New Jersey regulators will examine whether to allow out-of-state solar generation into the state's renewable energy program, a change from the current rules that proponents say would save ratepayers money.
The three-member New Jersey Board of Public Utilities (BPU) on Wednesday unanimously agreed to open "further deliberations" into whether the state should extend Class I eligibility to out-of-state photovoltaic generation in its renewable portfolio standard (RPS).
Per New Jersey law, the agency will aim to render a decision within 90 days or, if the issue requires additional time to work through, ask Vitol, which first requested the changes in the RPS rules, for additional time to sort through it. At the end of the 90-day period, BPU will either reject the company's petition or grant it, at which point the agency would officially initiate a rulemaking proceeding.
The debate over the use of out-of-state solar in the New Jersey program began in August, when Vitol and its developer subsidiary VC Renewables asked the BPU to grant Class I eligibility to photovoltaic systems beyond the state's borders. New Jersey's RPS obligates electric suppliers in the state to use renewables for 50pc of their retail sales by 2030. Broadly, the Class I category includes resources like wind and geothermal, along with solar projects in the state.
At present, only in-state projects can claim eligibility in one of New Jersey's three solar initiatives, a restriction intended to drive development within the state. Once a project's eligibility in one of those solar initiatives expires — 10 to 15 years after beginning operations, depending on the project — it then generates regular Class I renewable energy certificates (RECs), which trade at prices that are considerably lower than any of the three solar program's incentives. BPU does not currently grant Class I eligibility to solar projects outside of New Jersey, despite accepting RECs from other forms of renewable energy throughout the PJM region.
The PJM footprint at the end of July had 23,571MW of solar in other states, with 15,201MW potentially open to selling RECs into the New Jersey market under the right market and regulatory framework, according to Vitol. Ending the "arbitrary supply constraint" would help reduce the compliance costs borne by electricity customers by reducing procurement costs by at least $200-$500mn/yr, by Vitol's estimates.
But the proposal has drawn pushback, with BPU president Christine Guhl-Sadovy ahead of the board's vote remarking that "there's probably going to be a lot of stakeholder input on this matter".
Opponents include developers Leeward Renewable Energy and LS Power, with the former saying the mere existence of the petition had eroded market certainty and, thus, investor confidence in the state's market. And the changes may not functionally address the issue of ratepayers costs, with a hypothetical $10 drop in REC prices translating into only a 1pc reduction in residential electric bills, according to LS Power.
While BPU has not commented on Vitol's petition, the agency has been looking for ways to cut electricity costs in the wake of record-high prices in two consecutive capacity auctions in the PJM region, which have translated into escalating costs for ratepayers. To that end, the agency has frozen the 2026 RPS requirements at 35pc, rather than permitting them to rise to 38pc as originally planned, and directed its staff to review and possibly adjust the compliance obligations for the 2027-2031 periods. BPU expects to publish a straw proposal on the latter later this year.
