On July 23, 2012, Gov. Chris Christie signed into law c. 24, § 3, known as the Solar Act. The law amends the Electric Discount and Energy Competition Act (N.J.S.A. 48:3-49, et seq.) and has three principal objectives: (1) addressing the oversupply of solar renewable energy credits; (2) stabilizing the New Jersey solar market; and (3) promoting continued solar industry growth — all in accordance with the goals set forth in the state's Energy Master Plan (EMP).

A perceived crisis in New Jersey's solar industry has created a litany of questions as the state moves forward with its clean energy goals. The most pressing of these issues is how to incentivize solar growth, while also advancing the shared goals of providing reasonably priced power to consumers and protecting our environment and open space. The Solar Act is a legislative effort to resolve these issues.

The law, among other things, requires the New Jersey Board of Utilities (BPU), in consultation with the New Jersey Department of Environmental Protection (DEP), to establish standards and incentives to encourage the development of solar generation projects on closed landfills, brownfields and historic fill areas. New subsection (t) to N.J.S.A. 48:3-87 does just this by providing incentives and possible liability protection for solar facilities on sites qualifying as a "brownfield," "properly closed sanitary landfill" or an "area of historic fill."

Non-Net Metered Solar Projects on Farmland

As a contrast to subsection (t), new subsection (s) of the Solar Act applies to "farmland," which is defined as land actively devoted to agricultural or horticultural use, that was valued, assessed and taxed pursuant to the Farmland Assessment Act of 1964 (N.J.S.A. 54:4-23.1 to -23.24), at any time within the 10-year period prior to the Solar Act's effective date.Under new subsection (s), a solar electric power generation facility on qualifying land that is not net-metered, or an onsite generation facility (that is, the electricity is not being used to satisfy the electrical needs of structures on or adjacent to the land where the solar facility is located), is subject to a review process by the BPU. This review will determine whether the proposed project should be approved as "connected to the distribution system" and therefore eligible to earn solar energy credits ("SRECs").

Through these two provisions, the Solar Act encourages solar development on landfills via section (t), while simultaneously providing the BPU with the right to review and approve non-net metered projects to be located on farmland, through section (s). The intent of the law is to strictly scrutinize grid-connected projects on farmland, while expressly encouraging landfill development.

The BPU's execution of this particular aspect of the Solar Act's intent can be seen in its order dated April 29, through which it approved only three out of 57 applications pending before the agency to build grid-supply projects on farmland. This order seemingly indicates that, insofar as it relates to grid-supply solar projects as "connected," focus moving forward is going to be on landfills. It is important to note, however, that subsection (s) does not apply to net-metered projects (whether or not on farmland or open space), and that the Solar Act's policies pertaining to siting projects on farmland do not apply to such projects.

Classification as Brownfield

On Jan. 23, the BPU issued an order implementing section (t) of the Solar Act regarding solar projects on brownfields, areas of historic fill and landfills. For such projects, the BPU approved a certification process whereby both fully remediated landfills and "conditionally" remediated landfills (i.e., those that require additional remedial work) can obtain certification under Solar Act section (t) via an application process (the application has been posted on the BPU's website). Projects receiving final certification under subsection (t) are "connected to the distribution system" and eligible for SRECs.

Subsection (t) of the Solar Act also requires the BPU to establish a "financial incentive" for projects "certified" under the subsection to "supplement" the SRECs generated "in order to cover the additional cost of constructing and operating a solar electric power generating facility" on a brownfield, properly closed landfill or area of historic fill. Notably however, through its Jan. 23, 2013, order, the BPU deferred final determination concerning such "financial incentive" pending further consideration.

One proposed incentive, the creation of a "Super SREC," is under review by the BPU staff. The Super SREC would provide an additional economic incentive for developers building solar projects on landfill/brownfield sites through the creation of a special credit deemed as more valuable than a traditional SREC. Opponents to the concept argue that the creation of a Super SREC would flood the already over-supplied SREC markets, causing additional devaluation of the credit incentives.

Risks of Developing Solar Projects On Landfills

Despite these proposed new incentives, there are still significant costs and risks associated with developing solar projects on landfills.

As a principal example, the Spill Compensation and Control Act, N.J.S.A. 58:10-23.11, et seq. (Spill Act), imposes liability for cleanup and removal costs and other damages upon a "discharger" of a hazardous substance and persons "in any way responsible" for a hazardous discharge. The liability that could be imposed on a developer via the Spill Act is strict and joint and several. Moreover, New Jersey courts have expansively interpreted the phrase "in any way responsible." The Spill Act and other federal and state laws imposing draconian liability for cleanup of landfills or other contaminated sites have caused many developers of solar projects to shy away from such properties.

