In a trend that is good news for ratepayers, the cost of solar renewable energy certificates (SRECs) is dropping in New Jersey, falling from about $650 a month ago to less than half that, before rising in recent days.
But not everyone is happy about the trend, nor can they even agree about the reasons for the decline, an event virtually everyone would have welcomed just a short time ago.
The certificates have become one of the prime ways of financing solar installations in New Jersey, which is second behind only California, with more than 8,000 installations. SRECs are awarded to system owners for the electricity they generate, but are redeemed by power suppliers to meet their obligations to increase the amount of electricity produced by solar systems.
The precipitous drop in the price SRECs fetch when sellers offer them on the spot market worries those who think the market could crash, as it has done in Pennsylvania. Should the sector take a steep downturn, it would put an end to what has been explosive growth in the Garden State. In Pennsylvania, the spot market for the certificates has fallen from $300 to $100, according to Lyle Rawlings, vice president of the Mid-Atlantic Solar Energy Industries Association, primarily because the market was overbuilt.
In New Jersey, the drop in prices for the certificates began in mid-April when the Board of Public Utilities (BPU) announced the state would probably meet aggressive targets set by New Jersey’s Renewable Portfolio Standard (RPS) for the amount of electricity produced by solar systems.
"There was an immediate knee-jerk reaction by the market," said Ryan Marrone, a Lawrenceville attorney whose practice is primarily involved in renewable energy. "There certainly was a correction, but it hasn’t crashed."
Joseph Sullivan, BPU ombudsman, said the trend is a reflection of the market coming into balance for the first time between the supply of SRECs and the demand. "We’re seeing prices moderate," he said. "Anytime the prices go down, the ratepayers are carrying less of the cost. In the end, ratepayers pay for all of this."
Sen. Bob Smith (D-Middlesex), chairman of the Senate Environment and Energy Committee, said there were other factors in the price drop, blaming it, in part, on the failure of the Christie administration to finalize an Energy Master Plan (EMP) that it has been reworking for more than a year.
"We are not showing leadership on this," Smith said yesterday at a committee hearing on a bill to promote solar development. "We need to get the Energy Master Plan done."
In addition, Smith faulted the BPU for failing to develop Solar Compliance Alternative Payments (SCAP), which would allow power suppliers to pay a penalty if they do not meet their obligations to buy SRECs. The payment program was supposed to be adopted last July, but has yet to be approved by the BPU.
"Our state has created a tremendous amount of uncertainty in the market," Smith said. "We need to know what is happening with the SCAP."
Rawlings said the drop in the price of solar certificates is a concern, but told the committee yesterday during a hearing on a bill relating to solar that a crash could be prevented if the state establishes a "throttle" if too much solar capacity is built.
The differing opinions cast uncertainty on the fate of a bill (S-2377) that would mandate a big chunk of the solar industry to enter into long-term contracts to provide their systems, a step many had believed would drive down the price of solar certificates.
With the prices of the certificates dropping, not even Smith, the sponsor of the bill, was convinced it was the route to go. "We’re not committed to anything at this point," he said near the end of the meeting.