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In the Matter of Atlantic City Electric Company Renewable Energy Portfolio Standard Amendments to the Minimum Filing Requirements for Energy Efficiency, Renewable Energy, and Conservation Programs; and for Electric Distribution Company Submittals of Filings in Connection with Solar Financing STATE OF NEW JERSEY BOARD OF PUBLIC UTILITIES DOCKET NO. EO08100875 In the Matter of the Verified Petition of New Jersey Central Power and Light Company Concerning a Proposal For An SREC-Based Financing Program Under N.J.S.A 48:3-98.1 In the Matter of the Verified Petition of Rockland Electric Company Concerning a Proposal for An SREC-- Based Financing Program Under N.J.S.A 48:3-98.1 DOCKET NO. EO08090840 DOCKET NO. EO09020097 VERIFIED PETITION OF THE SOLAR ALLIANCE VERIFIED PETITION OF THE SOLAR ALLIANCE FOR INTERIM RELIEF IN THE FORM OF AUTHORIZATION OF ADDITIONAL CAPACITY ALLOCATIONS AND FOR INITIATION OF A PROCESS TO ATTAIN ASPIRATIONAL GOALS FOR THE SMALL MARKET SEGMENT UNDER THE EDC SREC-BASED FINANCING PROGRAM OR, IN THE ALTERNATIVE, FOR AUTHORIZATION OF A DEFINED TERM PROGRAM FOR CAPACITY ALLOCATION AND SREC-BASED FINANCING PENDING BOARD DETERMINATION OF LONG TERM FINANCING ALTERNATIVES THE SOLAR ALLIANCE, a coalition of thirty-three of the world s leading manufacturers, developers, and financiers of solar photovoltaic generation equipment whose mission is to promote effective state-based solar energy policy (hereinafter Solar 1

Alliance or Petitioner, respectfully requests the New Jersey Board of Public Utilities (hereinafter, the BPU or the Board to direct the state s three electric distribution companies (hereinafter EDCs participating in the SREC-Based Financing Program to solicit an additional 47.3 megawatts ( MW of solar capacity above previously authorized levels for Reporting Years 2010 through 2012. 1 Background and Procedural History Related to EDC SREC-Based Financing 1. Pursuant to the requirements of the Electric Discount and Energy Competition Act, N.J.S.A. 48:3-49 et seq. ( EDECA, the Board has adopted Renewable Portfolio Standards ( RPS rules, N.J.A.C. 14:8-2.1 et seq., that, among other things, require that a specified portion of the electricity supplied to New Jersey customers by each supplier or provider be supplied from solar electric generation systems. Under the RPS rules, suppliers and providers may comply with the solar requirements by submitting Solar Renewable Energy Certificates ( SRECs or by paying a Solar Alternative Compliance Payment ( SACP, or by a combination of the two methods. In 2006, the Board directed Staff to commence a stakeholder process to explore models that would enhance the ability of energy suppliers and providers to meet the RPS targets for solar electric generation and to support the continued growth of New Jersey s solar market. This process resulted in, among other things, Board action at its September 12, 2007 agenda meeting, which was memorialized in the Board s Order dated December 6, 2007 (I/M/O the Renewable Energy Portfolio Standards, Alternative Compliance Payments and Solar Alternative Compliance Payments, Docket No. EO06100744 ( December 6 Order. 1 A List of the Solar Alliance members is attached hereto as Exhibit 1. The positions expressed herein are on behalf of the Solar Alliance and are not necessarily those of any individual member company. 2

