 50% by 2030, ii) increasing the offshore wind carveout, iii) increases in the Solar carveout, iv) changes to the alternative compliance payments, and other several minor changes. 

Requirements:

New Jersey’s Renewable Portfolio Standard (RPS) was first adopted in 1999 and has been updated several times. In May 2018, A.B. 3723 increased the total RPS requirement in New Jersey to 35% by 2025 and 50% by 2030 where the specified percentage of electricity sold in the the state must come from qualified Class I renewable energy sources. In addition, 2.5% of the electricity each year must come from qualified Class II renewable energy source. 

As it is set up today, the RPS includes two separate provisions for renewable energy. The first provision, which was part of the initial RPS goal requires each supplier/provider serving retail customers in the state to procure 50% of the electricity it sells in New Jersey from qualifying renewables by EY2030 (“energy year” 2030 runs from June 2029 – May 2030). Solar specific provision was added in later in 2010 (A.B. 3520) which requires suppliers and providers to procure additional maximum of 5.1% of sales (updated May 2018) from qualifying solar electric generation facilities by EY 2021, which is then gradually reduced to 1.100% by EY 2033. 

As detailed in the table below, prior to A.B. 3520 enacted in 2010, the solar carve-out was stated as a percentage-based target that, when combined with other resource targets, resulted in a total renewable energy standard of 22.5% by 2021. The January 2010 legislation adjusted the solar portion of the standard to be stated in terms of gigawatt-hours (GWh), resulting in a revised schedule requiring 17.88% from Class I and 2.5% from Class II renewables by EY 2021 (together 20.38% by EY 2021), and an additional 5,316 GWh from solar-electric facilities by EY 2026. In 2012 the solar compliance schedule was reverted back to a percentage-based target of 4.1% by EY 2028 by S.B. 1925. In May 2018, A.B. 3723 updated the standard by extending it to 2030. 

The offshore wind provision added in August 2010 by S.B. 2036 is defined so that it will reduce the percentage of electricity sales that must be provided from other Class I renewable energy sources (see Class I description below). In other words, the addition of the offshore wind resource requirement will not increase the overall renewable energy targets.

Eligible Technologies:

The mandate sets different requirements for different types of renewable energy resources, termed “classes”. “Class I” renewable energy is defined as electricity derived from solar energy, wind energy, wave or tidal action, geothermal energy, landfill gas, anaerobic digestion, fuel cells using renewable fuels, and — with written permission of the New Jersey Department of Environmental Protection (DEP) — certain other forms of sustainable biomass. Class I renewable energy also includes hydroelectric facilities of 3 MW or less that are: placed in service after July 23, 2012 (the effective date of S.B. 1925); located in the state and connected to the distribution system; and, certified as low-impact by a nationally recognized organization based on a system that includes a variety of minimum criteria.

“Class II” renewable energy is defined as electricity generated by hydropower facilities larger than 3 megawatts (MW) and less than 30 MW*, and resource-recovery facilities (i.e., municipal solid waste or MSW) located in New Jersey approved by the DEP. Electricity generated by a resource-recovery facility outside New Jersey qualifies as “Class II” renewable energy if the facility is located in a state with retail electric competition and the facility is approved by the DEP. Solar energy, while it remains an eligible Class I technology, occupies a special place as the only resource eligible for the solar electric component of the standard. Offshore wind, defined as a wind turbine located in the Atlantic Ocean and connected to the New Jersey electric transmission system, likewise also occupies a special place within the RPS.

Carve-outs:

The required percentages of each category and the total renewables percentage required are listed in the table below. The term EY refers to compliance period or “energy year” for the standard, which runs from June – May and is defined by the year in which an energy year ends. Note that for Basic Generation Service (BGS) contracts executed prior to July 23, 2012 the supplier’s obligation is determined according to the standard in effect at that time (i.e., the A.B. 3520 energy-based standard). However, the ultimate statewide target for any year is determined by the S.B. 1925 targets and does not change regardless of this exemption. Thus any differences (i.e., deficits) arising from the pre-existing BGS contract exemption are distributed evenly across non-exempt sales. 

The solar carve-outs  were updated on May 2018 (A.B. 3723). The solar carve-out increases fro year 2019, 2020, and 2021 and then decreases thereafter to 1.100% to EY 2033. The table below provides schedule up to 2030.

Because of the unique nature of offshore wind, a time line has not been established for the offshore wind carve-out. The BPU’s adopted rules define a system where the standard for any given year is based on projected energy production from operating, eligible offshore wind facilities. In order to qualify as an eligible offshore wind facility, an applicant must submit a detailed project analysis to the BPU for approval. Among other things, the application must contain a proposal for pricing Offshore Wind Renewable Energy Credits (ORECs) as a fixed, flat rate or as a fixed price for every contract year. Suppliers will be required to purchase ORECs at a price and time period defined by the BPU. A.B. 3723 increases off-shore wind energy goal from previous 1,100 MW to 3,500 MW.

Compliance:

Suppliers/providers may meet these requirements by submitting “Class I” renewable-energy certificates (Class I RECs), “Class II” RECs, Solar RECs (SRECs), and ORECs, all of which represent the environmental attributes of one megawatt-hour (MWh) of generation from an eligible facility. All RPS compliance must be submitted in the form of RECs, which will be issued by the PJM-Environmental Information Services (EIS), through PJM’s Generation Attribute Tracking System (GATS). Both RECs and ORECs may be used for compliance during energy year in which they were generated or the following two compliance years. As a result of S.B. 1925, the lifetime for SRECs has been extended by an additional two years, so SRECs may be used for compliance during the year in which they were generated or the following four years. This extension of SREC lifetime applies only to SRECs created on or after July 23, 2012, the effective date of S.B. 1925. Any type of REC submitted for RPS compliance must be permanently retired.

