Solar Energy: Hot Today, Cold Tomorrow? 1 David Weinstein, Esquire Robert W. Bucknam, Jr., Esquire Michael Cosack, Independent Energy Consultant April 5, 2011

Harness The Power of the Sun to Create Electricity 2 2  One Minute of Sun’s Energy = One Year of World’s Energy  Three Days of Sun’s Radiation of Earth = 100% of Stored Fossil Energy

New Jersey is the Second Largest Solar Market in the U.S. 3 3 Cumulative Capacity of New Grid-Tied Solar Electric Installations in 2009* (in megawatts) *Includes all grid-tied PV & CSP Solar Energy Industries Association – 2009 Solar Industry Year in Review

Why is New Jersey so Hot? 4  Over 200 Days of Sunshine Each Year  Progressive Renewable Energy Portfolio Standards  Best SREC Pricing in the Country  Great Governmental Incentives 4

New Jersey’s Commercial Customers Pay the Sixth Highest Electric Rates* 5 *in the Continental U.S.

How Much Does A 1,000 kW Solar Array Cost? * Estimated Electric Rate of $0.15 per 1,250,000 kWh ** Estimated Turn Key Installation Costs *** Estimated Ground Mount Space Requirement 6 A New Jersey Commercial Green Building Spending $187,500* Annually on Electricity Considerations Equipment/Installation Costs**$4,500,000 Land/Roof Space Needed***4.5 Acres Construction Headaches? Funding Complexities? 6

Funding a $4,500,000 Solar Electric Project 7 Funding Options Balance SheetYes Bank LoanYes USDA GrantNo Federal Grant/Tax CreditsYes Federal Accelerated DepreciationYes State GrantNo State RebateNo State Production Incentives (SRECS)Yes Third Party Funding (PPA*, Lease)Yes *Power Purchase Agreement 7

New Jersey Commercial Green Building Potential Income From a $4,500,000 Solar Electric Project 8 8 $5,343,750 of Projected Income Over 5 Year Period US Treasury Grant/Tax Credits (1 yr)*$1,200,000 Federal Bonus Depreciation (1 yr)**$300,000 Federal Accelerated Depreciation (5 yrs)***$125,000 Sale of NJ SRECs (5 yrs)****$2,968,750 Electric Savings (5 yrs)*****$750,000 *30% of Eligible Project Costs (i.e. $4,000,000) ** Eligible Project Costs - US Treasury Grant x Federal Tax Bracket (i.e. 25%) *** Remaining Project Costs x Federal Tax Bracket (i.e. 25%) **** Five Year Contact at $475 per SREC ***** 1,250,000 kWh per Year at $0.12 Electric Rate

New Jersey Commercial Green Building Potential Income From a $4,500,000 Solar Electric Project 9 9 $12,969,898 of Projected Income Over 20 Year Period US Treasury Grant/Tax Credits (1 yr)*$1,200,000 Federal Bonus Depreciation (1 yr)**$300,000 Federal Accelerated Depreciation (5 yrs)***$125,000 Sale of NJ SRECs (15 yrs)****$6,562,500 Electric Savings (20 yrs)*****$4,782,398 *30% of Eligible Project Costs (i.e. $4,000,000) ** Eligible Project Costs - US Treasury Grant x Federal Tax Bracket (i.e. 25%) *** Remaining Project Costs x Federal Tax Bracket (i.e. 25%) **** Approximately 60% of Today’s Spot Market Price (i.e. $350 per SREC) ***** 1,250,000 kWh per Year at $0.12 Electric Rate and 3% Escalator

Solar Proposals Gone Bad 10

11 NJ SREC Pricing and Alternative Compliance Payments (ACPs) 11

Solar Not For All 12

EXAMPLES OF RECENT LEGISLATION FACILITATING SOLAR INSTALLATION N.J.S.A. 40:55D-4 Municipal Land Use Law (“MLUL”) now defines “Inherently Beneficial Use” as: a use which is universally considered of value to the community because it fundamentally serves the public good and promotes the general welfare. Such a use includes, but is not limited to, a hospital, school, child care center, group home, or a wind, solar or photovoltaic energy facility or structure. Positive criteria for Use Variance Application is presumptively satisfied. N.J.S.A. 40:55D MLUL: Mandates that that wind and solar facilities are permitted in industrial zones. "[A] renewable energy facility on a parcel or parcels of land comprising 20 or more contiguous acres that are owned by the same person or entity shall be a permitted use within every industrial district of a municipality." MLUL defines "renewable energy facility" as "a facility that engages in the production of electric energy from solar technologies, photovoltaic technologies, or wind energy." Supersedes any provisions to the contrary within the Municipal Zoning Ordinance. 13

