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Natural Gas Company Launches Solar Subsidiary

NJR Clean Energy Ventures furnishes upfront financing for residential and business solar systems.

New Jersey Resources (NJR) has earned a reputation as a well-run energy business, delivering solid returns and growth to investors, primarily through its natural gas business. But its newest venture is bringing savings to electric customers by installing solar systems on homes and commercial facilities.

The Wall Township company, the owner of New Jersey Natural Gas, expects to invest up to $40 million to $60 million in capital each year, offering residents and businesses the upfront financing to put solar panels on rooftops or the ground.

The entry into the solar market by NJR subsidiary, NJR Clean Energy Ventures, is viewed as an opportunity to grow the company’s business, help the state meet its aggressive clean energy goals, and save consumers money on their electric bills.

The outgrowth of a pilot program launched last year, NJR announced it would spend $9.4 million this year on an expected 350 residential projects, producing 2.2 megawatts of solar capacity. But the bulk of its outlay will involve commercial projects, with NJR Clean Energy Ventures already shelling out $17 million to buile 3.9 megawatts of solar capacity at projects mostly in central Jersey.

Driving Up Demand

All told, up to $250 million in solar projects are under consideration, an indication of how deeply the company believes the state’s aggressive Renewable Portfolio Standards (RPS) will help drive up demand, helping its bottom line.

"Why does it make sense for us?" asked Laurence Downes, chairman and CEO of NJR. "It is consistent with our core energy strategy, saves customers on their electric bills and supports the state’s environmental and economic development goals."

It also makes it easier for homeowners and businesses to support renewable energy by having the company foot the cost of installing the systems.

"We make it very transparent," said Downes, noting that a typical residential system could require an outlay of up to $35,000. "We make it much easier for the customer."

Here’s how their business model works: For residential customers, NJR Clean Energy Ventures acquires a rooftop control through a lease agreement with a homeowner, receives lease payments from the homeowner and also earns a 30 percent federal investment tax credit at the same time it monetizes the solar renewable energy certificates (SRECs) produced by the system. The homeowner gets the benefit of the electricity generated by the system.

The program, dubbed Sunlight Advantage, produces energy savings of $100 per month, far offsetting the lease payments of a typical residential solar system, which is $59 over a 20-year period. NJR Clean Ventures estimates the average customer will save $20,000 over the life of the system, with the added benefit of putting no money down and having the company manage the entire system.

The program is available in the entire state, but so far, 90 percent of the systems have been installed in NJR’s utility’s franchise area, according to company officials.

On the commercial side, NJ Clean Energy Ventures acquires either a ground or rooftop control through a lease agreement with the landlord, and either sells the electricity to the tenants or to the power grid. While the landlord gets lease payments, the company makes money through the investment tax credits and the SRECs it sells.

Under its business model, the tax credits amount to about 26 percent of its investment value; the energy sales about 13 percent; and the SRECs, about 61 percent, according to a slide presentation made to analysts recently.

In recent weeks, the value of SRECs has dropped, and then rebounded, causing some legislators and solar industry executives to worry that the market might crash, as happened in Pennsylvania.

But Downes said the long-term prospects for the sector are favorable.

Under the current RPS, the requirement for solar systems delivering electricity increases almost six times in five years. "There is a strong pipeline for potential projects," Downes said, noting the price of solar is coming down, which is what most people had expected.

Beyond the environmental benefits, NJR Clean Energy Ventures also partners with smaller businesses to help install systems, helping to build the state’s green economy. According to the Edward Bloustein School of Planning and Public Policy at Rutgers University, approximately five jobs are created for each $1 million invested in the sector.

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