New Jersey is back in the solar energy business. And that’s good news for clients who have been considering solar power for their home or business.

Legislation to rewrite New Jersey’s solar laws passed the state Senate and Assembly late last month and was signed into law by Governor Chris Christie on July 23.

As reported in a previous Client Alert in May, New Jersey’s solar energy program has been a huge success – second only to California’s in the number of solar installations – and it had become a victim of that success. The demand for solar is set by the state’s solar renewable portfolio standard (RPS), a measure of the amount of solar power that energy providers must have in their supply mix. Those energy providers demonstrate compliance with the RPS by purchasing solar renewable energy certificates (SRECs) from the owners of solar power systems. New Jersey’s program has been so successful and so attractive to solar power developers and customers that the number of installations has far exceeded the RPS. As a result, the price of SRECs on the spot market had plummeted to less than $100, and work on solar projects came to a halt.

A solution to “accelerate” the RPS and increase the requirement for solar was proposed in the 2011 New Jersey Energy Master Plan and in legislation last year. A deal on that legislation fell apart when solar developers, trade unions and the Christie administration could not agree on certain key components.

That experience became a lesson learned as all the interested parties looked for areas of agreement. After a pair of daylong committee meetings and multiple amendments, including amendments on the day of the final vote, the legislation passed both houses by overwhelming majorities.

Here is what the new law does. In order to reinvigorate the market, the solar renewable portfolio standard will be raised beginning next year and through 2017, thus increasing the number of SRECs that energy providers will have to purchase and therefore increasing the demand for solar projects. The schedule for the parallel solar alternative compliance payments (the “penalty” for not having enough SRECs, which effectively sets the ceiling price) will be reduced in an effort to ease the financial burden on electric utility ratepayers.

The Board of Public Utilities (BPU) must approve all solar projects that are not net metered (that is, sized to serve a host business) or built on brownfield sites or landfills. However, to accommodate large projects that have been in the development pipeline, including those proposed to be built on farmland, there is an exception to allow a total of 80 megawatts of grid-connected projects to proceed in each of the next three years, with no one project to exceed 10 megawatts. There is a provision in the bill that may effectively prohibit solar on farmland once grandfathering has been exhausted.

Solar projects on brownfields, landfills and what is defined as “historic fill” will be eligible for additional SRECs to cover the additional cost of construction on those sites and may be protected from liability under the state’s Spill Compensation and Control Act for discharge of hazardous substances. Net-metered projects of three megawatts or larger that serve commercial or industrial customers may also, subject to a determination by the BPU, be eligible for additional SRECs. All projects built on brownfields, landfills or historic fill and all projects of one megawatt or larger will be subject to New Jersey’s prevailing wage law.

Subject to certain limitations, state agencies and colleges, counties and municipalities, and school districts will be able to aggregate their facilities for net metering. This provision could allow Montclair State, for example, to put all the buildings on campus “behind the meter” without wiring them all to a solar installation or to each other.

The new law also includes a definition of what it means for a solar energy project to be connected to the electric distribution system, a change that may make it easier to site a project in the service territories of Atlantic City Electric and Jersey Central Power & Light.

Finally, in the hope of obtaining some greater transparency in the market, there will be a new registration program for solar projects that should make it easier to track development and construction activity.

The legislation was enacted as Chapter 24 of the Laws of 2012 and became effective as of signing. The BPU must implement many provisions of the new law by regulation, however, which means there is still work ahead. But for businesses that install solar and businesses that want solar power, it’s once again a sunny day.