EXAMPLES OF RECENT LEGISLATION FACILITATING SOLAR INSTALLATION N.J.S.A. 4:1C-32.4 Agricultural Development and Farmland Preservation - Right to Farm Act: Owner of preserved farmland may construct, install, and operate biomass, solar, or wind energy generation facilities, structures, and equipment on the farm, including on the preserved portion… The facilities may occupy no more than one percent of the area of the entire farm including both the preserved portion and any portion excluded from preservation. The one percent limitation is particularly suitable to wind and other facilities that occupy minimal ground space. N.J.S.A. 40:55D-38.1 MLUL, Pinelands Protection Act, Highlands Preservation Act, Coastal Areas Facilities Review Act: Prohibits solar panels from being included in calculation of impervious cover in the Pinelands, Coastal Zone and Highlands and amends to provide the same exemption. N.J.S.A. 52:27D Residential Development Solar Energy Systems Act: Where technically feasible, a developer of 25 or more units must offer to install, or to provide for the installation of, a solar energy system into a dwelling unit when a prospective owner enters into negotiations with the developer to purchase a dwelling unit. The developer must disclose – that a prospective owner may have a solar energy system installed in any dwelling unit; – the total cost of installing a solar energy system into a dwelling unit that will be charged to the owner; – information on the environmental benefits of, and potential energy cost savings associated with, solar energy systems; and – information concerning any applicable credits, rebates, or other incentives that may be available 14

Pinelands Commission Rule Proposal: Proposed amendments to the Pinelands Comprehensive Management Plan (CMP) specify in which Pinelands Management Areas and under what circumstances solar energy facilities may be permitted as a principal use. – The proposed rules would expand the range of locations available for the installation of Solar Facilities within the Pinelands Area, to such places as landfills, resource extraction sites and some environmentally restricted sites proposed or approved for cleanup or remediation. – Proposed rules would also eliminate the need for development approvals for Solar Facilities as accessory uses in many cases. S-2126 MLUL and CMP: Requires the Pinelands Commission to adopt regulations (proposed above) providing for development of solar or photovoltaic energy facilities – Provided development is consistent with the CMP. Will also permit – solar or photovoltaic energy facilities on landfills and closed resource extraction operations throughout the state as a permitted use pursuant to the MLUL, and – wind energy facilities on landfills and closed resource extraction facilities as a permitted use in all municipalities outside of the Pinelands area. 15 EXAMPLES OF PENDING LEGISLATION FACILITATING SOLAR INSTALLATION

A3125: MLUL Reported out of N.J. Assembly Housing and Local Government Committee, 2/3/2011: Prohibits municipal zoning ordinances from regulating solar panels under certain circumstances. Limits fees for certain renewable energy installations. – Would prohibit municipalities from charging excessive fees for processing applications for the installation of solar facilities on residential properties, and – Would prohibit municipalities also from adopting ordinances that regulate the installation of solar facilities on residential properties when certain dimensional and setback limitations are met. A2042, S465: Reported out of Assembly Telecommunications and Utilities Committee with Amendments, 2nd Reading, 3/7/2011: Requires New Jersey Board of Public Utilities (BPU) to increase credit provided when issuing Solar Renewable Energy Certificates (SRECS) for solar energy produced by equipment manufactured in New Jersey. Current law requires that BPU issue one SREC for every 1 megawatt hour of solar energy generated in New Jersey, this bill would require that BPU issue one SREC for every 850 kilowatt hours of solar energy if the equipment used to produce the solar energy is manufactured in New Jersey. 16 EXAMPLES OF PENDING LEGISLATION FACILITATING SOLAR INSTALLATION

Solar Industry, Cold Tomorrow? 17  Lower Electric Pricing  Lower Governmental Incentives  Higher Solar Panel Pricing  Better Alternative Energy Sources  Lower NJ Renewable Portfolio Standards and Penalties  Collapse of SREC Marketplace  Decrease in Sunny Days  Decrease in Federal Tax Brackets 17

18 David Weinstein, Esquire Robert W. Bucknam, Jr., Esquire Michael Cosack, Independent Energy Consultant Questions ?