After a year of vigorous lobbying by environmentalists and the solar industry, a bill aimed at boosting New Jersey’s grid-scale solar capacity to help meet the state’s goal of deploying 17 GW of capacity by 2035 was signed into law by Gov. Phil Murphy on Friday.

The bill, A4554, which passed the Senate 24-12 on June 30 and the General Assembly by 57-16 on June 24, would create a new incentive program and competitive bidding process for projects over 5 MW to stimulate solar development investment in the state, opening the door to larger-scale projects.

How much that will help the state foster new solar capacity to combat climate change, and whether the costs stipulated under the bill are acceptable, is a bone of contention. While solar developers and environmentalists like the bill and say it will stimulate much needed solar capacity growth, the New Jersey Division of Rate Counsel says the legislation will add hundreds of millions of dollars in subsidies annually to the cost of providing solar energy by removing cost caps already in place.

The state is seeking to reach 32 GW of solar capacity  generating 34% of the state’s electricity by 2050. Yet to reach that goal, the state will need to make “critical” steps to simulate investment in “grid supply solar facilities, community solar facilities and net metered solar facilities,” according to the bill’s language. At present, no solar development — except pilot community solar projects — can be created solely to feed electricity into the grid. Projects can only do so to divert excess electricity generated beyond the needs of the warehouse, building or other facility that is the intended user of the power.

“It is imperative that we take steps to greatly expand our use of clean energy power sources,” Sen. Bob Smith (D), who co-sponsored the bill, said after its passage. “The use of utility-scale solar energy will keep us on track for our long-term goals, ensuring the successful transition to renewable energy sources.”

Competing Demands

The legislation would create a new program of solar renewable energy certificates, SREC-II, to be reimbursed by the New Jersey Board of Public Utilities (BPU) for each megawatt-hour of energy produced, with a goal of producing 3,750 of MW new power generation capacity by 2026.

The bill also sets down rules for what land developers can use for larger solar projects, in a section shaped in part by concerns among farmers and environmentalists that the agriculture industry would suffer if developers were able to buy or lease unlimited tracts of farmland.

Yet the bill also would weaken a cap, enacted by the legislature in 2019, that limits to $750 million a year the cost of solar subsidies paid by the BPU, according to Rate Counsel Stefanie Brand. In a June 29 letter to the Senate urging it to hold off approving the bill, she said it would override a legislative mandate that subsidies for solar projects could not amount to more than 7% of the annual amount that customers spend on electricity.

“This legislation redefines and effectively eliminates that cap,” Brand said. “By our estimate it would cost your constituents approximately $1.2 billion each year for what is a relatively small portion of our clean energy load.”

In testimony in May to a Senate committee, Brand expressed concern that the legislation would be shaped, and costs pushed up, by lobbying from solar developers seeking subsidies, and that the bill would still only create 20 to 30% of the solar capacity that the state is looking to generate.

Promoting NJ’s Solar Sector

“The passage of this bill sends a strong message to the utility-scale solar industry that New Jersey is now open for business,” said Tim Daniels, principal of Dakota Power Partners, a solar project developer with a Millville, N.J., office and several large solar projects in the state. “This new law creates the first incentive program in New Jersey for utility-scale solar, so this was really the missing piece to the renewable energy puzzle.”

Fred DeSanti, executive director of the New Jersey Solar Energy Coalition, said he expects the bill to “open the door to the installation of 300 MW of utility-scale solar each year for the next five years.” That would add to the expected addition of 450 MW expected each year from ground- and rooftop-mounted solar projects, for a total increase of $750 MW/year for five years, he said. “That would be a great start to rapidly expanding New Jersey solar market.”

Tom Gilbert, campaign director for energy, climate and natural resources for the New Jersey Conservation Foundation, said the organization still had concerns over last-minute changes that “weakened the bill and could pave the way for over 4,000 acres of solar on prime farmland.” However, he said, the legislation would “advance” the state’s goal of “rapid growth of low-cost solar.”

“Utility-scale solar is the lowest-cost solar resource within New Jersey,” he said.

Shaping Incentives

The bill outlines two different incentive structures, one for projects larger than 5 MW and one for smaller projects. It would:

• create a competitive solicitation process for grid-supply or net-metered solar facilities greater than 5 MW in size that will seek bids every 18 months;
• direct the BPU to develop a small solar facilities incentive program that will award SREC-IIs to the owners of community solar facilities and net-metered solar facilities less than 5 MW;
• aim to provide SREC-IIs for the generation of at least 300 MW of net-metered solar facilities per year and 150 MW of community solar facilities per year, for each of the five years after the establishment of the SREC-II program;
• leave the BPU to create the details of the creation and distribution of the SRECs;
• prohibit solar projects greater than 5 MW in size from being developed on preserved farmland, forests, wetlands or other protected land; and
• allow no more than 2.5% of the state’s prime agricultural land to be used for solar developments.

‘Dual’ Farmland Use

The bill’s passage comes as the BPU is pursuing its own process — known as the Solar Successor Program — to determine the best way to stimulate the creation of solar projects and what kind of subsidies to offer.

The state shut down to new entrants its SREC Program in April 2020, in part because of concerns that the subsidies for solar projects were too high. The state now operates a transition program, with lower subsidies, while the BPU crafts a new program. The agency’s proposal includes lower subsidies and a competitive bid process for projects above 2 MW. (See NJ Solar Proposal Seeks More Market Competition.)

In a parallel effort, A4554 passed to the desk of Gov. Murphy amid considerable debate, much of which centered on the use of farmland for solar projects. Farmers and some environmental groups sought to minimize the amount of farmland that could be used for solar developments. But developers, and some other environmentalists, said the need for solar is so great because of climate change that some use of farmland is necessary. They added that New Jersey farmland is already under threat from warehouse developers looking to feed the demand for e-commerce. (See NJ Solar Push Squeezes Farms.)

In a move related to those concerns, the legislature passed a bill, A5434, in the last week of June that would establish a pilot program to develop “dual-use” projects in which solar facilities are sited on land that “continues to be actively devoted to agricultural or horticultural use.” The bill, also signed by the governor on Friday, aims to stimulate the creation of pilot projects of 10 MW or less, and prohibits the use of prime farmland for the pilot unless approved by the BPU “in consultation” with the state secretary of agriculture.

The dual-use concept — now being tested in several states — promotes cultivating crops that can grow in the shade of solar panels, or grazing animals around the panels. Solar developers tout the dual-use concept as an example of how farms and solar developments can co-exist and support each other, and argue that the rise of solar facilities need not mean the decline of farms.

The BPU has also proposed a dual-use pilot program, with details to be developed with state agriculture officials, as part of its Solar Successor program.