What Does It Really Cost Utility Customers to Subsidize Clean Energy?
Increasing transparency of power auctions could give ratepayers a better sense of what they're shelling out
How much is it costing utility customers to support the state’s aggressive clean energy goals?
Ratepayers already have coughed up $388 million in rebates and other financial incentives for theto promote solar panels, wind projects, and other renewable energy initiatives during the first years of the program, according to the latest figures compiled by the state’s Office of Clean Energy.
But that amount does not include what customers have shelled out since the state largely switched to a more market-based solar program -- again, largely funded by subsidies on customer utility bills. That figure is not as easily calculated, although the initiative fueled the tremendous growth of solar in New Jersey in recent years. In 2012, the clean energy program raised $309 million from utility ratepayers.
“We don’t know exactly what the cost is,’’ conceded New Jersey Division of Rate Counsel Director Stefanie Brand, who has been a proponent of bringing more transparency to the process. “It’s good for the public to know what they are paying.’’
The answer to that question might be forthcoming if the state decides to move forward on a recommendation by Brand and others to change anto determine which power suppliers will deliver electricity to much of New Jersey.
In those auctions, the suppliers must not only provide the electricity to keep the lights on, but also meet state-mandated requirements that a certain percentage of that power come from sources of renewable energy, like solar and wind.
Now, however, the New Jersey Board of Public Utilities isin the solar sector and energy industry, asking whether the state’s renewable energy requirements -- dubbed the renewable portfolio standard -- ought be carved out of the auction.
Beyond bringing more transparency to the auction, Brand said that taking the renewable energy requirements out of the process, could end up lowering rates for utility customers, as a consultant to the BPU also recommended.
Some stakeholders in the solar sector also have suggested taking the renewable energy requirement out of the annual auction, including the Solar Energy Industries Association and the Mid-Atlantic Solar Energy Industries Association.
“We support a separate procurement process [for solar credits],’’ said Dennis Wilson, president of the latter. He argued that the current auction process impedes developers from entering into long-term contracts to provide solar, a step he and others say reduces costs for consumers.
The existing auction system revolves around utilities every year buying one-third of the electricity they need for customers who haven't shopped around for different suppliers. The system has proved effective in averting price spikes when the cost of natural gas rises dramatically, as occurred after Hurricane Katrina disrupted drilling operations in the Gulf of Mexico.
The suppliers build into their auction prices the cost of supplying renewable energy, mostly from solar systems to date, to help meet the requirements of the state’s renewable energy portfolio. New Jersey hopes to have 20 percent of its electricity come from renewable sources by 2020.
What is uncertain is how much of a cushion power suppliers are building into their purchases of renewables in the annual auction process. “They are going to bid in the highest possible price to pay for [the solar credits],’’ Wilson said. “They are going to play it safe.’’
In its order seeking input on the proposal, the BPU noted much has changed in the solar sector in the past few years -- oversupply has driven down the prices that owners of solar systems earn for the electricity they generate, the governor signed into law a bill aimed at stabilizing the industry, and the market has been flooded with the so-called solar credits given to system owners for the power they produce.
The agency asked stakeholders to answer 11 questions concerning clean energy, but much of the wording seemed to indicate that it is leaning against any change in the auction process, a stance it has taken repeatedly in recent years.
Three of the questions ask responders to talk about risks associated with changing the auction system. Others ask whether changes might affect the competitive, retail market for electricity in New Jersey and if there are legal, regulatory, or other impediments to making the changes.