Additional solar electricity may be used to fulfill any of the three required categories, while additional “Class I” electricity may be used to fulfill the “Class II” requirement. To qualify as “Class I” or “Class II” renewable energy, electricity must be generated within or delivered into the PJM region. “Class I” or “Class II” renewable energy delivered into the PJM region must be generated at a facility that began construction on or after January 1, 2003, in order to qualify. Solar facilities are eligible to produce SRECs for 15 years, termed the “qualification life”, and thereafter may be issued Class I RECs, but not SRECs. Under the former rules suppliers/providers could not use RECs or SRECs associated with electricity generated at a customer-generator’s premises unless the facility was eligible for net metering. However, S.B. 2936 (2007) amended the law to allow all facilities “connected to the distribution system in [New Jersey]”, including but not limited to solar facilities, to generate RPS-eligible RECs or SRECs.

Alternative Compliance Payment 

If a supplier/provider is not in compliance for an energy year, the supplier/provider must remit an alternative compliance payment (ACP) and/or a solar alternative compliance payment (SACP) for the amount of RECs and solar RECs that were required but not submitted. The BPU determines prices for ACPs and SACPs, and reviews the prices at least once per year. The price of an ACP and an SACP is to be higher than the estimated competitive market cost of (1) the cost of meeting the requirement by purchasing a REC or solar REC, or (2) the cost of meeting the requirement by generating the required renewable energy.

The initial ACP and SACP levels were set by BPU order at $50 per MWh and $300 per MWh respectively in 2004. These levels were subsequently renewed several times without changes. The ACP remains unchanged at $50 per MWh. The modern SACP was established by BPU order in December 2007 as a rolling eight-year schedule beginning in EY 2009 (i.e., one additional year added to the back end of the schedule each year). In July 2012 S.B. 1925 established a 15-year schedule for EY 2014 – EY 2028. 

A.B. 3723 enacted in May 2018 added a ceiling price for the ACP such that the cost does not exceed 9% of the total paid for electricity by all of the customers in the state for year 2019, 2020, and 2021 respectively, and does not exceed 7% of the cost for following years. 

• EY 2009: $711 per MWh
• EY 2010: $693 per MWh
• EY 2011: $675 per MWh
• EY 2012 :$658 per MWh
• EY 2013: $641 per MWh
• EY 2014: $339 per MWh
• EY 2015: $331 per MWh
• EY 2016: $323 per MWh
• EY 2017: $315 per MWh
• EY 2018: $308 per MWh
• EY 2019: $268 per MWh
• EY 2020: $258 per MWh
• EY 2021: $248 per MWh
• EY 2022: $238 per MWh
• EY 2023: $228 per MWh
• EY 2024: $218 per MWh
• EY 2025: $208 per MWh
• EY 2026: $198 per MWh
• EY 2027: $188 per MWh
• EY 2028: $178 per MWh
• Continue to reduce by $10 each year to EY 2033: $128 per MWh

Energy Storage Study

A.B. 3723 enacted in May 2018 requires the Board of Public Utilities to conduct an energy storage analysis in the state. The study would involve number of considerations including cost and benefit of energy storage systems, implementation of renewable electric energy storage to provide emergency back-up power for essential services, determine the optimal amount of energy storage to be added in the grid and others. The report is due by May 2019. Six months after the study is completed, the Board is required to initiate a proceeding to establish a process and mechanism to achieving goal of 600 MW of energy storage by 2021 and 2,000 MW of energy storage of 2030. 

History

New Jersey’s RPS was originally adopted in 1999 as part of the state’s electricity restructuring legislation with initial renewables targets of 4.0% Class I and 2.5% Class I or Class II resources by 2012. In 2004 the BPU amended the standard to require the renewable energy targets be met by May 2008, and to add a requirement that at least 0.16% of sales come from solar electricity as part of the overall Class I target of 4.0%.

The BPU made even more extensive revisions to the RPS in April 2006, significantly increasing the required percentages of Class I, Class II, and solar resources towards an ultimate requirement of 22.5% renewables, including 2.12% solar, by May 2021. In December 2007 the BPU issued a far-reaching order (BPU Solar Transition Order) directing that further changes be made to many of the details of the RPS in an effort to increase the effectiveness and efficiency of New Jersey’s solar energy policies. Formal rule amendments associated with many of these changes became effective in 2009, although the broader renewable energy targets were not affected. As noted above, during 2010 the solar carve-out was redesigned and expanded and the offshore wind requirement was also added, while in 2012 additional substantial changes were made largely affecting the solar carve-out.

*The administrative regulations under N.J.A.C. § 14:8-2.6 restrict the size of eligible Class II hydropower projects to 30 MW or less, this restriction formally adopted by the RPS statute through AB 3455 that was enacted in March 2015.  

**The A.B. 3520 and pre-A.B. 3520 solar targets have been included for informational purposes and historical context. The A.B. 3520 targets continue to have some revelance in that they continue to apply to BGS provider contracts in existence prior to the enactment of S.B. 1925. All BGS contracts under a similar exemption contained in A.B. 3520 expired by May 31, 2012.