New Jersey Community Solar Policy Guide for Asset Owners & Developers

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New Jersey’s Community Solar Program

In August 2023, New Jersey transitioned its successful community solar pilot program to a permanent one called the Community Solar Energy Program (CSEP). The new CSEP brings significant positive changes like minimum bill credit guarantees for subscribers, mandated utility consolidated billing (UCB), a minimum low-to moderate-income (LMI) capacity requirement of 51%, along with new and easier methods for verifying LMI subscriber eligibility. With these features, among many others, New Jersey has crafted one of the best programs in the nation.

The permanent program culminated as the Garden State became a leader in solar energy with over 4,500 megawatts (MW) of installed solar capacity of all types. Preceding the CSEP and its pilot, the state set an ambitious requirement that every retail energy supplier procure 35% of the electricity it sells from renewable energy by 2025 and 50% by 2030. Then, in 2018 New Jersey passed the Clean Energy Act which helped accelerate New Jersey to generate 5.1% of its energy from solar, mandated the creation of a fixed incentive program, and directed the New Jersey Board of Public Utilities (NJBPU) to create a pilot community solar program.

Beginning with an initial cap of 75 MW per year in 2019, explosive interest in this new segment of the solar market saw the annual capacity limit double. In the second year of the program, the cap increased to 150 MW. And now, the first two years of the CSEP will see the cap increase to 225 MW for Energy Years (EY) 2024 and 2025.

Only 29 of the 150 approved projects have come online representing 50 MW of the 243 MW total. Notably, some of the program design problems of the pilot, like geographic restrictions for subscribers, have been adjusted to ensure broader success for the CSEP. And as one of the top ten states for renewable energy with a particular focus on expanding community solar for the benefit of low-income residents, New Jersey is poised to become one of the country’s premier industry leaders.

Program Details & Project Requirements

Program Capacity Blocks

Community solar will make up at least 150 MW of the 750 MW of incentivized solar development in New Jersey annually. By August 2026, a cumulative capacity of 750 MW of community solar alone must be available. The first two years of the CSEP, EY 2024 and EY 2025 beginning in November 2023 and June 2024 respectively, will have 225 MW blocks. The BPU retains flexibility to increase the capacity allocation depending on market conditions and its policy priorities.

Capacity will be segmented proportionally by utility service territory and new CSEP capacity blocks will be set at the beginning of each year. Electric distribution companies (EDC) are not allowed to develop, own, or operate community solar projects. For EY 2024, that capacity is segmented as follows:

• Atlantic City Electric – 27 MW
• Jersey Central Power & Light – 65 MW
• Public Service Electric & Gas – 129 MW
• Rockland Electric Company – 4 MW

Projects that were conditionally approved to participate in the pilot, but did not reach operation in the allotted time, will be allowed to submit a new application for the CSEP without counting against, or being subject to, otherwise applicable capacity limits.

Project Requirements

• Maximum 5 MW DC capacity
• Projects may be sited on rooftops, carports and canopies over impervious surfaces, contaminated sites and landfills, and on man-made bodies of water that have little-to-no established floral and faunal resources
• Projects may not be located on preserved farmland, forest, and Green Acres preserved open space
• Dual-use sites on farmland, or agrivoltaics, cannot participate in the community solar program¹
• Projects may not be co-located on the same or contiguous properties, with exception for a co-located net metered project
• Utilities may not develop, own or operate community solar projects.

Subscriber Requirements

• Minimum of 10 subscribers per project
• Projects must guarantee a minimum bill savings rate of 15%
• No maximum subscriber limits
• No single subscriber can subscribe to more than 40% of a project’s total net energy
• Subscribers may not participate in more than one community solar project.
• Subscriptions cannot exceed 100% of the subscriber’s annual historic annual usage (kwh)
• Subscriptions are portable if the subscriber stays within the same utility service territory.
• Subscribers to a new CSEP project² can reside anywhere in the EDC service territory in which the project is located

2 Effective August 16, 2023, all pilot program projects are subject to the same rules in the permanent program, with the exception for any pilot project that volunteered to implement a geographic restriction for enrollment which will receive further evaluations from the BPU.

