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Fine Print: Senate Bill S-2371

Would require solar projects to be funded by long-term contracts to purchase SRECs rather than buying and selling them on the spot market -- potentially driving down prices.

Synopsis: The bill aims to drive down the cost of solar energy by increasing the number of solar projects that are built under a long-term financing mechanism rather than selling solar renewable energy credits (SRECs) on the spot market.

Sponsor: Sen. Bob Smith (D-Middlesex)

What it aims to do: The bill attempts to deflate one of the big criticisms of the state’s efforts to promote solar energy—its high cost. Currently, most solar projects are financed using SRECs, which are allocated based on how much electricity the systems generate. But two-thirds of the certificates are sold on the spot market, fetching prices of around $640. In contrast, certificates purchased under long-term contracts run around $400, driving down the price of the project.

How it came about: The solar industry has been searching for ways to encourage people to enter into long-term contracts with mixed success. The drop in price is sought because the ultimate cost of solar certificates is borne by ratepayers, who already pay some of the highest electric rates in the nation. The bill is modeled, in part, on a controversial measure pending in the legislature that sets up a pilot program to guarantee ratepayer subsidies over 15 years to build new gas-fired power plants. Unlike that measure, however, this bill enjoys strong support from the environmental community.

Why it raises concern: There is a sentiment among some business interests that New Jersey already has handed out too many subsidies and incentives to promote the solar industry. Also, some lobbyists worry about locking ratepayers into long-term contracts for electricity, given the volatile nature of the energy market.

Prospects: Smith, the powerful chairman of the Senate Environment and Energy Committee, usually gets what he wants, so the bill is likely to win legislative approval. Its fate with the governor probably hinges on how the administration revises the energy master plan. Some solar energy advocates fear the administration is going to ratchet back on the incentives it has given to the sector to spur its development.

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