With many in the solar industry worried about its prospects in New Jersey, the state will convene a stakeholders’ meeting this week to focus on what, if anything, should be done to stabilize a sector some say is in danger of collapsing.
The session, to be convened by the state Board of Public Utilities (BPU) in Trenton on Thursday, comes at a time when the price of solar renewable energy certificates (SREC), the primary means of financing the installation of new systems, has fallen precipitously.
The cause, most agree, is an oversupply of the certificates resulting from a flood of investment by developers large and small seeking to take advantage of generous ratepayer subsidies and lucrative federal tax incentives to cash in on the fast-growing solar program. With an oversupply of the certificates, there has been steep decline in the prices they earn for producing electricity from the solar systems.
On Friday, the certificates, which had been trading on the spot market for as high as the mid-$600 range a few months ago, were down as low as $150 before rebounding later in the day to a high of $200, according to Howard Fleisher, managing partner of NJSREC.com, a solar consulting firm.
A Dilemma for the Administration
The issue presents a difficult dilemma for the Christie administration, which expressed concerns about the high price of solar power in its revised Energy Master Plan (EMP) released this past June. While the falling SREC prices are welcomed because ultimately ratepayers bear the cost of paying off the certificates, if they drop too steeply it could disrupt an industry that has created thousands of jobs in an otherwise sluggish economy.
“Without some measure being taken, the next two years could see sub-$200 SREC prices,” predicted Jeffrey Milanaik, a member of the New Jersey Solar Energy Coalition. “With a depressed market, two-thirds of the businesses will be out of business.”
That would undermine the state’s efforts to grow a green economy. To date, although New Jersey is making a push to develop offshore wind and attract the manufacturing segments that would help it grow, its most successful efforts have been in creating a vibrant solar sector. More than 10,000 solar installations have been deployed in the state, second to only California.
What’s to be done? That essentially is the purpose of the stakeholder meeting, which originally was scheduled to focus on the electric utility-run solar schemes that are set to expire soon. The program, involving utility-sponsored solar installations financed by long-term contracts with customers, locked in deals to develop 21 megawatts of solar capacity earlier this summer. More contractors bid to participate in the program than ever before in a solicitation held last month.
Many solar industry officials, such as Lyle Rawlings, president of Advanced Solar Products in Flemington, favor extending the program, citing a bill passed by the Senate (S-2371), which, among other things, would require 80 percent of the certificates to go to utility-run programs with long-run contracts.
The advantage of long-term contracts is they give price certainty to both owners of the systems and investors. In the most recent utility-run program, SREC prices were locked in between $265 and $422, far below the more than $600 the certificates are selling on the spot market.
Sending a Message
More importantly, Rawlings argued the state needs to send a message that it will manage the solar market, either through a floor price for the certificates, as some have suggested, or through a structured market run by the electric utilities involving long-term contracts.
“We need some controls on the pace of construction,” Rawlings said.
In inviting stakeholders to the meeting, the Office of Clean Energy suggested one way to solve the oversupply issue is to establish a floor ceiling (the lowest price) for the certificates. Other industry officials support another option, which would accelerate how many solar certificates power suppliers would have to buy next year to meet a legislatively mandated target for solar energy.
That approach is favored by the New Jersey Solar Energy Coalition, which has engaged a consultant to gauge its effectiveness in stabilizing the market, according to Milanaik. Whether the state agency will endorse that approach is uncertain, since it opposed the bill when it came up for a vote in the Senate Environment and Energy Committee this summer.
Nevertheless, the debate at the session this week should help frame whatever measures are taken by the administration and lawmakers this fall to deal with problems facing the solar sector.