Low-Income Requirements and Eligibility

LMI Project Requirements

New Jersey’s community solar program has a particular focus on bringing a lower cost of electricity to LMI residents, mandating that at least 51% of each project's capacity be reserved for LMI subscribers. A community solar project may not accept participation by a non-LMI subscriber if doing so would cause LMI participation in the project to fall below the 51% capacity threshold. Qualification must be determined at:

• The execution of subscription agreement
• When a customer moves to a new utility account
• Every fifth anniversary of a subscription

LMI Requirement Non-Compliance

Projects with subscriptions that fall below 51% LMI capacity are required to provide the BPU written notice within 30 days of the occurrence with a plan to reenter compliance. Projects owners whose facilities do not meet or maintain the LMI requirement on an annual basis could be liable to financial penalties including the loss of the bill credit value for the portion of the subscriber base that does not meet the LMI targets, and a change in the project’s incentive value.

Additionally, the BPU may conduct audits of subscriber lists to ensure compliance with the 51% requirement. Subscriber organizations are required to retain records of subscriber contracts, disclosure forms, proof of attestation of LMI eligibility, and allocation lists, which must be made available to the BPU upon request.

LMI Eligibility & Verification

Subscriber organizations are required to verify the eligibility of LMI subscribers, unless a community solar project is on government owned property like an affordable housing complex where the tenants would be the subscribers.

There are three verification methods for LMI subscribers in the CSEP: categorical, geolocational, and through self-attestation.

Categorical Eligibility

Acceptable proof of LMI eligibility can be established by providing proof of participation/enrollment in one of the following:

• Medicaid
• Supplemental Security Income (SSI)
• Supplemental Security Disability Insurance (SSDI)
• Special Supplemental Nutrition Program for Women, Infants, and Children (WIC)
• Temporary Assistance for Needy Families (TANF)
• Low Income Home Energy Assistance Program (LIHEAP)
• Universal Service Fund
• Comfort Partners
• Lifeline Utility Assistance Program
• Payment Assistance for Gas and Electric
• Section 8 Housing Choice Voucher Program
• Supplemental Nutrition Assistance Program (SNAP)
• Lifeline program administered by the Universal Service Administrative Company
• Other LMI local, State, or Federal programs
• Other proof of income such as tax returns, W-2, or paystubs

An alternate form of income verification may be proposed through a petition by a subscriber organization and approved by the Board.

Geo-eligibility

The subscriber’s residence is located in a census block where 80% or more of the households earn less than 80% of the area median income according to the US Department of Housing and Urban Development (HUD).

Self-Attestation

An individual subscriber may sign a self-attestation form attesting their household income is less than 80% of the area median income. This form does not carry a penalty of perjury. Subscribers must use the BPU’s form available on New Jersey's Clean Energy website.

Affordable Housing

Tenants of affordable housing properties are some of the people who should be first to receive the direct financial benefits community solar provides. Master-metered affordable housing properties (AHP) are required to pass on the majority of the bill savings to residents. Residents must receive specific, substantial, and quantifiable direct or indirect benefits.

However, HUD guidelines would likely consider community solar savings proportionally delivered by the AHP to tenants to be income. This would impact their income eligibility for the housing as well as the funding the AHP receives from HUD.

To remedy this issue where it may occur, the BPU directs master-metered AHPs to provide a signed affidavit to the subscriber organization to present to the BPU affirming that specific identifiable, sufficient, and quantifiable benefits will be passed through to tenants.

These are the ways AHPs may provide benefits to master-metered tenants:

• Direct payments like an annual or periodic check or unrestricted gift card
• Periodic rent or utility fee rebate
• Facility upgrades that represent quantifiable long-term savings
• Other resident services

For master-metered affordable housing buildings serviced with master-metered commercial rates, the value of the bill credit is set at the current pre-Sales and Use Tax retail rate inclusive of supply, delivery, and demand charges. Demand charge credit rates are calculated as an average of demand charges paid by all multi-family housing units billed on a commercial rate schedule served the EDC over the previous year divided by the kilowatt-hours used over the previous energy year.

