It has only been a month since an organization called the Coalition for Responsible Regulation, Inc. filed suit in the U.S. Court of Appeals for the District of Columbia Circuit challenging the U.S. Environmental Protection Agency’s endangerment finding and, already, 16 states have lined up with the EPA, seeking to intervene in support of the challenged regulation.

The challenged regulation, entitled “Endangerment and Cause or Contribute Findings for Greenhouse Gases under Section 202(a) of the Clean Air Act” (the “Final Rule”), was published in the Federal Register on December 15, 2009 and was issued by the EPA in response to the U.S. Supreme Court’s landmark decision in Massachusetts v. EPA, 549 U.S. 497 (2007).  The rules regulate emissions of greenhouse gases from new motor vehicles and engines. 

In the Final Rule, the Administrator finds that “the body of scientific evidence compellingly supports” her conclusion that “greenhouse gases in the atmosphere may reasonably be anticipated both to endanger public health and to endanger public welfare.” She defines the resulting air pollution referred to in Section 202(a) of the Clean Air Act to be “the mix of six long-lived and directly-emitted greenhouse gases: carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O)), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfer hexafluoride (SF₆).”  The Administrator concluded that the mix of greenhouse gases from transportation sources contribute to the climate change problem, which is reasonably anticipated to endanger public health and welfare.

The Final Rule triggers the EPA’s statutory duty to promulgate regulations establishing emissions standards for motor vehicles covered by Section 202(a)of the Clean Air Act.

Noting that the Court’s action on the petition for review will affect the public health and welfare of their residents and will also affect a host of global warming impacts that the proposed intervenors are suffering, the following states seek to intervene in support of the EPA: Commonwealth of Massachusetts and the States of Arizona, California, Connecticut, Delaware, Iowa, Illinois, Maine, Maryland, New Hampshire, New Mexico, New York, Oregon, Rhode Island, Vermont and Washington.  The City of New York also filed in support of the EPA.

Notably absent from the Motion for Leave to Intervene as Respondents is the State of New Jersey, from which EPA Administrator Lisa Jackson came as the prior Commissioner of the New Jersey Department of Environmental Protection. New Jersey, which just last week inaugurated new Republican Governor Chris Christie, who unseated Democrat Jon Corzine, formerly supported climate change litigation and was among the states challenging the EPA in Massachusetts v. EPA.  The following states were not in the Massachusetts v. EPA case but joined the fight now in support of the regulations: Arizona, Delaware, Iowa, Maryland and New Hampshire.

As the legislative season heats up again in Connecticut, with a session scheduled to commence in early February, some energy industry lawyers, policymakers and leading Legislators themselves have been talking over the last few weeks about what Connecticut should do to improve the deployment of renewables generally and solar in particular.  There seems to be more recognition that, for Connecticut to achieve its broad greenhouse gas emission reduction strategies and climate change mitigation goals, more needs to be done to promote investment in renewables in the state and, if green jobs can be created along the way, all the better.

A question that keeps coming up in Connecticut is how New Jersey, which has a similar climate and is not even in the top-ten list among states with respect to the intensity of sunshine, could achieve status as the state with the second largest quantity of installed solar photovoltaic capacity, second only to California.  If you look at per-square-mile or per-capita statistics, New Jersey can even boast that it has the most installed solar projects in the U.S.

So what has New Jersey done to promote solar PV?

After implementing one of the more aggressive renewable portfolio standards (RPS) in the country as part of the Energy Master Plan, with its mandate that 22.5% of the energy supply be generated from renewable sources by 2021, the NJ RPS also contains a solar “carve out” of 2.12% by 2021.  This is the amount of energy supply required to come from solar PV.  The state also decided to wean itself from the grant-based program except for residential and small commercial on-site solar P/V installers, because the available grant funds alone would not support the growth needed to achieve the RPS and solar carve-out.  And so, the New Jersey Board of Public Utilities adopted a rule that instituted a massive increase in the “alternative compliance payment,” or ACP, for solar from $350 (the amount for other renewables) to initially $711 per megawatt hour.  This is the amount that has to be paid into the fund if load-serving entities do not have enough solar energy in their portfolios.  And hence, the solar renewable energy certificate, or SREC, was given a massive increase in valuation.  Since SRECs typically trade at 75% to 80% of the ACP, market values for SRECs rose to the $600 to $650 range.

Especially when these state incentives are combined with the federal renewable energy investment tax credit and accelerated depreciation allowed, the market signals sent in New Jersey to the solar industry have attracted business investment on a grand scale, created green jobs and market-based renewable investments along the way.

In my view, Connecticut needs to take similar steps.  The following strategies would help Connecticut facilitate deployment of solar photovoltaic installations in a market-based approach that reduces the reliance on direct governmental grants, promote the creation of green jobs, and attract private capital investments.  Here’s my Top-10 List:

1.      Create a Solar PV Carve-out within the Class I RPS to mandate separate solar RPS.

2.      Create separately-recognized solar renewable energy certificates, or SRECs.

3.      Substantially increase the alternative compliance payment amount for solar PV.

4.      Allow electric distribution companys (EDCs) to conduct auctions or otherwise conduct a process to acquire long-term SREC contracts (+/- 15 years), but mandate transparent pricing to send market signals in real time.

5.      Allow EDCs and capacity and peaking generation contractors to install on-site solar (with reasonable size limits to protect viability of non-utility market for projects) and recover project costs through rate base.  (For private wholesale generation sites, this can be done through a cost of service contract for differences with an EDC.)

