August 2010

By: Roger Schwarz, Esq.

New Jersey's clean energy programs recently took a hit – in fact, two hits – when funds were diverted to balance the state’s FY2010 and FY2011 budgets. But there is good news: most of those programs continue to operate, and commercial and industrial energy customers will see an increase in what is available to them.

Although nearly $400 million from New Jersey's Clean Energy Fund, Retail Margin Fund and Greenhouse Gas Initiative Fund was diverted to balance two successive state budgets, the street-level impact will not be quite so harsh. That’s because a good chunk of that $400 million represented money that had been appropriated but never spent in previous budgets.

Moreover, going forward, businesses can expect to see a larger share of the new clean energy budget allocated for programs that will benefit them.

In part this change reflects the pro-business philosophy of the Christie administration, but this change is also in recognition of the fact that there is a greater bang for the energy efficiency buck with programs for commercial and industrial energy customers than with residential customers (an $11 return on investment versus $4 on residential projects).

New Jersey's solar energy program continues to be a vibrant national leader, particularly where business customers are concerned. Solar projects atop office buildings, hospitals and other commercial space are financed through the sale of solar renewable energy certificates (SRECs) and don't rely on state grants or rebates. Advantageous federal tax treatment remains in effect through the end of this year, and energy efficiency and renewable programs offered by New Jersey's electric and gas utilities are unaffected.

With the budget (for this year at least) behind them, Governor Christie's energy team is now taking a look at the energy policies that inform that budget. A review of the state’s Energy Master Plan is due on the Governor’s desk by the middle of August. But the current Plan is less than two years old. What’s going on here?

It seems clear that the economic assumptions underlying the plan have changed. Many of the plan’s projections for the cost of energy are pegged to the price of natural gas, which was predicted to keep rising. But the combination of the recession and the continuing discovery of new domestic natural gas supplies call into question both the energy cost projections and the cost/benefit of energy conservation programs intended to control consumption. Some of the programs are likely to be redesigned as a result.

We will take a look at the revisions to the state Energy Master Plan and how it may affect you in an upcoming Client Alert. For now, we want you to know that today is an excellent time for our business clients to explore opportunities to save on their energy bills through efficiency upgrades and the installation of solar power.

Roger Schwarz, a member of the Renewable Energy Group, is an attorney at Issues Management, the public affairs subsidiary of Lowenstein Sandler. He may be reached at 609-252-1300.

For information about the Lowenstein Sandler Renewable Energy Group, please contact any of our members:

James Stewart
973.597.2522
jstewart@lowenstein.com

Roger Schwarz
609-252-1300
rschwarz@issuesllc.com

Jeffrey M. Shapiro
973.597.2470
jshapiro@lowenstein.com

John Stolz
973.597.6228
jstolz@lowenstein.com

Mary J. Hildebrand
973.597.6308
mhildebrand@lowenstein.com

Robert J. Paradiso
973.597.2404
rparadiso@lowenstein.com

Lowenstein Sandler's and Issues Management's attorneys represent a wide range of clients in matters relating to the alternative energy industry, providing integrated solutions in an area that is rapidly evolving and increasingly complex. Our clients in this sphere include private and publicly traded companies of all sizes, as well as start-ups. The firm's work in this area is cross-disciplinary, drawing on the extensive knowledge of attorneys in our highly regarded environmental, energy, intellectual property, real estate, tax, venture capital, litigation and corporate practices.

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