Environmental & Energy Law Monitor : Environmental & Energy Lawyer & Attorney : Cole Schotz Meisel Forman & Leonard Law Firm : NJ, Mid-Atlantic Brownfield & Climate Change Law

The growth of New Jersey's solar industry has been driven by an ambitious requirement that increasing percentages of the regulated power suppliers’ energy come from renewable energy sources, favorable financial incentives and favorable regulatory provisions such as net metering rules.  In order to determine the economic viability of a solar project and the return on investment, the financial incentives available under both New Jersey and federal law must be analyzed.  Catherine Bostock, a Member of the Environmental Law Department of Cole Schotz and Gordon Duus, Chair of the Department, recently had an article on this subject published in the December 13, 2010 issue of the New Jersey Law Journal.  Click here to read the article.

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On April 22, 2010, Governor Christie signed a new law that exempts solar panels from the calculation of impervious cover under a number of state laws. The calculation of impervious cover can be a critical factor in development projects in New Jersey, as many state and municipal laws limit the percentage of a property that can be covered by impervious cover. For instance, the Highlands Water Protection and Planning Act limits the size of new developments to 3% impervious cover, while the stormwater management rules are triggered based upon the amount of impervious cover added by a project.

The goal of the new legislation is to remove regulatory obstacles to developing solar power projects. The new legislation amends the Waterfront Development Act, the Pinelands Protection Act, the Coastal Area Facility Review Act, the Highlands Water Protection and Planning Act, the Municipal Land Use Law as well as laws related to county site plan approvals, stormwater management plans and the conversion of age-restricted community developments.

Under the new law, a “Solar Panel” is defined as “an elevated panel or plate, or a canopy or array thereof, that captures and converts solar radiation to produce power, and includes flat plates, focusing solar collectors, or photovoltaic solar cells and excludes the base or foundation of the panel, plate, canopy, or array.” Thus, while the solar panel itself is not impervious, the area where the solar panel attaches to the ground – the base or foundation – is still deemed impervious.

The new law does not, however, change how the calculation of impervious cover is undertaken under the Freshwater Wetlands Protection Act and the Flood Hazard Area Control Act. The legislative history does not indicate whether this was a deliberate or inadvertent omission. However, given the strict development limitations under these two laws, and the large areas covered by them, this omission could be significant.

Any New Jersey developers seeking to build a solar energy project, or include solar power generation as an ancillary feature of a development, will need to consult with their development team professionals to consider how this new legislation might impact their project.

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On March 31, 2009, Governor Corzine signed three clean energy bills in front of a combined heat and power production facility at Rutgers University Busch Campus.

With stated goals of reducing dependence on foreign oil, creating jobs and combating global warming, the first bill requires developers to offer to install solar energy systems on development of certain new home construction.  The bill also gives home owner associations, within developments of over 25 units, the right to access the units to repair solar energy systems and collect fees from owners for maintenance costs of such systems.

A second bill permits renewable energy facilities to be located in industrial zones.  Renewable energy facilities are facilities that engage in the production of electric energy from solar technologies, photovoltaic technologies or wind energy.

The final bill authorizes the Board of Public Utilities to use revenue from retail margin assessed on certain customer classes to benefit only those customer classes by supporting development of combined heat and power, energy efficiency and demand response projects.

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On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009, also known as the Stimulus Bill. Among the numerous programs encompassed within the Stimulus Bill are significant proposed expenditures for environmental and energy projects. There are many opportunities for businesses to capitalize on the federal funding and tax incentives provided by the Stimulus Bill. But those businesses need to move swiftly to make sure they do not miss out on these opportunities.

Energy Programs

The Stimulus Bill includes approximately $30 billion for projects relating to the generation, transmission and distribution of renewable energy and approximately $5 billion for energy efficiency projects, including projects to weatherize certain properties. There are many opportunities for companies involved with the various aspects of renewable energy and energy efficiency to capitalize on the available funding within the Stimulus Bill. There may also be funds available for commercial or industrial property owners to help fund investments in energy efficiency technologies which have the potential to significantly reduce the future property operating costs. 

