New Jersey has launched a yearlong process to evaluate the effectiveness of its solar net-metering system and generate possible alternatives amid developer concerns that potential changes could hinder future project installation rather than stimulate it. 

The state Board of Public Utilities (BPU) outlined the evaluation plan in a two-hour online forum Nov. 19, during which consultants reviewed the state’s current system, evaluated options for change and provided insights into net-metering reform strategies adopted in New York, California and Illinois. 

The evaluation was triggered by the expansion in the amount of electricity produced by net metering. The state’s 2018 Clean Energy Act allows that when 5.8% of the total annual kilowatt-hours (KWh) sold in the state is net metered, the state can “cease offering net metering to customers that are not already net metered.” The state reached the threshold in the energy year that ended May 31, 2024. 

In response, the BPU launched a “robust stakeholder process” to develop an updated net-metering mechanism, according to the BPU announcement of the plan. 

The goal is partly to “provide certainty on compensation mechanisms going forward” and to “encourage economic efficiency and fair allocation of costs and benefits,” Sawyer Morgan, a project manager in the BPU’s clean energy division, said in the online forum. The policy also should “integrate with grid modernization, energy storage and demand response technologies” and provide support for a “strong solar industry.” 

Net metering refers to the way solar projects designed to generate electricity only for the user can send electricity into the grid if they create more power than the customer needs. With a utility paying for the electricity, the strategy can help the customer pay off the project investment. 

The agency seeks stakeholder policy proposals that will be presented and compared at a technical conference Jan. 21, 2025. From these, three policy options will be developed and a straw proposal released in June 2025, with a final report expected in November 2025. 

Solar Sector Goals

Fred DeSanti, executive director of the New Jersey Solar Energy Coalition, said the state needs to better define its vision for the new policy. 

“These are not really complimentary goals,” he said. “A lot of these are in conflict with one another, and I really think it’s important for the state to give us more specific guidance in terms of what’s more important in those goals, maybe ranking them or scoring them.” 

While the residential solar market is “doing well,” the “commercial sector is underperforming somewhat” and the state needs to give clarity in what its priorities are and evaluate the impact of any policies “based upon the anticipated consequences,” he said. 

“Because I think those consequences could be very, very significant,” he said. “Take a wrong step here and we could really undermine a lot of the good that’s been done.” 

Some of the handful of solar developers who spoke in the meeting expressed concern that the contribution of solar to the state would get lost in discussions on policy, especially if cost is emphasized. 

“This process shouldn’t be seen as a ‘let’s sharpen our pencils and figure the exact value of solar to the grid,’” said Andy Wall, a board member of the Mid-Atlantic Solar and Storage Industries Association. 

“We can’t lose sight of that fact. The purpose of net metering is to promote the willingness of New Jersey residents and businesses to host solar for the rest of us,” he said. 

Net Metering Reimbursement Calculations

New Jersey at present has 197,000 residential net-metered installations and 9,500 non-residential net metered installations, totaling 2,305 MW, with an annual generation of 4,600 GWh, according to the BPU. The state had a total installed solar capacity of 4.95 GW, in September as it aims for a goal of 12.2 GW of solar energy by 2030. 

The state’s focus on drafting a new program comes seven months after new compensation rules for solar net metering in California — known as Net Energy Metering 3.0 (NEM) — took effect. The rules cut the payments for net metered electricity from solar-only projects, in favor of solar and storage projects. A study by the California Solar and Storage Association (CALSSA) found that even before the rules took effect, they had triggered 17,000 solar sector job losses. (See Can US Maintain Record Solar, Clean Power Growth? ) 

Abe Silverman, a former BPU general counsel who now runs the Ralph O’Connor Sustainable Energy Institute at Johns Hopkins University, said New Jersey’s program is designed to bring order to the sector now that the 5.8% threshold has been reached. 

“I read this new proceeding as an opportunity for the board to hear from folks in an organized manner, rather than waiting for the utilities to come in and make a filing to change the net-metering rules, which could be chaotic and create uncertainty for solar developers,” he said in an interview with NetZero Insider. “It’s significantly better for developer certainty to have an active proceeding.”    

BPU officials said they’re considering three net metering mechanisms, the methods by which the amount of electricity sent to the grid is calculated and its value — and the payment by the utility — is established. 

In the first method, similar to traditional net metering, the customer’s electricity generation “rolls the meter back, offsets their consumption, regardless of when it occurs, and excess generation, and all generation, is basically compensated at the customer’s retail rate,” said Akhilesh Ramakrishnan, a project manager for The Brattle Group, which is working on the issue for the BPU. 

Under the second method, called Net Billing and the most commonly used of the three, the amount of electricity sent to the utility — exported — is measured. So too is the amount of additional electricity imported because the customer at a particular time hasn’t generated enough by solar, Ramakrishnan said. The electricity imported and exported each has its own rate, and the difference between the two is either charged or credited to the customer, he said. 

In the third method, Buy All, Sell All, the cost of all the electricity used by the customer is calculated, as is the cost of all the electricity generated, he said. Either the difference is paid by the customer, or they receive a credit if the amount generated exceeds the use. 

Consultants who studied the net metering reform efforts used by other states told the hearing that New York and California use a form of the Net Billing method, with different rates for electricity imports and exports. New York also added a surcharge to “attempt to reduce the amount of cost that’s being shifted from these customers to non-solar customers,” Ramakrishnan said.  

Preliminary studies show rooftop installations are lower in California after the state introduced NEM 3.0, but there were other factors at play — such as a rise in interest rates — that mean the impact of NEM 3.0 is unclear, he said. 

Illinois has developed a Buy All, Sell All system, he said. 

Ratepayer Costs

In New Jersey, the BPU said customers who already are net metered likely could continue as they are, but the agency still is studying the issue.   

Andrew Gold, assistant deputy rate counsel with the New Jersey Division of Rate Counsel, expressed concern about the burden on ratepayers. He said the state’s achievement of the 5.8% threshold “signals both the success of prior net-metering policy initiatives as well as the need to carefully consider next steps that could reform the net metering process in ways that continue to promote behind-the-meter solar generation, but at a much lower ratepayer cost.” 

Ratepayers have to pick up some of the costs of buying net-metered electricity, and also some generation, transmission and distribution fixed costs, which are not paid by the customer generating the power, he said. 

“This rate design often results in under recovery of these capacity costs by net metering residential ratepayers at other residential ratepayers’ expense,” he said. Reform can bring “tremendous opportunities for creating greater efficiencies and reducing ratepayer financial support costs for net metering systems, both legacy and new installations,” he added.