WASHINGTON (Reuters) - New Jersey Governor Chris Christie signed into law on Monday a bill that aims to stabilize the largest solar market in the United States, which has suffered from a sharp decline in demand for renewable energy credit and credit prices.
The Republican governor signed S-1925, a bipartisan bill that easily passed in both houses of the state legislature.
The bill will move up the start of a mandatory renewable energy production quota by four years and would lower the price ceiling for credits that electricity producers must use to comply with the quota.
In the first quarter of 2012, New Jersey surpassed California as the largest U.S. solar market. But developers had built too many solar projects in New Jersey when prices for renewable energy credits (RECs) were upward of $600 at the end of last year, weakening the REC market by causing supply to outweigh demand and prices to drop over 80 percent.
The bill aims to boost demand and price levels for RECs, which are supposed to incentivize developers to build more installations.
Utilities will be required to get 2.05 percent of their power from solar projects starting in 2014, 0.5 percent more than currently required.
The percentage would be raised to 4.1 percent by 2028. It also sets a ceiling price on RECs by setting the maximum penalty price for failing to meet the renewable quota at $339 for each megawatt-hour short of the goal in 2014.
This would prevent the sort of wild price swings seen in New Jersey's solar market over the past year.
The bill also allows developers to bank, or hold onto RECs, for five years instead of three, encouraging them to sell the credits at a better time instead of selling into a long market.
It also changes the renewable energy quota from a fixed megawatt requirement to a variable percentage each year, "ensuring that the level of solar obligation rises and falls with overall energy demand" depending on economic factors, the governor's office said.
These fixes to New Jersey's current renewable energy laws would help the state continue to grow and maintain its ranking as a top solar producer, industry experts said.
"This legislation addresses the current oversupply of N.J. solar renewable energy credits (SRECs), brings stability back to the N.J. solar market, and keeps the N.J. solar industry growing over the next several years," the Solar Energy Industries Association said.
Environmentalists, who had criticized Christie for pulling the state out of a northeast U.S. program to cap and price carbon emissions last year, praised Christie for signing the solar bill.
"The bill is far from perfect, but without it there would be no solar in New Jersey," said Jeff Tittel, executive director of the New Jersey Sierra Club.
Reporting By Valerie Volcovici