Project Selection, Maturity Requirements & Community Engagement Plan

Project Selection

Projects will be selected on a first come, first serve basis until the MW block for each market segment is fully subscribed for the Administratively Determined Incentive (ADI) program, the incentive mechanism through which community solar projects earn higher valued credits in the CSEP.

Additionally, projects applications must include a guaranteed minimum bill credit savings rate for subscribers. If any EDC’s capacity block is oversubscribed, all eligible applications will be ranked by their savings rate with preference given to those projects with the highest savings rates.

If there is a minor deficiency (listed here) in the application for a project, the project developer will have seven business days to address the issue before the application is rejected. Projects not selected will have the opportunity to reapply during the next application period.

Maturity Requirements

The following are requirements for conditional acceptance into the Permanent Program:

• Evidence of site control, consistent with PJM standards
• Receipt of all non-ministerial permits
• Plan for obtaining remaining permits or proof of application of building permit, unless located on a contaminated site or landfill
• Subscriber acquisition plan with a registered subscriber organization
• Community engagement plan
• An executed EDC interconnection study for projects 1 MW or larger, or evidence of having submitted a Part 1 Interconnection Agreement to the EDC for projects smaller than 1 MW
• For projects located on a contaminated site or landfill:
  • A completed DEP permit readiness checklist
  • An approved site mitigation plan, if applicable
  • BPU certification of eligibility verification from the NJDEP, including that the project is on NJDEP’s list of contaminated or landfill sites or has received a waiver if not on one of those lists, a review of compliance history at the proposed site, approval for proper closure of the landfill, and contaminated site remediation information.
• Existing projects (i.e., projects that have reached PTO) will not be allowed to convert to become a community solar project.

Community Engagement Plan

Developers must submit a Community Engagement Plan with their application that details how the project will reach out to the community near the solar project as well as potential subscribers within the EDC area. This requirement should ensure that developers attain a degree of local support prior to approval and construction.

Required elements for a Community Engagement Plan would include:

• Description of partner community organizations or how they will be identified
• Statement of the philosophy the project will operate under to promote community benefits
• List of desired outcomes for community engagement
• Point(s) of contact responsible for maintaining community relationships
• Sample of written language and educational content to be used for project marketing
• Plan to incorporate data and community feedback to continually improve engagement

Developers must submit a letter of support from the municipal government or mayor of the locality where the project is developed to ensure the interests of the communities are protected.

Credit Mechanism, Incentive Program, and Billing

Incentive Structure

The law created an interim incentive called the Transition Incentive (TI) while a permanent program was being developed, now called the Successor of Solar Incentive (SuSI). The Administratively Determined Incentive (ADI) program is the specific incentive and registration program set up by SuSI through which new community solar projects will apply. See the ADI portal here. The type of project determines the value of the New Jersey Solar Renewable Energy Certificate-II, called NJ SREC-IIs, generated at a rate of one SREC-II per MWh of electricity produced by a community solar project.

The incentive program is production-based and was differentiated by LMI and Non-LMI projects for pilot projects with LMI projects receiving a higher incentive. Since all projects in both the pilot and permanent program are LMI-serving, the difference in incentive is irrelevant until the program accepts non-LMI projects. All community solar projects in the CSEP can expect to earn $90/SREC-II per MWh the project generates for 20 years.

Closed Incentive Structure

There is a cost cap on the expenditures for renewable energy incentives at no more than 7%, down from 9%, after 2021. This was reflected in the drop in SREC-II incentive values from $152 down to $90.

• The first two years of the community solar pilot were part of the TI program and would generate TRECs generated on a per MW-hour basis and guaranteed for 20 years.
• Each TREC has a base value of $152/MWh multiplied by its factor class. For community solar, that factor was 0.85 making each community solar generated TREC worth $129.20.