2. The December 6 Order (i established a rolling eight-year SACP schedule at levels that were higher than pre-existing SACP levels, (ii established a two-year SREC trading life, (iii established a 15-year SREC qualification life during which each solar electric generation system can continue to generate SRECs, and (iv put controls in place to limit the overall cost of solar incentives. 3. In the December 6 Order, the Board also directed the Office of Clean Energy to initiate a proceeding to explore whether additional mechanisms could be established to support the financing of solar generation projects by providing greater assurances about the cash flow to be expected from such projects. 4. Following that proceeding, in an Order dated August 7, 2008 Order (I/M/O Renewable Energy Portfolio Standard: Amendments to the Minimum Filing Requirements for Energy Efficiency, Renewable Energy, and for Conservation Programs; and for Electric Distribution Company Submittals of Filings in connection with Solar Financing, Docket No. EO06100744 ( August 7 Order, the Board, among other things, directed the Electric Distribution Companies to undertake renewable energy improvements by facilitating SREC-based financing of solar electric generation projects in a manner that supports the transition to a market-based approach of delivering incentives for solar electric generation. August 7 Order at 17. To implement that direction, the Board specifically directed Atlantic City Electric Company ( ACE and Jersey City Power & Light ( JCP&L to file, by September 30, 2008, and Rockland Electric Company ( RECO to file, by January 31, 2009, proposals pursuant to N.J.S.A. 48:3-98.1 for SREC-based financing of solar generation projects that would incorporate the criteria and provisions outlined by the Board in the August 7 Order. 3

5. The August 7 Order explicitly sized the capacity allocations under the SREC- Based Financing Program as a declining percentage of the overall Reporting Year requirements for SRECs: that is, EDCs were required to make contractual commitments to procure sixty percent (60% of the EDCs incremental SREC allocation for Reporting Year ending May 31, 2010 (2010 Reporting Year; fifty percent (50% of the EDCs incremental SREC allocation for Reporting Year ending May 31, 2011 (Reporting Year 2011; and forty percent (40% of the EDCs incremental SREC allocation for Reporting Year ending May 31, 2012 (Reporting Year 2012. 2 August 7 Order at 16. 6. The August 7 Order further conveyed the Board s intent to regularly monitor the status of the development of market-based long-term contracts, and to make adjustments to the timeframes and requirements associated with the SREC-Based Financing Programs as a percentage of the annual solar RPS obligation on that basis. August 7 Order at 9, 11. 7. Pursuant to the Board s directive in the August 7 Order, JCP&L filed on September 30, 2008 an SREC-based solar financing program, I/M/O the Verified Petition of Jersey Central Power & Light Company Concerning a Proposal for an SREC-Based Financing Program Under N.J.S.A. 48:3-98.1, which was assigned Docket No. EO08090840. On October 1, 2008, ACE filed its SREC-based solar financing program, I/M/O Renewable Energy Portfolio Standard: Amendments to the Minimum Filing Requirements for Energy Efficiency, Renewable Energy, and for Conservation Programs; and for Electric Distribution Company Submittals of Filings in connection with Solar Financing, which was assigned Docket No. EO08100875. On February 9, 2009, RECO filed its SREC-based solar financing program, I/M/O the Verified Petition of Rockland 2 The total capacity subject to the program requirements additionally included the full 2008 Reporting Year shortfall, as well as sixty percent (60% of the projected 2009 Reporting Year shortfall. August 7 Order at 16. 4

Electric Company Concerning a Proposal for An SREC-Based Financing Program Under N.J.S.A 48:3-98.1 which was assigned Docket No. E009020097. 8. The Solar Alliance was granted intervenor status in all three of the aforementioned proceedings by Board Order. 9. On March 13, 2009, ACE, JCP&L, BPU Staff, Rate Counsel, and The Solar Alliance entered into a Stipulation by which JCP&L and ACE agreed to coordinate to the extent possible and to use essentially the same SREC-based financing program. This Stipulation outlines the elements of the ACE and JCP&L SREC-based financing program. The Board approved this Stipulation in its Order dated March 27, 2009 (hereinafter ACE/JCP&L Order and all remaining issues that were not resolved by the Stipulation were subsequently resolved by a stipulation signed on July 29, 2009, and approved by Board Order dated September 16, 2009. On December 9, 2010, these same parties entered into a Stipulation amending the ACE and JCP&L SREC-based financing program by increasing the size limit from 500 kw to 2 MW and increasing the flexibility with respect to the developer cap. The Board approved this new Stipulation in its Order dated January 3, 2011. 10. On July 24, 2009, RECO, BPU Staff, Rate Counsel, and The Solar Alliance entered into a Stipulation by which RECO agreed to coordinate to the extent possible and to use a program similar to the SREC-based financing program approved for ACE and JCP&L. This Stipulation outlines the elements of RECO s SREC-based financing program. The Board approved this Stipulation in its Order dated July 31, 2009 (hereinafter RECO Order. On December 9, 2010, these same parties entered into a Stipulation amending the RECO SREC-based financing program by increasing the size 5

