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No Easy Solutions for the Solar Sector

Tom Johnson | January 6, 2012

Short of the unlikely passage of a proposed bill, the solar sector will continue to be in the dark about how the state plans on stabilizing prices.

The solar sector yesterday won long-sought backing from the legislature for a bill that would ramp up the installation of solar systems in New Jersey, but it probably amounts to a Pyrrhic victory.

The legislation (S-2371), which is in position to be approved by both houses on the final day of the lame duck session on Monday, probably will not be signed by Gov. Chris Christie -- even if it passes both houses -- according to proponents and opponents.

If that happens, it leaves the solar sector without a clear answer as to how the state will stabilize an industry that has witnessed one of the primary means of financing solar installations -- credits earned by owners of solar systems for the electricity they produce -- drop dramatically in price over the past six months, a decline some fear could lead to a collapse of the sector.

The division also underscores a continuing dispute between Democratic lawmakers and the Christie administration over efforts to promote solar development in New Jersey, which is second only to California in the number of solar installations. Democrats say it is one of the few areas of the state economy still growing, while administration officials question whether that aggressive growth is making New Jersey less competitive with other states, by making electricity more expensive.

The bill has been under discussion since this past summer when the market for solar credits first began falling from a high in the mid-$650 range to below $200, a drop that make the economics of solar that much more problematic.

Perhaps more problematic than the bill’s uncertain fate, however, is the pushback the sector is getting from business and consumer advocates over the acceleration of the state’s requirement that power suppliers buy more of their electricity from solar systems, a move they argue will spike already high electricity bills for residents and businesses.

"This is going to have a devastating impact on the economy of the state," warned Stefanie Brand, director of the Division of Rate Counsel, who projected accelerating the requirement that more electricity used by residents come from solar could end up costing ratepayers $7 billion over the next few decades.

Assemblyman Joseph Malone (R-Burlington) agreed. "If we have $7 billion to spend, we ought to be spending it on a crumbling infrastructure," said Malone, one of the two Republicans on the committee to vote against releasing the bill.

"What are you going to be doing for one industry and how will it impact the whole?" asked Sarah Blum, a vice president of the New Jersey Business & Industry Association, noting that solar subsidies hit large energy users the hardest.

But proponents of the bill argued, if nothing is done, New Jersey’s once fast-growing solar sector will slow to a crawl.

"Unless we do something to support them, we’re not going to see any new solar built," said Sen. Bob Smith (D-Middlesex), the sponsor of the bill. Nonetheless, Smith acknowledged the persistent problems in trying to reach a consensus on the issues, noting that the solar sector was hardly a "monolithic" structure, but more resembling a "herd of cats."

The bills main provisions were generally supported by many in the solar sector, including a proposal to virtually double the amount of solar that should be built in New Jersey in 2013, an action most said would soak up the excess supply of solar credits caused by the boom cycle in the industry.

They also argued that in the bill to reduce payments made by power suppliers instead of supplying solar credits would lead to big reductions in the cost of solar that is ultimately paid by ratepayers, who foot the cost of both the solar credits and payments by suppliers in their electric bills.

Other provisions were troubling to many solar lobbyists, including a requirement in the bill to "grandfather" up to 1,200 megawatts of new projects that would be fast-tracked without any state review, a prospect that could increase the glut of solar credits, once again driving the price down.

The bill also drew opposition from conservation and smart growth advocates who feared it would lead to the development of huge solar projects on farmland, a prospect the Assembly Telecommunications and Utilities Committee sought to address by reducing the amount of agricultural land that could be converted to solar farms.

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