After finishing two rounds of its successful solar loan program, New Jersey’s Public Service Electric and Gas Company (PSE&G) has received approval to offer a third round of loans to 97.5 MW worth of residential and non-residential solar projects and is expected to announce a start date shortly. Solar Loan III is similar to the previous two programs in that recipients have the option of paying off the loan with the Solar Renewable Energy Certificates (SRECs) that the system produces over time. The value of these SRECs will be determined by the higher of the market price or the pre-agreed-upon floor price for each system. However, unlike previous programs, the floor price for each system’s SRECs will be determined by a bid process instead of a preset schedule.
Applications will consist of a description of the system, typical loan application information, and a proposed SREC floor price “bid.” The applications will be sorted by bid, lowest to highest, and then approved in this order until the capacity for the solicitation has been filled. Loan awards will be calculated based on the net present value of the SRECs that the system is estimated to be able to produce over the course of the loan term (10 years) at the bid SREC floor price. According to draft documents, the interest rate will be 11.179% per year for all non-residential loans (down from 11.3092% in Solar Loan II). PSE&G has yet to announce the interest rate for residential loans (which stood at 6.5% in Solar Loan II), but there is some indication that the interest rate may be in the neighborhood of 11% as well. Previously, floor prices for SRECs in the 58.83MW Solar Loan II program ranged between $330-450 per SREC according to the program’s predetermined schedule. Right now, New Jersey SRECs are clearing at around $120, meaning that competitive bids for this program will likely come in much lower than the preset floor prices in Solar Loan II.
As denoted by the table below, there are five categories of eligibility, each with its own capacity allocation from the program at large. In addition, any remaining capacity from Solar Loan Program II will be added to the Large Non-residential category allocation at the start of the program. After the program’s start date, PSE&G will solicit applications every two months or six times per year for two years (or longer, if the capacity is not filled within this time), allocating a small percentage of the total capacity to each solicitation.
|Category||Total MW in Program|
|Residential Aggregated (3rd party owned)||9.75 [10%]|
|Small Non-residential (<150 kW)||13.48 [15%]|
|Large Non-residential (150kW-2MW)||61.39 [60%]|
|Landfills/Brownfields (<5MW)||5.13 [5%]|
The fee structure for Solar Loan III is slightly different than that of its predecessors. There is a $20 per kW application fee for each system that is capped at $7,500, as well as an uncapped $85 per kW administration fee for those systems accepted into the program. The per-SREC fee differs between residential and non-residential installations. Residential systems pay $120 per kW upfront to cover SREC transactions costs for the lifetime of the loan. For each SREC used to pay down a non-residential loan, there is a $10.18 fee (to be billed and adjusted annually based on PSE&G’s forecasts of program costs).
PSE&G will auction off any SRECs they choose not to retire in order to cover the costs of the program. To avoid disrupting the New Jersey SREC market, they will not hold an auction prior to 2016 unless otherwise directed by regulators. Additionally, PSE&G does not hold an option on SRECs not used to pay back the loan as it did during Solar Loan II, so these SRECs can be used at the system owner’s discretion. Borrowers will always have the option to pay back the loan with cash rather than SRECs.
Sol Systems will continue to track the progress of this program and will provide any updates on our blog. Sol Systems also invites developers with projects located in New Jersey in need of financing to contact our team at firstname.lastname@example.org or (888) 235-1538 ext. 2. Our team would be happy to discuss your project with you and assess financing opportunities.
About Sol Systems
Sol Systems is a boutique financial services firm that offers investor clients direct access to the renewable energy asset class and provides developers with sophisticated project financing solutions. Founded in 2008, Sol Systems focuses on meeting the most critical needs of the industry, including SREC monetization, capital placement, tax equity, and New Market Tax Credits. To date, the company has arranged financing for thousands of projects and facilitated hundreds of millions in investment on behalf of Fortune 100 companies, private equity, family offices and individuals.
For more information, please visit www.solsystemscompany.com.