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Protecting Solar Subsidies for Homes and Small Businesses

If the Office of Clean Energy has its way, residential and small-business owners will not lose solar subsidies at year's end.

Here's some good news for homeowners and small commercial firms. It appears likely they will not be shut off from the subsidies that promote development of solar systems on their homes and businesses.

In the latest effort to stabilize New Jersey's unsettled solar market, the state Office of Clean Energy has floated a proposal that would extend utility-sponsored loan programs to residential and small business customers. Existing programs are due to expire at the end of this year. That would quash concerns from some solar advocates the Christie administration is pulling out of the residential and small commercial market.

A draft Energy Master Plan (EMP) unveiled by the Christie administration this June recommended that priority be given to larger-scale projects that would be located on brownfields, landfills, and large commercial warehouses, at the expense of smaller, more expensive, installations on homes and at small businesses. The rationale behind that approach is that larger projects drive down the cost of solar systems, which eventually are borne by ratepayer subsidies.

It is still unclear whether the Board of Public Utilities (BPU) will adopt the proposal to expand the utility loan programs, but many in the industry have lobbied for doing just that. They view expansion of the programs, in which utilities finance solar installations through long-term contracts, as a way to deal with the steep drop in the prices of solar renewable energy certificates (SRECs), which owners of solar panels earn for the electricity they produce.

With the prices of the SRECs falling by more than half in the past few months, some solar executives fear the once thriving solar market in New Jersey could crash. Long-term contracts setting a fixed price for the certificates give investors the assurance they need to keep putting their money into the sector, they argue.

"The best way to do that is to expand the EDC [Electric Distribution Company] program because it provides built-in stability for the SREC market," said Lyle Rawlings, vice president of the Mid-Atlantic Solar Energy Industries Association at a recent stakeholder meeting on the issue.

With solar one of the few sectors enjoying growth in New Jersey's struggling economy, the issue over what to do about the slump in the industry is attracting increasing attention from the Christie administration and lawmakers, although they are not necessarily in agreement on what needs to be done to stabilize the marketplace.

For the most part, the utility-run loan programs have provided a way to install solar at a lesser cost than systems built relying on spot market prices for the certificates. Because of lucrative state and federal incentives, the price of SRECs has fallen from the mid $600 range to the $200 level, a trend blamed on an oversupply of the certificates.

The state expects the oversupply of SRECs to continue into 2013, so if the utility-loan programs are continued they would not start up again until then, according to a straw proposal prepared by the Office of Clean Energy. They also would be limited to residential and small commercial projects.

Beyond expanding the utility programs, the state proposal also raises the option of accelerating the requirement that energy suppliers need to purchase more of the electricity they supply to customers from solar systems, an approach an advisory group to the BPU endorsed. Under the state's proposal, however, that option would only occur if it does not increase the burden on ratepayers.

"If we are increasing the program, then the ratepayer has to come out with some cost savings," said Michael Winka, director of the Office of Clean Energy.

The state proposed an additional option—doing nothing. With most experts expecting lucrative federal incentives to promote solar to expire at the end of the year, there is an argument that simply allowing those benefits to end will deal with the oversupply of SRECs by eliminating an incentive that had attracted many investors to the sector. That proposal, however, drew little support at a stakeholder meeting last week in Iselin.

The consensus at the meeting seemed to favor extending the utility loan programs, although there was some dissension raised by the Division of Rate Counsel, which questioned whether an extension of thoe programs and acceleration of the requirement to buy more solar would lead to new rate spikes for ratepayers.

There are three similar utility loan programs run by Jersey Central Power & Light, Atlantic City Electric, and Rockland Electric. Public Service Electric & Gas runs a separate solar loan program, which it also is proposing to continue, along with a Solar 4 All program that involves putting solar panels on utility poles and installing solar gardens and rooftop installations.

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