6.      Establish one-stop-shopping with the Connecticut Department of Public Utility Control or other capable agency to certify completion and verify qualifying amounts of SRECs generated by a solar project installed in Connecticut with transparent market prices to facilitate open trading of SRECs.

7.      Authorize Connecticut to negotiate a compact or memorandum of understanding  with New Jersey and other states with similar programs to allow for the cross-border recognition and free trade of SRECs (at least through other states that comprise the Regional Greenhouse Gas Initiative (RGGI) or Northeast regional transmission organizations (i.e., ISO New England, ISO-NY, and PJM) with comparable GIS tracking systems).

8.      Adjust real and personal property tax law to ensure that solar improvements are not taxed.

9.      Revise zoning law to define solar as a beneficial use such that solar projects cannot be denied without substantial evidence in a written record finding that a solar project is not a beneficial use in a specific case.  Consider establishing exclusive jurisdiction for larger scale solar PV projects with the Connecticut Siting Council for projects equal to or greater than 1MW to expedite siting by petition for declaratory ruling.

10.  Allow for unlimited size of net metered solar projects behind customer meters provided that system size cannot be greater than customer’s on-site electricity requirements, subject to standard interconnection agreement with EDC following EDC confirmation of no adverse impact on distribution system. 

Please write in on this blog and let me know what would be on your wish list to help facilitate the deployment of solar and other renewables in Connecticut.

By Shawn Smith

McCarter & English, Hartford Office

The New Jersey Board of Public Utilities (BPU) recently proposed an amendment to its net metering rule that will create an even greater economic incentive for utility customers to develop on-site renewable energy, especially solar energy systems.

The proposed amendment would eliminate the 2 megawatt (MW) limit on the size of renewable energy systems eligible for net metering, which would lift an obstacle for large-scale solar projects.  This gives customers the opportunity to develop larger renewable energy systems to generate renewable energy and offset their electric bills.  By developing new systems or expanding upon existing ones, customers can take advantage of the economic and environmental benefits of net metering.

The net metering rules allow customers which generate on-site electricity using Class I renewable energy sources, such as solar, to connect with the local electric distribution company (EDC) and generate electricity on the customer’s side of (or “behind”) the meter.  The net meter virtually “spins both ways,” meaning that the EDC will either charge the customer for electricity supplied in excess of that generated on site by the renewable project, or credit the customer for purchases resulting from excess energy generated by the renewable energy source.  Under the existing net metering rules, a renewable energy system cannot (1) generate more than 2 MW of electricity, or (2) exceed the annual amount of “electricity supplied by the electric power supplier or basic generation service provider to the customer.”  The 2 MW restriction created a ceiling that limited the ability for larger commercial customers to take advantage of net metering.

By proposing to lift the ceiling, the BPU is inviting customers (or third-party developers using power purchase agreements, for example) to invest in larger renewable energy systems that generate more than 2 MW of electricity.  Such a policy shift helps the state to achieve its ambitious objectives set forth in the Energy Master Plan of  achieving 22.5% of renewables, including a renewable portfolio standard target of 2.12% of all energy sold in NJ coming from solar generation.

Despite arguments from some owners of large warehouses and developers seeking to build utility-scale solar projects on vacant property sites, the BPU rejected calls to revise the second net metering condition, which requires that a renewable energy system’s generating capacity be equal to or less than the average amount of electricity consumed by that customer on site either from that supplied annually by an electric power supplier or the EDC in the form of basic generation service.  Nevertheless, the potential economic payoff for customers investing in renewable energy projects is clear--the larger the renewable energy system, the lower their electric bill.

When the net metering rule is combined with other New Jersey regulatory incentives that promote solar projects, especially as the available federal investment tax credits and accelerated depreciation credits provide enhanced opportunities to support solar projects, the solar industry is expected to continue to focus its business development efforts on NJ and larger-scale sites can expect the solar industry to come knocking. 

The proposed amendment provides a particularly significant opportunity for commercial customers to develop or expand upon solar energy systems to take advantage of the substantial market incentives for solar that exist in New Jersey.  New Jersey has encouraged the development of solar energy through its Energy Master Plan (EMP) and the market for Solar Renewable Energy Certificates (SRECs). New Jersey’s solar market, which is the second-largest in the United States (second only to California), continues to grow as a result of these efforts. 

The BPU is soliciting comments on the proposed amendment to the net metering rule through March 5.  Anyone interested in submitting comments is free to do so.

Another notable proposal of the BPU concerns New Jersey’s “Prevailing Wage Law,” which requires the BPU to adopt regulations to ensure that the prevailing wage rate be paid to workers “employed in the performance of certain contracts for construction undertaken in connection with board [BPU] financial assistance.”  Renewable energy projects constructed with BPU’s financial assistance will soon be subject to the prevailing wage requirements if the BPU proposal is adopted.  The BPU is soliciting comments on the prevailing wage law through March 5.  Anyone interested in submitting comments is free to do so.

Finally, in yet another effort to expand renewables, the BPU opened the door for renewable energy projects located outside of New Jersey, other than solar, to qualify for New Jersey RECs.  Previously, only on-site renewable energy facilities directly connected to a New Jersey EDC’s distribution system could qualify for RECs.  Now, pursuant to the new regulation adopted recently, the BPU is allowing qualifying renewable projects located outside of New Jersey, except solar, to obtain New Jersey RECs provided these projects are connected to the PJM Interconnection, L.L.C.’s (PJM) generator information system for tracking renewable energy.  PJM is a non-profit regional transmission organization that coordinates the movement of wholesale electricity in all or parts of 13 states and the District of Columbia, including Pennsylvania, New Jersey and Maryland.