Public Service Electric and Gas Company (PSE+G) today received approval from state regulators to begin offering $105 million in loans to help finance the installation of solar systems on homes, businesses and municipal buildings throughout its electric service area. The funding will provide a source of stable, secure capital to spur additional investment in solar energy.
"Now that the Board has approved our proposal, we will move as quickly as possible to begin offering solar loans to developers and customers," said Ralph LaRossa, president and COO of PSE&G. "We welcome this new opportunity to play a strong role in meeting the state's aggressive renewable and conservation goals, and reduce carbon emissions."
Initially the program will only be available to non-residential customers. PSE&G needs approval from the NJ Department of Banking and Insurance to provide direct loans to residential customers. There are also plans to review residential loan documents with a group of stakeholders before the program is offered to residential customers.
Filed with the New Jersey Board of Public Utilities (BPU) last April, the innovative proposal was the first of a number of new plans the company announced during 2007 as part of a long-term, comprehensive strategy to combat climate change.
Since then, PSE&G has invested in hybrid vehicles and biofuel, as well as energy efficient wires and transformers. The utility has also proposed a carbon abatement pilot program that would provide energy-saving measures such as home energy audits, programmable thermostats, attic insulation and high- efficiency lighting upgrades to residential and business customers.
PSE&G's solar program addresses the goals put forth by the state through the Energy Master Plan process, and by the BPU through the renewable portfolio standard (RPS). Both call for the ability to meet 20 percent of the State's energy needs with renewable energy by the year 2020. Solar is a Class I renewable energy supply resource and is specifically called for as a clean source of renewable energy in the state's goals.
The proposal was reviewed by a stakeholder working group, which included BPU staff, the Department of the Public Advocate, solar developers and installers, large energy users, and other electric and gas utilities. These discussions led to a settlement agreement that resolves various issues, paving the way for today's approval by the BPU. The program had received strong support from the solar industry, environmental advocates and the business community when it was first unveiled last year.
The program will support the development of 30 megawatts of solar power, designed to fulfill about 50 percent of the RPS requirements in PSE&G's service area for the energy years 2009 and 2010. That's enough electricity to power 24,000 homes and, in terms of CO2 emissions, is the equivalent of removing about 3,700 cars from the road.
Here are the major components of the program as approved by the BPU:
- PSE&G's solar program will be open to all of its electric customers, including low-income, residential, commercial, industrial and municipal/governmental. The solar panels would be owned by the developer or the host customer.
- Applications will be available for two years and accepted on a first-come, first-served basis until 30 megawatts of projects have been developed.
- PSE&G would provide loans to developers or customers to cover approximately 40-60 percent of the cost of a solar installation project, depending on the projected output of the solar energy system and the cost of the system. The borrower would repay the principal, plus interest, over 10 years for residential customers and over 15 years for all other borrowers, a considerably longer investment timeframe than traditional lenders are willing to provide for solar installations.
- The remaining project cost would be funded by the owner of the solar installation. The owner may have access to funds from banks and investors. In addition, the owner may be eligible for a federal investment tax credit. (Utilities are currently not eligible for this tax incentive.)
- Owners of solar energy systems would repay the loan with Solar Renewable Energy Certificates or SRECs, which are created every time the system generates solar electricity. It takes one megawatthour of solar generation to create one SREC, which has value in the marketplace. An SREC is a New Jersey tradable product that represents the clean energy benefits of electricity generated from a solar energy system. For the purposes of this program, an SREC is valued at the market price or $475, whichever is higher. Borrowers could also repay the loans in cash.
- PSE&G's electric customers will pay for the cost of the solar program through the Solar Pilot Recovery Charge (SPRC), which will be included in the delivery part of their monthly bill. PSE&G will sell the SRECs it receives for loan repayment in an auction, and credit the proceeds from the sale to customers through the SPRC, which will offset a portion of the program costs.