Proposed Solar Projects Pose Test for Grid, SREC Program

Tom Johnson | June 2, 2010
NJ’s double-edged solar surge spurs clean-energy gains, spawns new debates

Forgive Atlantic City Electric if it’s complaining of a mild case of sun stroke.

The utility, serving half a million customers in mostly rural southern New Jersey, is facing requests to hook more than 500 megawatts of solar systems into its power grid. That has it telling applicants some of its power lines can no longer accept any new generation. Despite an aggressive solar program that places New Jersey behind only California in installations, the total installed capacity today is approximately 140 megawatts.

The solar revolution in New Jersey is a reflection of how successful the state has been encouraging alternative energy. It also demonstrates some of the pitfalls accompanying rapid growth.

Here’s one: With plenty of open land in the south, most of the large solar projects proposed by developers are in Atlantic City Electric’s territory, where the transmission and distribution power grid is not as robust as the one farther north because of its smaller population and industrial base.

SRECs Debated

There’s also new debate over what constitutes a transmission system and what constitutes a distribution line—an important distinction because only systems that hook into distribution lines qualify for solar renewable energy certificates (SRECs). The certificates are paid to owners of solar systems for each megawatt of electricity they generate and are the key to making most solar projects profitable.

The long line of projects, including the largest yet proposed in the state, is spawning another debate: Just how big should the average solar project be? The issue is critical because several megaprojects could end up swallowing up an entire year’s worth of solar certificates, which could in turn derail the state’s growing solar sector.

In Atlantic City’s franchise territory, more than 50 different solar projects have been proposed. That would create an additional 500 megawatts of capacity, according to Stephen Steffel, senior supervising engineer for Pepco Holdings Inc., the utility’s parent. They vary in size from as small as 1 kilowatt to 74 megawatts, he said.

Overpowered by the Sun

While the utility does not expect all of the projects to come on line, the deluge already is straining its distribution system, Steffel said, creating voltage fluctuations that can affect the reliability of the power grid. On at least three of its feeder lines, the utility has told developers it cannot accept any more capacity.

In other cases, if a project wants to move forward, Atlantic City Electric is telling developers they will have to pay for a new feeder line or transformer to accommodate the generation being added to the utility’s system, Steffel said.

“We’re not saying there’s no way to connect anymore. Whatever upgrades are necessary for the project, we tell them what needs to be done,” he said.

More important, at least to the solar developers, is the issue of SRECs and connecting to a portion of the power grid considered part of the utility’s distribution system.

“The problem with the current program is there is very limited availability for SRECs,” said Fred Zalcman, director of regulatory affairs in the eastern states for Sun Edison, which is a member of trade group Solar Alliance. “We think there’s an opportunity here to make more use of the distribution system by opening it up to bigger projects that would help bring economy of scale and lower costs to customers.”

The alliance has proposed to state regulators any project tying into a 100-kilovolt line and below should qualify for SRECs. That would allow solar projects for large industrial customers in the 5- to 7-megawatt range to qualify, so long as part of the power generated by the systems is consumed on the property.

Beyond Technical Questions

Others in the sector, however, worry whether the distribution systems are capable of handling all the new power that would be added to their lines if many of these projects move forward. “There are limits because of the state of our distribution system,” argued Pamela Frank, vice president of business development of Sun Farm Network.

There are issues beyond the technical questions, Frank said, including land use and economic considerations.

If the state relies on a few megaprojects to meet its solar goals, it would be discarding one of the main assets of solar energy — its value as a distributive resource. That means solar energy is often used very close to where it is generated, eliminating line loss in transmitting electricity long distances and the added costs of increased congestion on the power grid, she said.

“With solar, we have an opportunity here to have a very vibrant and growing industry,” Frank said. “It’s all going to be dictated by the average size of a solar system in New Jersey. For us, what we thought made a lot of sense was something in the range of 2 to 5 megawatts.”

Zalcman agreed a balance must be struck among the various players. “You cannot have sustained orderly development of a solar market in New Jersey if you have a few larger megaprojects sucking up all the SRECs,” he said.