limit from 500 kw to 2 MW. The Board approved this new Stipulation in its Order dated January 3, 2011. 11. Taken together, the stipulations for the three EDCs provided the following annual MW capacity allocations: EDC RY 2010 RY 2011 Capacity RY 2012 Capacity Capacity (MW (MW (MW Total JCP&L 23 10 9 42 ACE 10 5 4 19 RECO 2.267 0.803 0.699 3.769 Total 35.267 15.803 13.699 64.769 ACE/JCP&L Stipulation at 6; RECO Stipulation at 6. Each of the two stipulations explicitly recognize that the MW to be solicited in each year are subject to an annual review by the Board relative to SREC requirements under the August 7 Order, and the inventory of New Jersey solar project commitments developed pursuant to this SREC Program and independent markets. Id. ACE/JCP&L Stipulation at 6; RECO Stipulation at 6. 12. As of the date of this Petition, eight separate solicitations have been conducted. The eighth and most recent solicitation was conducted on September 2, 2011. Upon information and belief, as of the date of this petition the recommendations of the Solicitation Manager resulting from this solicitation were forwarded to the stipulating parties but the Board has not yet certified the results of this latest round. 13. The BPU has directed Staff to evaluate, through a stakeholder process, the EDC SREC-Based Financing Program among other matters. See email communication from Mike Winka, Director of Office of Clean Energy, to Renewable Energy Committee, 6

dated August 23, 2011, available at <http://www.njcleanenergy.com/files/file/renewable_programs/0593_001.pdf, and attached hereto as Exhibit 2. Pursuant to this directive, Staff convened a public meeting on September 15, 2011 in Trenton to elicit the input of the public. In parallel, the Staff has initiated a review process with the stipulating parties to evaluate the results of the EDC SREC-Based Financing Program and recommend next steps, if any. The Solar Alliance has consulted with the stipulating parties concerning the proposals made in this Petition. The Solar Energy Advancement and Fair Competition Act 14. On January 17, 2010, Governor Corzine signed into law The Solar Energy Advancement and Fair Competition Act, P.L.2009, ch. 289, amending N.J.S.A. 58:3-51 et. seq. (hereinafter, The Solar Act or SEAFCA. The Solar Act amended EDECA by codifying, and in certain respects modifying, the Board s solar carve-out program within the general RPS. Among other provisions, beginning with Energy Year 2011, The Solar Act established binding annual targets for the procurement of solar energy by New Jersey suppliers and providers. Id. at 58:3-87 38.d. (3. Additionally, The Solar Act explicitly sanctioned the EDC-Based SREC Financing Program, allowing that The board may allow electric public utilities to offer long-term contracts and other means of financing, including but not limited to loans, for the purchase of SRECs and the resale of SRECs to suppliers or providers or others, provided that after such contracts have been approved by the board, the board s approvals shall not be modified by subsequent board orders. Id. at 58:3-87 38.k. 7

The Critical Role of the EDC SREC-Based Financing Program in Today s Solar Market 15. The EDC SREC-Based Financing Program was created to fill a void in the solar marketplace; namely, the absence of long-term contracting for SRECs by New Jersey suppliers and providers. The dearth of long-term SREC contracting inhibits the ability of solar project developers to obtain necessary project finance, which in turn jeopardizes the achievement of solar RPS goals at an acceptable cost to ratepayers. Thus, the Board directed the establishment of additional securitization measures that would provide greater certainty about the minimum cash flow expected from the project s ability to generate and sell SRECs. August 7 Order at 3. 16. The EDC SREC-Based Financing Program has been delivering on its stated objective of facilitating solar development at SREC prices below the prevailing spot market price. The program has become progressively more competitive with each successive bid round as evidenced by the amount of capacity bid relative to the offered bid block; and by the downward trend in the weighted average price of accepted bids. 8