• Renewable Energy. Allocations in the Stimulus Bill include (a) $6 billion in loan guarantees for renewable energy generation and transmission projects, (b) $11 billion for research, development and pilot programs relating to the so-called “Smart Grid,” which will enable greater development and use of renewable power sources, and (c) $2.5 billion for research related to renewable energy and energy efficiency. Also included in the Stimulus Bill are tax cuts for businesses investing in renewable energy technologies.  Here is the link to the US Department of Energy discussion of the Stimulus Bill: http://www.energy.gov/recovery/index.htm
   
• Energy Efficiency. The Stimulus Bill also includes (a) $5.25 billion to make lower income housing more energy efficient, (b) $6.3 billion in grants for state and local government energy efficiency investments and (c) $300 million for consumer rebates for purchasers of energy efficient “Energy Star” appliances. The Stimulus Bill also includes tax cuts for individuals investing in residential energy efficiency improvements.

Environmental Programs

In total, the Stimulus Bill includes approximately $18.8 billion dollars in federal spending for environmental projects relating to site remediation, water infrastructure and flood control and mitigation projects. There may be opportunities to include funding for water infrastructure projects into on-going or planned development or redevelopment projects. Additionally, increased funding to the federal brownfields program may provide sufficient stimulus to continue planned redevelopments.

• Property Remediation. $600 million is allocated to the United States Environmental Protection Agency to fund the cleanup of hazardous waste sites listed on the National Priorities List, which is the USEPA’s list of some of the most contaminated sites in the nation. With this increased spending to cleanup Superfund sites, we expect there to be a potential rise in federal cost recovery litigation as the USEPA attempts to recoup those cleanup costs from the responsible parties. An additional $200 million is allocated to cleaning up properties with leaking underground storage tanks, and $100 million is allocated for grants providing for the cleanup and redevelopment of brownfields sites. Here is the link to the USEPA brownfields program: http://www.epa.gov/brownfields/
   
• Clean Water State Revolving Fund.  $4 billion is allocated to the states to fund loans administered under the Clean Water State Revolving Fund. This fund is designed to upgrade wastewater treatment systems and address stormwater management, nonpoint source pollution, and watershed and estuary management projects nationwide.   Here is the link to the Clean Water State Revolving Fund: http://www.epa.gov/owm/cwfinance/cwsrf/index.htm
   
• Drinking Water State Revolving Fund. $2 billion is allocated to the states to fund loans administered under the Drinking Water State Revolving Fund. This Fund provides loans to support infrastructure investments for both publicly and privately owned community water systems. Here is the link to the Drinking Water State Revolving Fund: http://www.epa.gov/safewater/dwsrf/index.html#facts
   
• Other Water Infrastructure. $4.6 billion is allocated to the US Army Corps of Engineers for projects such as environmental restoration, flood protection and dam projects. An additional $340 million is allocated to the Natural Resources Conservation Service, an entity within the US Department of Agriculture, for watershed improvement projects, including flood protection projects and water quality protection programs. Here is the link to the Natural Resources Conservation Service: http://www.nrcs.usda.gov/

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Businesses and property owners can use solar systems to reduce their annual energy costs and even generate income. The cost of installing these systems is significant. However, there are a number of incentives from the federal and state governments that reduce the upfront costs of solar system installation and generate money for many years after the initial repayment period.        

For upfront costs, the Federal Investment Tax Credit (FITC) provides a 30% tax credit for solar energy systems, so that you can take 30% of the cost of the solar system as a credit against taxes you would otherwise have to pay. The tax credit was recently extended for eight years. Front loaded depreciation is another significant tax incentive. In northern New Jersey, PSE&G's solar loan program may provide financing for 40-60% of the cost of installing a solar system which can be repaid in cash or with credits for energy produced.

Government incentives also make the use of solar systems more profitable. New Jersey is transitioning from a system of rebates to encourage solar system installations to a system of “solar renewable energy certificates” (“SRECs”) based on the amount of energy produced by the system, which can be sold, traded and, in some cases, used to repay loans for installation. “Net metering” also creates economic benefit because it allows a solar system owner to earn money for any excess power the system generates and returns to the electrical grid and of course having solar power reduces operating costs by reducing or eliminating the need to buy electricity from the utility.

Businesses can take advantage of these incentives directly or they can lease the solar system from a third party under a power purchase agreement. In that arrangement, the business avoids upfront costs, agrees to buy power at a discounted rate and passes the incentives to the third party. It is advisable for businesses to consult with legal professionals when entering into contracts with installers and power purchase agreements. 

*This article originally ran in the February 17, 2009 issue of NorthJersey.com

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