Net Metering in New Jersey: Saving The SREC Market by Turning Back the Dials
As an incentive for installing behind-the-meter renewable energy generation systems, many states and utilities have adopted net-metering programs in which the utility offers credits — usually at retail rates — for energy produced by these systems, essentially turning back the dials.
For example, if you consumed 10 kilowatt-hours of electricity in the month of May and you produced 8 kilowatt-hours from your rooftop solar system, the utility credits your account so that you’re only responsible for paying for 2 kilowatt-hours.
Net metering benefits both consumers and utilities. Consumers benefit from having lower — and, in some cases no — utility bills; and utilities benefit from the fact that power is generated on site, potentially requiring less investment in transmission and distribution infrastructure.
Net metering is also seen by many as the key to preserving New Jersey’s thriving solar industry.
In New Jersey, the solar industry is experiencing an overbuild scenario, in which the state has enough installed solar to meet its Renewable Portfolio Standard (RPS) for solar through energy year 2014 and possibly 2015. The RPS is a standard set forth by the N.J. Board of Public Utilities that requires utilities to produce a certain amount of energy from renewable energy sources, in this case solar.
The overbuild is due to the rapid growth of solar in New Jersey, which is a consequence of generous federal and state incentives, including New Jersey’s Solar Renewable Energy Certificate (SREC) program. SRECs are a financial incentive representing the environmental benefit of solar that are sold by system owners to utilities. The overbuild reduced demand for SRECs, hence lowering their value and discouraging solar development by increasing the payback period for solar systems.
The N.J. Legislature recently passed a bill that would absorb much of the SREC glut by accelerating the RPS. The bill creates new demand for solar development by increasing the amount of solar to be installed over the next few years. Another consequence of the legislation, which Gov. Christie is expected to sign soon, is that it promotes net-metered projects as opposed to utility-scale projects that feed electricity directly into the grid. Grid-tied projects contribute to the SREC oversupply because they generate a large number of certificates.
New Jersey is now the top commercial solar market in the nation thanks largely to net-metered projects on flat-roofed commercial buildings. But despite the fact that we have the country’s largest concentration of such buildings, we haven’t even begun to tap into their solar potential. The new legislation will promote the deployment of solar on commercial buildings, thus helping businesses reduce their operating costs, reducing peak power demand and contributing to energy security.
The Legislature should be commended for legislation that supports its thriving solar industry and increases the state’s attractiveness to business.