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Senate Measure Aims to Reduce the Price of Solar Systems

Long-term contracts, proponents say, are the key to driving down cost of solar energy.

In a step aimed at driving down the price of solar systems, legislators are gearing up to pass a bill to encourage electricity suppliers to enter into long-term contracts to buy power from solar panels on New Jersey homes and businesses.

The bill (S-2371) seeks to make the current solar market more competitive by requiring power suppliers to enter into long-term contracts with owners of solar systems, a move proponents say would lower the cost of electricity produced by solar panels.

It would do so by shifting how Solar Renewable Energy Certificates (SRECs), the money earned by the electricity produced by the systems, are traded and sold. Now, most SRECs are sold on the spot market, earning the system owner $650 or more. If more of the certificates are sold under long-term contracts, advocates say it could drive the price down to around $400.

The drop in price is sought because ultimately electric ratepayers end up covering the cost of SRECs. This has boosted electric bills in New Jersey as the state seeks to promote greater reliance on solar energy.

Mixed Results

Because of the high prices fetched by SRECs on the spot market, efforts to convince residents and businesses to enter into long-term contracts to finance installation of solar systems have yielded mixed results. Three of the state’s electric utilities have pilot programs to encourage solar installations through long-term contracts, but each of the auctions run under the programs has been undersubscribed.

Solar industry executives have persistently argued long-term contracts would make it easier for them to obtain financing from banks to install solar systems, making them more accessible to all segments of society.

“Simply put, long-term contracts would unlock financing for solar development," said Terence Sobloweski, business development manager for SunPower, one of the more active solar firms in New Jersey.

Jeff Tittel, executive director of the New Jersey Sierra Club, agreed. "It’s good because it will allow large solar projects to obtain the capital they need to be built," Tittel said. "It also becomes more important as New Jersey is phasing out rebates for solar projects."

Phasing Out Rebates

New Jersey is second behind only California in the number of solar systems installed on homes and businesses, but the majority of those systems were developed with the aid of lucrative rebates, which the state has been phasing out in recent years. Next year’s budget for the New Jersey Office of Clean Energy includes no money for rebates for traditional solar installations, since the state has moved to a market system based on solar certificates.

While most solar industry advocates endorse the shift to long-term contracts, some worry it could squeeze out smaller solar businesses if all of the certificates in any given year are swallowed up by megaprojects that take advantage of the new system.

But Sobloweski doubts that scenario, saying New Jersey’s geography and unique system of promoting solar make that prospect unlikely. "Most of our projects could benefit from long-term contracts, even residential systems," he said.

Dolores Phillips, executive director of the Mid-Atlantic Solar Energy Industries Association, a trade group consisting of smaller solar firms, said her organization supports long-term contracts, provided they are available to all segments of society and all types of solar businesses. Her group plans to offer amendments to the bill when it is taken up next week in Trenton in the Senate Environment and Energy Committee.

Sen. Bob Smith (D-Middlesex), the chairman of the committee and sponsor of the bill, was out of the country and unavailable for comment yesterday.

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