Stepping Up Solar Production Before the Administration Slows It Down

A new bill would boost the amount of solar power produced in New Jersey in hopes of stabilizing the market

The state is moving to accelerate how much solar power will be produced in New Jersey, a step it hopes will rejuvenate a sector coming under increasing scrutiny from the Christie administration.

In releasing a bill (S-2371) to bump up how much electricity the state needs to produce from solar systems, the Senate Environment and Energy Committee yesterday hoped to stabilize the burgeoning market for solar in New Jersey.

The legislation was, for the most part, endorsed, if at times only lukewarmly, by an increasingly diverse and fractured solar industry. The bill that emerged from the committee was far different from the one that was originally introduced and sought as its main goal to foster the development of long-term contracts for people who buy solar systems, a move that many argue would bring down costs.

That cost appears to loom as a new conflict between the Democratic-controlled legislature and Republican administration, especially given recommendations in a recently released Energy Master Plan (EMP) suggesting the state slow down its pace of development of new solar systems. New Jersey is second in the nation in the number of solar systems, with more than 8,000, an achievement largely built on subsidies paid by electric and gas customers.

With New Jersey saddled with some of the highest energy costs in the nation, the administration has made reducing electric bills a top priority. But Democrats in the legislature have resisted efforts to scale back the state’s solar goals, which would essentially require solar systems to produce the equivalent of five nuclear power plants by 2026. With such ambitious goals comes a big price tag, a cost a few business lobbyists and even some solar advocates question whether consumers could stomach.

The bill that advanced from the committee would accelerate how much electricity power suppliers would have to buy from solar systems, a step that drew opposition from the Board of Public Utilities (BPU). The agency wants to explore if the current solar subsidies could be diverted to more efficient uses. It also wants to subject the subsidies to a cost-benefit analysis, according to Ken Sheehan, chief counsel to the BPU.

That drew an incredulous reaction from Sen. Bob Smith (D-Middlesex), the chairman of the committee. “It’s the only thing creating jobs in New Jersey,” Smith told Sheehan. “Go back to the BPU and tell them to get their heads out of the sand and tell them ‘this is what we should be doing.'”

In the past two months, the prices of solar renewable energy certificates (SRECs), which are earned for the electricity systems produce, dropped nearly by half from $650, before rebounding. Smith and others fear the supply of the SRECs is outstripping the demand, a trend that could lead to a crash in the market as has occurred in other states.

The bill aims to avoid that prospect by increasing the amount of electricity produced from solar in the state’s solar renewable portfolio standard (RPS). Instead of having to produce 543 new megawatts from solar systems in 2013, the new requirement would jump to 718 megawatts from solar. One megawatt produces enough power for about 800 homes.

“Right now, it looks like the accelerated RPS is the way to protect the market from crashing,” Smith said.

However, if the bill goes through as currently drafted, it could wind up undermining a different emerging market in the state — selling cheaper electricity to residential customers than they currently pay their electric utility. Because natural gas prices have dropped so much, it has given retail energy suppliers an opportunity to undercut prices offered by the utilities, affording residential customers a choice for the first time in the decade since the state deregulated the sector.

Murray Bevan, counsel to the Retail Energy Supply Association, said the accelerated pace for the solar RPS could cost his members tens of millions of dollars because they would be saddled with the expense of going out and buying much more SRECs than they had anticipated when they entered into three-year contracts to supply customers.

“What you are doing is really hurting the retail energy market,’’ said Bevan, who asked that the state delay picking up the pace of solar requirements for two or three years. “It places our guys at a competitive disadvantage,” he said.

Even some solar advocates urged the committee to hold off action on the bill. Fred DeSanti, a lobbyist representing the New Jersey Solar Coalition, said the greatest threat to the state achieving its ambitious solar goals is to have “too much success, too soon,” all of which would be borne by ratepayers.