17. The conditions that gave rise to the SREC-Based Financing Program still exist today. As revealed by the Retail Energy Supply Association s representative at the September 15 th stakeholder meeting on the solar transition, suppliers and providers are generally disinclined to contract for SRECs beyond the term of their load obligation. Thus, for BGS load, the associated three-year term is well short of the SREC term necessary to secure solar project financing. The same holds true for third party suppliers (hereinafter TPS. Cf. Retail Energy Supply Association, Solar Summit Discussion Document, at 1. (RESA opposition to any scheme that requires TPSs to enter into long term SREC contracts, as the market for TPSs is based on short term supply contracting and takes advantage of real-time price signals. Absent continuation of the EDC SREC- Based Financing Programs, the Solar Alliance sees a return to the status quo ante and near-exclusive reliance on the volatile (and therefore more risky and costly spot market. See, e.g., Summit Blue and Rocky Mountain Institute, Analysis of Ratepayer Impacts of 9

Alternatives for Transitioning the NJ Solar Market from Rebates to Market Based Incentives, July 31, 2007. 18. As noted above, for Reporting Year 2012 (June 1, 2011 May 31, 2012 the Board has directed a total of 20.102742 MW of capacity to be made available for longterm contracting under the EDC SREC-Based Financing Program, of which 10.901678 MW is to be located within the JCP&L service territory; 6.925359 MW from ACE; and 2.275705 MW from RECO. See NERA Request for Proposals Under the SREC-Based Financing Program, dated August 17, 2011 at 3 (available at http://njedcsolar.com/assets/files/njedcsolar_rfp_rules_8-17-2011.pdf. Of this amount, the Board by Order dated July 14, 2011 has approved awards pursuant to the Seventh Solicitation as follows: 6.016521 MW for solar projects in the JCP&L service territory; 3.515975 MW in the ACE service territory; and 2.33795 in the RECO service territory. Docket Nos. EO08100875, EO08090840, EO09020097 (Consolidated Order on Results of the Seventh Solicitation, dated July 14, 2011. In the same Order, the Board directed the EDCs to conduct an eighth solicitation (hereinafter 8 th Solicitation with 4.885157 MW bid for projects within JCP&L s service territory and 3.409385 MW bid for projects within ACE s service territory. Id., July 14 Order at 6. These amounts were further adjusted based on August 15, 2011 to account for projects that were awarded allocations in prior bid rounds but failed to proceed to contract, resulting in modifications to the above-stated bid block. 19. Bids were submitted pursuant to the 8 th Solicitation on or before September 2, 2011. Assuming no fallout of previously awarded projects and a full allocation of 10

capacity pursuant to the 8 th Solicitation, this fully exhausts the remaining capacity under the current EDC SREC-Based Financing Program. 8th Round Allocation - Adjusted (MW Remaining Capacity EDC RY 2012 Capacity (MW 7th Round Allocation (MW JCP&L 10.901678 6.016521 9.986292 0 ACE 6.925359 3.515975 5.477147 0 RECO 2.275705 2.337975 0.15431 0 Total 20.102742 11.870471 15.617749 0 Aspirational Goals for the Small Market Segment 20. For ACE and JPC&L, the Board has established an aspirational goal that approximately 25% of the Projects be from the small market segment; i.e., systems less than or equal to 50 kw in capacity. ACE/JCP&L Order at 4. For RECO, the Board has established an aspirational goal that approximately 50% of the Projects be from the smaller segment. RECO Order at 4. 21. Notwithstanding the overall success of the program in achieving its capacity targets at declining average SREC prices, the aspirational goals for the small market segment have not been reached. For individual utility bid rounds achievement of the aspirational goal relative to total capacity sought range from a low of 0% (multiple occurrences to a high of 9.4% (Solicitation 7, ACE. Similarly, relative to the actual capacity awarded, the small market segment comprised from a low of 0% (multiple occurrences to a maximum of 9.2% (Solicitation 7, ACE. In the aggregate, bid rounds have resulted in a low of.08% (Solicitation 1 to a high of 6.2% (Solicitation 7 of the total capacity sought. As a percentage of actual awards, the small market segment accounted from 2.4% (Solicitation 2 to 8.1% (Solicitation 3 towards the aspirational 11

