New Jersey Set to Catch Up with California

A pioneer and leader in solar energy, NJ further embraces solar with new legislation

The State has been on a roller coaster as far as adoption of clean energy is concerned. New Jersey was the one of the pioneer states in establishing the Renewable Portfolio Standard in 1997. It had more success than other RPS states in promoting solar energy on account of its Solar Renewable Energy Credits (SREC) and solar carve-out. In 2011, New Jersey was second only to California to install over 100MW of solar capacity in a single year, and also stood second in the country in terms of cumulative solar capacity. Then came the crash of SREC trading prices in 2011-12. Though Governor Christie promised to be a clean energy champion during his campaign in 2009, he repeatedly ignored or opposed proposals dealing with clean energy during his gubernatorial years. In 2016, 3.6% of electricity in the state is reported to be harnessed from other sources. Electricity from solar-photovoltaic accounts for 1% of the total energy generated in the state. The state has currently slid to the fifth position in the nation. 

A renewable portfolio standard (RPS) is a regulation that requires electric supply companies (utilities) to produce a specified fraction of their electricity from renewable energy sources. 30 of the 50 are RPS states in the country. In New Jersey, the total RPS requirement (till the new legislation in April 2018) was to generate 24.39% electricity from renewable sources by 2028. New Jersey also has a 4.1% solar carve out; i.e.of all energy generated, 4.1% is to come from solar by 2028. The actual solar carve out in 2018 is 3.2%. 

In most east-coast solar markets, as in NJ, the main incentive driving the market is SRECs, which stands for Solar Renewable Energy Credits. One SREC is equivalent to one mega watt (MW)of solar energy generated. In order to meet the state’s RPS, utilities must buy SRECs. If they do not purchase SRECs, they must instead pay an Alternative Compliance Payment to the State Government.  

New Administration's Plans for Clean Energy

With a new administration in Trenton in 2018, and also in anticipation of one of its four nuclear reactors shutting down operation in October this year, NJ is embracing renewable energy more than ever for meeting its energy needs. NJ Governor Phil Murphy signed a historic bill in May 2018 to significantly advance New Jersey’s clean energy economy. The legislation is expected to stabilize and expand New Jersey’s renewable energy sector by 2021 and help extend the cost-saving benefits of solar to more families, communities and businesses in the state through the establishment of a community solar program. The legislation is expected to grow New Jersey’s renewable energy development, maintain more than 7,100 solar industry jobs, and expand the benefits of clean energy to more residents. 

Actions Planned

  • Increasing the solar target: The Bill establishes renewable energy goals of 21% by 2020, 35% by 2025, 50% by 2030, and 100% by 2050 making New Jersey RPS requirements one of the loftiest in the nation. The states's solar carve-out requirement is raised to 5.1% of total electricity sales by 2021.  
  • Closing the current SREC trading program in an orderly way: The legislation proposes to phase out SRECs and replace them with a new or modified way of encouraging increased reliance on the technology. It is however not clear as what that system will be. SRECs have been hugely responsible for promoting solar installations in the state, however, there are many drawbacks to this subsidy system. SREC is a financial instrument that is traded just like the stocks. Hence the price of SRECs reacts sharply to supply demand imbalances. For instance, when the supply of SRECs is high, its price plummets. As a result, SREC ceases to act as an incentive for new installations, thereby defeating its very purpose. Also, SRECs were meant to act as a subsidy in the initial years of solar adoption in the state. Now that the panels have become cheaper and state has an effective policy supporting it, the subsidy needs to be withdrawn to make the solar market more efficient and develop effective pricing strategies. Also, there have been instances when the benefit of SRECs is reaped majorly by solar aggregators and not the property owners who invested in the panels.   
  • Reducing the overall cost of the current solar program: This is planned to be carried out by lowering the Solar Alternative Compliance Payment. 
  • Energy Storage: Solar energy technology has variable output. In which case, storage systems have great potential for smoothing out the electricity supply from these sources and insuring that the supply matches the demand. NJ is planning to achieve 600 MW of energy storage by 2021 and 2000 MW by 2030. 
  • Energy Efficiency: This requires each utility to implement energy efficiency measures to reduce electricity usage by 2% and natural gas usage by 0.75%.
  • Creating a community solar program: The new legislation also proposed to develop the much overdue and awaited community solar program in the state. Garden State will become the 18th state in the country to enable community solar.  

A community solar project—sometimes referred to as a solar garden or shared renewable energy plant—is a solar power plant whose electricity is shared by more than one household. The primary purpose of community solar is to allow members of a community the opportunity to share the benefits of solar power even if they cannot or prefer not to install solar panels on their property. 

  • Offshore Wind: Governor Murphy also aims to harness wind energy, particularly off shore wind. The program has set a goal of generating 3,500 MW of offshore wind energy by 2030. It also reinstates an expired programs to provide tax credits for offshore wind manufacturing activities.

Industry Response

Industry leaders and Clean Energy Advocates have reacted overwhelmingly positively to Governor Murphy's initiave to consolidate solar in the state. 

"It has never been more important for leaders to stand up for clean energy jobs, local investments and clean climate progress in our communities. We are encouraged that in the face of rollbacks in Washington, Governor Murphy is stepping up with bold action," said Pari Kasotia, Mid-atlantic  Director of Vote Solar.


"Thanks to this important legislation New Kersey residents who rent, live in apartments or can't afford the upfront cost tp install solar panels will not be better able to get their power from the sun, "said Luis Torres, Senior Legislative Representative for Earthjustice


Today, Governor Murphy is empowering New Jersey residents to create, store and share clean solar power with their neighbors, making the electric grid stronger and more resilient. New Jersey will be better prepared for future storms, grow good quality energy jobs for the state and build a more consumer centered energy system with home-grown, affordable power that will benefit everyone, said Anne Hoskins, Chief Policy Officer for Sunrun.