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RFI Re: Social Cost of Carbon In Cost Cap Calculation
The Clean Energy Act of 2018 (CEA) established a cost cap for renewable energy (RE) programs in New Jersey, limiting the cost of specific Class I RE programs to 9% of total electricity costs for customers in 2019-2021, and 7% in subsequent years. The programs under the cost cap include the Solar Renewable Energy Certificate (SREC) Registration Program, the Class I RE requirement, the Transition Incentive Program, and the Administratively Determined Incentive Program. The cost of Offshore Wind Renewable Energy Certificates and of Solar Renewable Energy Certificate IIs (SREC-IIs) from certain projects are not included in calculating the cost of renewable energy programs.
The Board of Public Utilities (Board) is responsible for implementing the Cost Cap. The Cost Cap was amended in January 2020 to include new directives on calculating costs and benefits, including an express directive to account for energy and environmental savings. The Board annually certifies compliance with the Cost Cap and is authorized to take the necessary actions to maintain statutory compliance, including but not limited to adjusting the Class I RE requirement.
Determining the cost of the RE programs subject to the Cost Cap involves calculating the costs and benefits of these programs. The savings attributable to the environmental benefits produced by the programs are included in that calculation as an offset to their total cost. In determining the savings produced by the RE programs, the Board looks to the social cost of carbon dioxide (SC-CO2) emissions.
In calculating the Cost Cap for energy year (EY) 2022, the Board determined that the net cost of RE programs in EY 2023 was approximately 6.29% of New Jersey’s total electricity costs. This determination incorporated an SC-CO2 produced in 2016 by the U.S. Government Interagency Working Group (IWG) on Social Cost of Greenhouse Gases. Adjusted for inflation, the IWG estimate was $62/ton in May 2024 dollars. In November 2023, a U.S. EPA report revised the SC-CO2 to $233 per ton. The Board noted that using that more recent value in the EY 2023 Cost Cap calculation would have resulted in a net benefit of 2.56%.
The Board acknowledged that the change in SC-CO2 might have implications for future Cost Cap calculations and directed staff to gather stakeholder input on the revised SC-CO2 estimate.
The deadline for comments in this matter is 5 PM on April 16, 2025.
More information is provided in the Public Notice.
Public Notice (03/17/2025)
QO20020184
(In The Matter Of Certification Of Energy Year 2023 Cost Cap Calculation And Setting ADI Program Megawatt Blocks For Energy Year 2025)
