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Law Meant to Stabilize Solar Sector Raises Vexing New Questions

Where solar-energy systems are installed -- brownfields or farmland -- could affect future of NJ market.

When the talk turns to installing solar-energy systems, the debate often recalls the old adage about what to keep in mind when buying real estate -- location, location, and location.

That issue is emerging as particularly contentious for the state Board of Public Utilities, which is wrestling with the logistics of implementing a law signed by Gov. Chris Christie last July aimed at reviving New Jersey’s once thriving solar sector.

Perhaps the most controversial aspect of that law gives the BPU broad authority in deciding the site and the size of grid-supply solar projects that are allowed to move forward. Should it be on agricultural land, where many developers are seeking to build systems, or on brownfields and landfills, which the state’s Energy Master Plan proposes to convert to a beneficial use?

The answer to that question has huge implications.

To some, it could help New Jersey meet very ambitious goals to reduce its reliance on the fossil fuels that contribute to global climate change. Others argue that too many grid-supply projects -- systems that deliver electricity directly into the power grid, rather than for residential or business customers -- will only exacerbate the problems plaguing the state’s solar sector.

Here’s why: While the law passed this past summer aimed to discourage the building of solar systems on agricultural land and open space, it did allow developers with projects on that land to petition the state agency to qualify for solar credits, the price the systems earn for the electricity they produce, if the state agency approves the developer’s proposals.

By the most conservative estimates, the agency says more than 500 megawatts of projects are seeking approval to be built on farmland, according to Scot Hunter, renewable energy administrator for the BPU’s Office of Clean Energy. There may be up to 700 megawatts of projects seeking approval, Hunter said.

“There’s a huge amount of grid-supply projects trying to move forward,’’ warned Dennis Wilson, president of the Mid-Atlantic Solar Energy Association, a group representing solar companies in the region. Wilson and others fear that if all or most of those projects advance, it could create a glut of solar credits, which could ultimately crash the market.

With both lucrative state and federal incentives in place, more than 900 megawatts of new solar has been built in New Jersey over the past decade, mostly in the past few years. It has helped propel the state into being second behind only California in the number of solar installations.

The rapid growth, however, has had its downsides. So many solar credits -- also known as Solar Renewable Energy Certificates -- were being generated that it led to a steep decline in their price, which dropped from the mid-$600 range to the $80 range in recent days. The drop has spurred fears that investment in the sector could dry up.

In an initial stakeholder meeting on how to implement the law, several developers complained that the state, which initially encouraged grid-supply projects, is now reversing its course. By most accounts, grid-supply projects are less costly to ratepayers, who ultimately bear the cost of the move to clean energy, due to their sheer economies of scale.

Elliott Shanley, owner of solar firm PVOne, in Shrewsbury, told the agency at the meeting in Trenton on Friday, that the state used to encourage the development of grid-supply projects, until the passage of the bill this past July. He questioned the fairness, equity, and potential of stranded investment in those projects, which Shanley claimed could be as much as $200 million.

Pin Su, owner of Blue Sky Technologies in Edison agreed. “It was quite a shock,’’ he said. “All of a sudden there was a rule change.’’

With the legislative changes, others said many projects far along in the pipeline may falter, even though they have complied with rules, which suddenly have changed after years of negotiating the regulatory pipeline.

Tom Tuffey, vice president of Community Energy Solar, a Pennsylvania firm, noted his company has two projects, which have received many of the necessary approvals, including interconnection service agreements with the PJM Interconnection, a difficult approval to secure.

“Everything is done. It’s just we have to clear this up,’’ said Tuffey, referring to winning approval from the BPU to build its grid-supply projects.

For the BPU, the question poses huge issues. Not only could the proposed farmland grid-supply projects wreck havoc with its efforts to stabilize the solar sector, but also it faces difficult decisions about what type of incentives it ought to give developers of brownfields, closed landfills, and historic fill areas.

Because developing solar systems on those facilities is much more costly, the bill approved by lawmakers and Christie proposed to hand out incentives to make those projects happen. One of the ideas mentioned in legislative hearings -- to award bonus solar credits for those projects -- was roundly opposed by much of the solar industry in the stakeholder hearing this past Friday.

Stakeholders suggested that handing out bonus solar credits in a sector already oversupplied with SRECs would further cripple the market. “We think it is a really bad idea,’’ said Fred Zalcman, speaking for the Solar Energy Industries Association, an industry trade group.

More importantly, if most of the grid-supply projects move forward, it could swamp the solar market once again with an oversupply of solar credits, wreaking havoc with the price of the certificates and causing huge losses to homeowners and businesses that financed their systems expecting higher returns.

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