It probably will fail to stabilize a solar market in turmoil, but a state agency is expected to act today to fulfill a long-delayed legislative mandate to set the prices power suppliers pay to help promote the development of solar energy in New Jersey.
The New Jersey Board of Public Utilities (BPU) is scheduled to adopt a 15-year timeframe for payments made by suppliers who fail to buy enough solar renewable energy certificates (SRECs) to comply with state mandates that a certain percentage of their electricity be produced by solar systems.
Ironically, the action, long pushed for by the solar sector in New Jersey, comes at a time when there is an oversupply of SRECs, which owners of solar systems earn for the electricity their panels produce. The result has been a deep drop in the price of the certificates, making the adoption of the compliance payments less important than it had been in the past.
"In a long market, the SACP is meaningless," said Fred DeSanti, managing director of MC2 Public Affairs LLC, referring to the jargon used by the state to refer to the solar alternative compliance payments.
Taking advantage of lucrative ratepayer subsidies and generous federal tax incentives, the solar industry in New Jersey has exploded with more than 10,000 systems installed, producing well above 400 megawatts. That point was reinforced yesterday when the Solar Energy Industries Association released a report that found, for the first time, New Jersey's commercial market for solar exceeded California, making it the largest non-residential market in the country.
That news has been overshadowed by the big drop in prices for solar certificates, which once fetched more than $600 on the spot market, but have slipped to the $200 range as of yesterday, according to Michael Flett, president of the FleetExchange, a firm that trades the solar certificates.
The drop has caused fears the solar market could experience a sharp slowdown in the next couple of years unless some action is taken to stabilize prices. Administration officials have convened a stakeholders group to decide what, if anything, needs to be done, but so far there has yet to emerge a consensus among the solar sector, which is increasingly fractured.
Lawmakers have proposed accelerating the mandates for solar power, a move proponents say would suck up the oversupply of SRECs. But that option has received a cold shoulder from the administration. Others have suggested a establishing a price floor, but that, too, has been criticized as only increasing the cost to ratepayers, who ultimately pay for the solar certificates.
Some argue establishing the SACP will help, in part, by giving certainty to prices over 15 years, a step that would encourage more long-term contracts for installing solar systems. If that was accomplished, it would reduce the price volatility that has discouraged the use of long-term contracts by suppliers and customers, according to Fred Zalcman, who works for Sun Edison.
"It will provide a benchmark for the whole industry," Zalcman said, but he added he did not think it would lead to higher prices for the solar certificates, an assessment others echoed.
"I don't think so," said Assemblyman Upendra Chivukula (D-Middlesex), a sponsor of the bill that directed the BPU to establish a SACP schedule by July 2009. "It's too late now."
Chivukula said he is working on a bill to try and stabilize the program, but, so far, he and other Democratic lawmakers have not been on the same page as the Republican administration.