target. Calculated from NERA, SREC-Based Financing Program Solicitation Results, August 8, 2011 (available for download at < http://njedcsolar.com/assets/files/njedcsolar_results_by_segment_08-08-20111.pdf>. The Solar Alliance s Requested Relief 22. The Solar Alliance acknowledges that the Board has recently initiated an investigation into the effectiveness of the EDC SREC Finance Program. However, The Solar Alliance is concerned that this deliberative process, much less any subsequent Board proceedings, will not be completed in a timely enough manner to prevent the uninterrupted delivery of this critical program. Moreover, given the length of the sales cycle associated with solar projects, developers are today negotiating deals with solar hosts for projects for a 2012 commercial operation date. Given the regulatory uncertainty associated with the continuation of the EDC SREC Finance Program, the availability of long-term SREC contracts cannot be assumed. 23. The Board s August 7 Order explicitly reserves the Board s discretion to conduct periodic reviews of the status of market-based long-term contracts, and to adjust the scope of the EDC SREC-Based Financing Program accordingly. August 7 Order at 11. Further, the August 7 Order provides that the Board can consider, as part of these annual reviews, whether the timeframes and percentage requirements for transitioning to a fully market-based approach need to be extended, based on the status of the development of market-based contracts. Id. 24. The capacity allocations in the Board s August 7 Order are the product of two factors: 1 the Board s determination of the percentage of the solar RPS obligation 12

procured through structured programs 3 relative to the open market ; and 2 the solar MWh requirement in the applicable Reporting Year. The latter derived from thenexisting solar RPS requirements embodied in the Board s RPS rules, and pre-date the Solar Act, which as noted in paragraph 14, increased the annual solar RPS goals. Since the passage of the Solar Act, the Board has not modified the capacity allocations within the structured programs to accord with the Solar Act s solar RPS goals. The Solar Alliance respectfully requests that the Board do so now. 25. Specifically, to prevent a debilitating hiatus in the program while the Board considers whether a longer-term extension or expansion of the program is warranted, the Solar Alliance respectfully requests the Board to provide interim relief by allocating 47.3 MW of additional capacity under the EDC SREC-Based Financing Program, subject to competitive solicitation. The Solar Alliance further requests that this capacity be made available in two separate solicitations to be conducted within the 2012 Reporting Year (i.e., on or before May 31, 2012. This additional capacity is derived by applying the Board s previously adopted percentages for the structured market to the adjusted solar RPS obligations pursuant to the Solar Act, and fulfills the Board s expectation that the structured market will provide a long-term contracting option as a set percentage of the overall solar market. The Solar Alliance s calculation of this additional capacity is provided as Attachment 3. In addition, consistent with prior procedure, previously awarded projects that fail to contract or to complete could be added to the capacity in any 9 th or 10 th solicitation. 3 In the recent OCE White Paper on the Solar Transition, the OCE coins the term structured market to refer to the EDC SREC-Based Financing Program and the PSE&G Solar Loan program. This is juxtaposed to bilateral contracting among market participants, which is referred to as the open market. NJBPU Staff White Paper, Next Steps in the Solar Transition, dated September 9, 2011 at 3. The Solar Alliance supports this taxonomy as a more accurate characterization of the market, insofar as the EDC SREC-Based Financing Programs are also market-based. 13

26. As an alternative to providing the interim relief requested under the prior proceedings, the Solar Alliance respectfully requests the Board to issue an order for a defined program authorizing two separate solicitations during the 2012 Reporting Year for a total of 47.3 MW as well as any capacity not allocated or built under previous solicitations. Such an alternative order, limited to a defined period, would maintain the viability of the SREC market for sufficient time for the Board to complete the evaluation that is currently underway and would neither preempt nor foreordain the outcome of such process. 27. Additionally, given the shortfall in attaining the aspirational goal for the small market segment, see 21, supra., the Solar Alliance requests the Board to direct Staff to convene the ACE, JCP&L, RECO, BPU Staff, Rate Counsel, and The Solar Alliance to consider process changes that could foster greater participation within this segment and to institute any agreed upon changes prior to the development of the next solicitation if so ordered. 28. The relief requested in paragraphs 22 through 26 should be separate and apart from any more long-term and comprehensive reforms that may be implemented as part of the BPU s ongoing review of the solar transition. Respectfully Submitted: Dated: October 4, 2011 STEVENS & LEE A PA PROFESSIONAL CORPORATION ATTORNEYS FOR THE SOLAR ALLIANCE Of Counsel: Susan P. LeGros, Esq. By: Michael A. Gruin, Esq. Attorney I.D. No. 009362001 14