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Agency Straw Proposal Aims to Stabilize Solar Sector

State sees long-term utility-run programs as way to avert crash.

The state wants to extend utility-run solar programs, a measure long advocated by industry lobbyists as a way of averting a crash in the fast-growing sector.

In a straw proposal developed by the state Office of Clean Energy with input from industry stakeholders, the agency recommends an extension of utility-sponsored programs to promote solar through long-term contracts with homeowners and businesses or solicitations with solar developers.

Expect a lot of grousing about the proposal, though, especially from some in the sector, clean energy advocates, and lawmakers.

To some industry advocates, the proposed expansion of the utility programs is far too modest—providing for an additional 120 megawatts of solar capacity over three years. That would amount to about 40 megawatts each year, less than half of what was installed last month (84 megawatts) in New Jersey's overheated solar sector.

"It's not enough to do anything to prevent a collapse in the solar market," said Lyle Rawlings, Advanced Solar Products, Inc., a Flemington-based solar developer. "We're extremely concerned."

With so much solar being installed, the price of credits homeowners and businesses earn for the electricity their systems generate has dropped dramatically since last summer, falling from the mid-$600 range to below $200. If prices for the credits, the primary source of financing solar installations, continue to fall, clean energy advocates fear investment in the sector will dry up.

For several months, the industry has lobbied to extend the utility-run programs by the state's four electric utilities as one way to stabilize the market, but they also argued to accelerate how much electricity should come from solar systems, a step endorsed by the new Energy Master Plan. Ramping up that requirement would force power suppliers to purchase more of their electricity from solar systems.

The lobbying, however, has been unsuccessful, at both the legislative and the executive levels, in part, because the industry cannot reach a consensus on how the acceleration should be done. The straw proposal is unlikely to break that impasse, according to some.

"It's way to low," said Jeff Tittel, director of the New Jersey Sierra Club, referring to the expansion of the utility-run programs to 120 megawatts. "This is not going to fix the problem. It is just going to cause a bigger war between legislators and the [Christie] administration."

Solar industry executives are hoping for a compromise that would soak up an oversupply of credits, or solar renewable energy certificates. The oversupply was created by lucrative federal and state incentives, allowing some investors to make a 25 percent rate of return on their investment.

Rawlings said the 120-megawatt expansion recommended by the straw proposal falls far short of what is necessary to soak up the oversupply of solar credits. "We believe a minimum of 450 megawatts is needed, and even that doesn't close the gap between supply and demand," he said.

The straw proposal is also unclear whether the state will ramp up the requirement that power suppliers provide more of their electricity from solar projects, Rawlings said.

"If they are only proposing to expand utility programs another 120 megawatts, a lot of homeowners, schools, towns and churches will be unable to pay off the bonds for their solar systems," Rawlings said.

Division of Rate Counsel Director Stefanie Brand, however, described the straw proposal as reasonable. "It's not too much," said Brand, whose division has been wary about expanding solar programs because the solar credits are ultimately paid off by ratepayers.

"It's a better solution than some of the things that have been proposed," she said, referring to a couple of industry-recommended compromises. "Ratepayer subsidies never have been intended to subsidize this industry for the long term. That wasn't the deal."

If GM made too many cars, it would not be up to consumers to buy up the excess, Brand said. "At some point, they [the solar sector] have to rightsize their own industry," she said.

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