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Opinion: A Fix for NJ’s Solar Sector Could Be Right Across the Hudson

Running the numbers on New York’s ‘Sun Program’ reveals a less-expensive, more stable way to attain New Jersey’s ambitious solar goals

potter
Credit: Amanda Brown
R. William Potter

On February 29 2016, Lyle Rawlings, president of the Mid-Atlantic Solar Energy Industries Association (MSEIA), testified before the state Senate Environment Committee urging enactment of S-1707, the Renewable Energy Transition Act (RETA).

Near the end of the hearing, the committee chair, Sen. Bob Smith, asked Rawlings to prepare a report supporting his testimony that we can achieve the ambitious goals of RETA — which requires New Jersey to generate 80 percent of its electricity from renewable energy by 2050 – at a minuscule cost to ratepayers if New Jersey adopts the New York system that pays declining, fixed incentives to finance defined "blocks" of solar project development.

Four months later in June, 2016, Rawlings completed his detailed report.  Prosaically titled “MSEIA Comparison of NJ and NY Solar Incentive Programs,” the report should be required reading by public utility regulators at the Board of Public Utilities (BPU) and by every legislator and resident worried by the specter of global climate change and wondering how best to reduce planet-warming carbon emissions at an affordable cost

The MSEIA report tells how: Once you have navigated the many tables and graphs, the takeaway is clear, concise, and compelling: New Jersey should follow New York’s example and rely on a specified price tag to pay for promoting aggressive solar growth that is one-fifth to one-seventh as costly as this state’s “commodity pricing model,” which is loosely based on letting uncertain market forces  — supply and demand — determine how much a solar developer may be paid for solar-produced electricity, called "solar renewable energy credits" (SRECs).

As Rawlings summarizes his findings:

"Using NY’s MW Block Incentive, NJ can build solar from 2018 through 2030 [duration of the New York plan] at a growth rate that supports the 80 percent by 2050 goal [of RETA] for a total present value cost of $1.1 billion...The rate impact of the MW block incentives would peak at $0.002 per kilowatt-hour or 2/10ths of a cent per kilowatt-hour in 2030.”

In other words, while a billion dollars even if paid over a 12-year period, is still a lot of money, its actual ratepayer impact is almost invisible — an extra two-tenths of a cent per kilowatt-hour.

For a household consuming 500 KWH per month, that translates into paying an extra dollar — roughly 3 cents per day.  That’s pocket change for most of us, less than a cup of coffee once a month, yet enough to promote thousands of new solar projects around the state, reducing climate-changing emissions and other pollutants from power plants and providing thousands of jobs for solar installers along the way.

Now consider the cost for New Jersey if we continue to use the BPU-approved market-based system in which SREC payments can fluctuate wildly from one year to the next, thereby increasing the risk factor, which in turn induces solar project investors to demand a sky-high rate of return on each project.

According to the Rawlings' calculations, the total cost for New Jersey in present-value terms for supporting aggressive solar growth from 2018 to 2030 — using the current SREC commodity-market system — comes to $6.01 billion to $7.65 billion and has a rate impact of paying an extra $0.01 to $0.013/ per kilowatt-hour or 1.0 cent to 1.3 cents per kilowatt-hour.

For a ratepayer consuming 500 kilowatt-hours a month, that comes to an extra $5.00 to $6.50 a month — not a budget-busting charge for most residents, but much heftier than necessary to achieve RETA’s planet-friendly targets.

So, if you want to support the growth of clean and sustainable solar power in New Jersey, doing your part to combat the frightening forces of climate change, would you rather pay an extra 2/10 of a cent per kilowatt-hour or a dollar a month in your electric bill?  Or would you prefer to pay five to seven times more?

This should be a no-brainer for BPU regulators and supportive legislators.  True, as President Ronald Reagan famously said, “trust but verify”: The BPU should closely review the Rawlings report and hold hearings on whether — as California and other states have done — to abandon the SREC (pronounced "S wreck") commodity-pricing model in favor of the New York “Sun Program” which substitutes simplicity and certainty for complexity and uncertainty, and therefore delivers far more solar bang for the buck.

R. William Potter is a partner in the Princeton-based law firm Potter and Dickson. The views expressed are his own and do not necessarily reflect the views of the firm or any client.

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