Consolidated Billing

• EDCs must offer utility consolidated billing (UCB) no later than January 1, 2025
• All residential customers must be enrolled in UCB
• Commercial customers as identified by subscriber organizations may be excluded from UCB
• Billing will use net-crediting methodology, guaranteeing a specified savings rate
• Allows for multiple savings rates for different subscribers
• Utility fees for UCB set at 1% of subscription fees
• Pilot projects must transition to UCB within a year of its availability
• Subscriber organizations must enter into agreement with the billing EDC to establish terms and enrollment requirements, payment info, allocations, etc.
• All EDCs must publish a manual to describe enrollment process
• EDCs must provide a customer bill sample and template that allows for the subscriber organization’s contact info to be displayed.

Credit Value

• The calculation of the value of the bill credit shall be set at retail rate, inclusive of supply and delivery charges
• The bill credit calculation from the pilot will be maintained in the CSEP for residential customers and most commercial customers: supply + delivery charges (excludes non-by passable charges).
• For master-metered affordable housing buildings serviced with master-metered commercial rates, the bill credit calculation will include supply, delivery, and demand charges
• Subscriber organizations must provide a certification to the EDCs indicating which subscribers qualify as affordable housing subscribers

Credit Banking

• Unused credits shall carry over monthly billing periods until the end of an annualized period, the closure of a subscriber’s utility account, or the end of their subscription, after which excess net bill credits shall be compensated at the EDC’s avoided cost of wholesale power
• Subscribers or subscriber organizations may select an annualized period so that their use of banked credits is maximized
• Generation not allocated to a subscriber may be banked for up to 12 months from the start of project operation.
• Banked credits may be held for 12 additional months to be allocated to new subscribers, after which they shall be compensated at the EDC’s avoided cost of wholesale power.
• After the first 24 months of operation, hosts may not reallocate banked credits, all credits will be paid out at the EDC avoid cost of wholesale power
• EDCs must notify subscriber organizations within 10 days of the termination or suspension of a subscribers EDC account for any reason

Market Analysis

New Jersey has crafted a strong community solar program and managed to time it such that it takes near-maximum advantage of the Inflation Reduction Act’s (IRA) Investment Tax Credit (ITC). The program requires efficient and innovative use of siting, has a higher LMI requirement than the IRA, and has LMI verification methods that could prove instructional for the federal low-income program.

The availability of self-attestation gives the state a significant leg up when it comes to LMI enrollment, which is only made easier by the UCB requirement beginning 2025. It has the added bonus of being one of the allowed methods for LMI verification in the IRA, which disallows the use of geo-eligibility, though New Jersey still allows that method. After UCB is implemented, the BPU is considering automatic enrollment for residents at a municipal level.

With a population of over 9 million, New Jersey has a poverty rate of about 10%. It also has a relatively high median household income of almost $90,000, meaning there is a significant population of medium-income residents in the multiple millions that would be eligible to subscribe to community solar. According to the Census Bureau, nearly a third of all households in the state speak a language other than English at home, indicating the need for subscriber organizations to have multilingual capabilities.

A community solar billing working group will be established once the CSEP is fully initiated with representation from the BPU, EDCs, subscriber organizations, developers and others relevant parties. This should be a useful forum in advocating for more positive updates in future EYs.

Electric utilities and their territories

• Atlantic City Electric
  • 560,000 customers
  • Territory includes the entire southern third of the state
• Jersey Central Power & Light
  • 1.1 million customers
  • Territory is divided into the coastal counties south of New York City and the western counties adjacent to Pennsylvania
• Public Service Electric & Gas
  • 2.3 million customers
  • Territory includes cities and towns surrounding major metro areas of Philadelphia and New York City
• Rockland Electric Company
  • 72,000 customers
  • Territory includes part of Bergen and Passaic counties

Appendix

Utility Territory Map

Other state community solar policy guides from Perch

• Colorado Community Solar Policy
• Illinois Community Solar Policy
• Minnesota Community Solar Policy
• Midwest Community Solar Policy (Michigan, Ohio, Wisconsin)
• Washington DC Community Solar Policy
• Maine Community Solar Policy
• New Mexico Community Solar Policy
• Maryland Community Solar Policy
• Delaware Community Solar Policy
• New York Community Solar Policy
• Massachusetts Community Solar Policy
• California Community Solar Policy
• Michigan Community Solar Policy
• Pennsylvania Community Solar Policy