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Opinion: Nuclear Subsidy Bill Could Spell End of Solar Sector

Left unchanged, the bill that's slated to come before the Legislature will wipe out the mechanism used to finance solar systems, without putting anything in its place

Credit: Amanda Brown
R. William Potter

Seemingly lost in the high-octane squabble over legislation to subsidize operation of PSEG's nuclear power plants is the potentially fatal harm that a recent version of the bill will do to solar energy's future in New Jersey. Put bluntly, there may not be any, unless the bill, S-877, is quickly amended, since passage is predicted by March 26.

This collateral damage is threatened despite Gov. Phil Murphy's campaign commitment to promote solar and its critical role in preventing the worst impacts of global climate change — such as the flooding of much of the Jersey Shore due to rising sea levels triggered by global warming and our dependence on fossil fuels.

A recent study by the Union of Concerned Scientists (UCS), titled "New Jersey Faces Chronic Inundation," finds that if current trends continue, some 21 Jersey Shore towns will be "chronically flooded" by 2035. And by 2100, more than 100 New Jersey coastal municipalities — including much of Newark and Elizabeth — will face the same watery fate, "second only to Louisiana," according to the UCS study.

Despite these grim scenarios, the public debate swirling around the nuclear bailout bill has focused attention almost entirely on the direct cost of saving nuclear — estimated at $300 million a year or about $40 in higher annual residential electric bills — as an alternative to burning much more natural gas piped in from the fracking fields of Pennsylvania.

At the same time, this single-minded focus on cost now includes a drumbeat of attacks on the cleanest energy source of all — solar-photovoltaic electric — which already provides zero-emission power disbursed among 80,000 installations on the roofs of Garden State homes, schools, houses of worship, and hospitals, as well as reclaimed landfills and even atop parking lots.

Solar at risk

The total value of this investment in Jersey solar comes to approximately $9 billion, and all of it is placed at risk. That's because S-877 caps total costs of all renewables at 7 percent of a typical residential bill through 2021, which then drops to 5 percent thereafter. Those "cost caps," seemingly plucked from thin air, could shut down the solar industry in New Jersey and lead to the bankrupting of countless projects — since that 7 percent cap will be reached by next year, according to the Mid-Atlantic Solar Energy Industries Association (MSEIA).

So if S-877 is not fixed before an expected vote at the end of the month, say goodbye to 7,000 to 10,000 jobs in the solar sector, and forget about Murphy's promise to substitute renewable energy (solar plus offshore wind) for 100 percent of our electric power needs by 2050.

But that's not the worst of the collateral damage from this misplaced focus on the allegedly high cost of electricity in New Jersey, which by some measures is not really so high. New Jersey is ranked 39th among the states when cost is measured in electric bills and not simply utility rates. And even then New Jersey is ranked at 10th in electricity rates.

However, due to the wasteful way that most solar projects in New Jersey have been financed — through the sale of solar renewable energy credits, or SRECs, that enable utilities to meet their Renewable Portfolio Standards (quotas) — most of those 80,000 installations will be at risk of bankruptcy.

Lower-cost financing needed

That's because the bill does away with the SREC financing system without providing for a lower-cost substitute, such as awarding contracts through competitive bidding or offering feed-in tariffs, solar financing schemes that are now used in other states and embraced in much of Europe, where renewables have come to prominence.

At the same time, we need to take care of the legacy cost of outdated SREC-financed projects. (New Jersey is the last major solar market still clinging to this outdated system of incentives.) Otherwise, thousands of solar customers — including school districts, churches, and homes studded with gleaming solar panels — will lose their investments, which they made in expectation of earning a steady stream of SREC payments for 10 to 15 years.

So, where do we go from here?

For starters, we need to balance the equation, looking not only at the direct or out-of-pocket cost of promoting solar — or, for that matter, nuclear as well — but also by recognizing the societal benefits (called "positive externalities" by economists) of renewable energy. Solar doesn't just eliminate climate-changing pollutants (carbon and methane), it helps to suppress the peak-power cost of electricity, otherwise paid in everyone's electric bills, since the sun shines brightest when electricity demand (and therefore cost) is highest.

Above all, Murphy needs to be firm in his commitment to growing more renewable energy in New Jersey, coupled with plucking the low-hanging fruit of energy efficiency to reduce overall power needs.

If the governor is thus committed, he will insist on fixing S-877 before it comes to a floor vote in the Legislature at the end of the month. Or he can ask that its sponsors remove the solar provisions and address how to reform solar financing in a separate bill.

In this way he can vault New Jersey back into national leadership in advancing renewable energy, a place once held by the Garden State as the "California of the East" — before the backsliding of the Christie years.

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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