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Crucial Vote Set on Legislation Aimed at Reviving Solar Sector

Trade group pegs cost as high as $400 million and seeks amendment to bill lawmakers seem eager to pass, no matter the cost.

With a crucial vote on a new bill to prop up the solar industry in New Jersey possible as early tomorrow, a trade group yesterday warned it could cost consumers at least $300 million annually, and possibly as much as $400 million.

The Retail Energy Supply Association, an organization whose members provide electricity to residents and businesses who shop around for cheaper prices than what their incumbent utilities offer, is seeking amendments to a bill (A-2966) scheduled to be heard by the Assembly Telecommunications and Utilities Committee on Thursday.

“When all is said and done, this legislation, as currently drafted will cause tremendous harm to customers,” said Jay Kooper, director of regulatory affairs for Hess Corp., and the association’s New Jersey state chair.

The measure, a version (S-1925) of which already has cleared the state Senate, is viewed as critical by solar proponents to staving off a collapse of the solar sector in New Jersey, which has been one of the few growing segments of the economy.

The bills would ramp up how much electricity from solar systems power suppliers must purchase -- a step advocates say would help soak up an oversupply of credits owners of existing systems earn for the power they produce. The oversupply of credits in the marketplace has cradled prices, dropping by more than one-third since last summer.

The legislation, as currently drafted will more than double the obligation of suppliers to purchase the credits, also known as solar renewable energy certificates (SRECs), according to the association.

Based on its assumption, described as conservative by members, and projections of anticipated increases in the price of credits, the change could increase the cost of electricity by $307 million to $400 million annually, the association said. The lower figure is based on the price of credits rising to $250 -- a figure some analysts say is necessary to continue investment in the sector -- or to $300 for the credits if the prices spike even more, boosting the cost to $400 million.

Since falling from a high in the mid-$600 range, the price of the credits has dropped to around $180, rebounding from under $100 earlier this spring.

New Jersey has aggressively promoted the development of solar power, installing more than 15,000 systems, at a total cost of $363 million -- second only to California in the number of solar installations.

Its cost, subsidized by utility customers, however, is raising increasing complaints from some consumer advocates and business interests, the latter who wind up paying the bulk of the cost because they consume more than 60 percent of the electricity used in the state.

The issue revolves around a couple of key questions: Just how much is the state willing to subsidize cleaner and less polluting fuels if it means higher electric bills for consumers and businesses, which make them less competitive with other states? Especially in a state, which has never met key federal air quality standards?

So far, their arguments have failed to sway lawmakers, who seem intent on trying to revive the solar sector, whatever the cost.

For the association, the accelerated ramp up in how much credits they must buy is an increasingly difficult proposition. Most of their contracts tend to be three years in length, which factor in how much renewables they must purchase to comply with state mandates. When those mandates change, so do their costs, which fall on their customers.

“Not only will this bill increase the prices that all retail customers eventually will pay, it singles out customers of competitive retail suppliers for unfair treatment,” said Kooper. “Customers of competitive retail suppliers are immediately subject to higher solar energy costs while customers purchasing under wholesale contracts [by incumbent electric utilities] are exempted from those costs.”

The burden to the retail suppliers occurs at a time when, because of falling natural gas prices, they are able to offer consumers cheaper electricity bills than the incumbent utilities. The uncertainty of not knowing the costs of purchasing the credits will drive competitive suppliers out of the market, the association said, a step that would deprive consumers of cheaper energy alternatives.

The association is seeking amendments to the bill that would delay implementation to June 2015, when most of their contracts with customers expire. They argue the state Board of Public Utilities adopted a program to extend a utility-sponsored solar program to allow those contracts to expire, a step lawmakers should follow.

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