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BPU Straw Proposal Advanced to Stabilize Solar Sector

Industry executives agree utility-run programs the right step, but more megawatts needed.

What is it going to take to bring new investment into the state's once fast-growing solar sector?

That issue was debated yesterday as the New Jersey Board of Public Utilities held a public hearing on a straw proposal from its staff on a way to stabilize the sector, which is seeing a dramatic slowdown in the number of solar projects in the pipeline after a period of extraordinary growth.

For the most part, the state is on the right track for fixing its solar sector by extending utility-run programs, according to several industry executives, who nevertheless urged Christie administration officials to greatly expand how much capacity from solar projects will be built in the next three years.

The straw proposal, developed by the Office of Clean Energy, calls for an additional 120 megawatts of solar capacity to be built through utility-run programs over the next three years, which would roughly amount to 40 megawatts each year.

That is far short of what is needed to stabilize the market, most solar executives argued, especially to deal with an overheated solar sector. The industry has witnessed the prices of credits homeowners and businesses earn for the electricity their systems produce drop by two-thirds since last summer.

Some executives argued at least 80 megawatts of new solar capacity be developed each year, an amount they argued would soak up the oversupply of credits, which most agree was fueled by overly lucrative state and federal incentives that spurred a wave of investment in the sector.

In January alone, more than 84 megawatts of new solar capacity was installed in New Jersey, although that number dropped by more than half in February, but still led to the installation of 39 megawatts, virtually equivalent to what the straw proposal suggests in an entire year.

Now, with prices of credits dropping, many in the solar sector say the best way to encourage new investment is to expand utility-run programs, which provide solar to small businesses and residents through long-term contracts. The added advantage to that strategy is that it lowers the cost of paying off the solar credits to electric customers, who ultimately bear the brunt of subsidizing development of the renewable energy in New Jersey.

BPU President Bob Hanna seemed open to expanding the capacity of the utility-run programs, after hearing some solar lobbyists suggest that the new capacity should be expanded to between 450 megawatts and 500 megawatts over the next three years.

"Could it go up or down? Yes," Hanna said, adding it may well depend on what the state legislature does. Beyond extending the utility-run programs, the state's new Energy Master Plan recommends accelerating how much of the state's electricity should come from solar systems, but that decision has to be made legislatively, not by the executive branch.

Therein lies the heart of the problem. Both branches of government are being tugged by opposing forces in the solar sector, leading to a lot of inertia. One side seeks to build big utility-scale grid-supply projects, while the other seeks to build solar projects catering to small businesses and residential projects not primarily supplying power to the grid.

The staff proposal by the Office of Clean Energy only deals with one aspect of the issue, according to some.

Dennis Wilson, president of the Mid-Atlantic Energy Industries Association, said the administration needs to work with lawmakers on how to deal with the large grid-supply solar projects. "Two thousands of megawatts is not going to go away," Wilson predicted, referring to those grid-supply projects, many of which are slated to be built on agricultural lands.

Hanna said the state is trying to encourage those large grid-supply projects to be located on landfills and brownfields, but some said that could spike the cost of solar because of the unsettled nature of many garbage dumps and the costs of cleaning up brownfields, which are contaminated industrial sites left fallow.

Others cautioned the state needs to look at the big picture so that it does not have do deal with the problem in the near future.

"If we fix it, how do we makes sure it does not happen again," said Larry Barth of NJR Clean Energy Ventures.

In the meantime, many of the state's biggest solar installers have been laying off employees, including 80 at Trinity Solar.

Paul Flanagan, litigation manager for the Division of Rate Counsel, called the straw proposal a "good first step."

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