Noting these worries, both the federal and state governments have taken action to attempt to allay such concerns for developers.

The Solar Act's Response to the Spill Act

While imprecisely drafted, the Solar Act affords possible additional liability protection to owners/operators of solar projects on a "certified" brownfield, properly closed sanitary landfill or area of historic fill. New subsection (t) provides that the BPU, in consultation with the NJDEP, "may find" that a person who operates a solar electric generating facility (and the owner of the property on which such a facility is located) "shall not be liable" for cleanup and removal costs to the NJDEP or any other person for a discharge of hazardous substances. The provision contains a number of conditions, including a prohibition against "exacerbation" of existing conditions. It remains to be seen how the two agencies will implement these provisions, which are clearly intended to afford an additional layer of liability protection to solar developers (and property owners).

Earlier in 2012, the New Jersey Department of Environmental Protection (NJDEP), by rule amendment, exempted solar facilities from the definition of "industrial establishment" pursuant to the Industrial Site Recovery Act, N.J.S.A. 13:1K-6, et seq. (ISRA), rendering ISRA inapplicable to such facilities. When applicable, ISRA creates a separate source of liability for cleanup of contaminated sites.

For a solar operator to qualify for this protection at a "brownfield" site, a "final remediation document" must have been issued — meaning that the site has been cleaned up in accordance with applicable law. A sanitary landfill must have been "properly closed." With respect to an area of historic fill, the solar developer must show through a preliminary assessment and site investigation that "hazardous substances [presumably other than historic fill] have not been discharged."

Developers should also take some comfort in noting that construction and operation of solar installations are unlikely to contribute new contaminants to a site — a fact recognized by the DEP in adopting the exemption from ISRA. Moreover, hazardous substances employed in solar modules are well-contained and unlikely to result in discharges that impact the environment.

Nevertheless, construction of solar facilities on contaminated sites, particularly landfills, does present technical and engineering challenges and risk of "exacerbation" of pre-existing contamination. Risks include impairment of a cap installed on a landfill or brownfield site, risk of shifting settlement of landfill contents through placement of weight-bearing equipment, interference with the stability of side slopes and changes to volume and flow pattern of stormwater, requiring different and/or additional stormwater management infrastructure.

Even if liability risks are adequately managed, constructing solar facilities on contaminated sites involves additional costs for environmental and geotechnical studies and investigations, permitting, soil management, health and safety compliance, monitoring, record keeping and other compliance not associated with a clean site. One developer has estimated that these costs make brownfields 20 to 30 percent more expensive than traditional utility-scale solar development. It remains to be seen whether the "financial incentive" contemplated by the Solar Act will address and mitigate these cost impacts.

PSE&G's "Solar 4 All" Program

On May 29, the BPU officially signed off on Public Service Electric and Gas Co.'s (PSE&G) proposal to invest up to $446 million in new solar installations throughout the state. Of the $446 million, PSE&G will spend $247 million over the course of five years to build 42 MW of solar on brownfields and landfills, as well as 3 MW in pilot projects, under its "Solar 4 All" program. Certainly, PSE&G has taken the first step in fulfilling the EMP's goals of converting landfill sites into productive energy sources. PSE&G's program demonstrates the utility's commitment to building an "energy strong" New Jersey, and its foray into landfill-based solar development is laudable from an environmental perspective.

Conclusion

The liability protection afforded by the Solar Act may provide additional assurance to developers of solar facilities and their investors and lenders, but will not obviate the need for careful environmental diligence to identify and manage site conditions. Where possible, developers are well-advised to secure contractual indemnification from site owners, affording protection against pre-existing environmental conditions, and may also wish to consider available insurance products.

These projects are expensive and risky investments, despite the protections provided by the Solar Act and the Environmental Protection Agency's RE-Powering America's Land Initiative (which encourages renewable energy development on current and formerly contaminated lands, landfills and mine sites, when it is aligned with the community's vision for the site), more needs to be done if the EMP's goals of placing solar facilities on landfills, brownfields and other contaminated sites are to be met.

The BPU's approval of PSE&G's Solar 4 All proposal may provide developers and interested parties with a means for actually determining how expensive it will be to develop all of New Jersey's many contaminated lands, brownfields and landfills. But the state's policy of promoting solar development under subsection (t) will only become a reality if the BPU takes additional steps to implement the Solar Act's policies in a robust manner, and to alleviate the risk and cost that will be borne by developers interested in bringing landfill-based projects online. •