Despite Some Optimistic Assessments, Doubt Still Haunts Solar Sector

Tom Johnson | October 24, 2011 | Energy & Environment
With prices for solar certificates still unsteady, industry group questions if this is a correction or a crash

Scott Weiner is troubled by a lot of the rhetoric he hears about New Jersey’s efforts to promote solar energy, particularly what he called the pejorative terms used to describe incentives and subsidies supporting the sector.

According to the past president of the Board of Public Utilities (BPU), “Where we are today should be a cause of celebration.”

Weiner made that statement to a group of state officials and industry executives at a meeting in Bordentown on Friday, where the chief topic was how the state should finance its programs to spur greater reliance on clean energy sources, such as solar, and ways to reduce energy consumption in the state.

“There’s a market; there’s a demand,” said Weiner, who is also a former commissioner of the state Department of Environmental Protection (DEP) said. “It’s successful.”

Plummeting Prices

That argument has been somewhat overshadowed by a steep decline in prices for solar renewable energy certificates (SRECs), which owners of solar systems earn for the electricity they generate. The cost of those certificates is ultimately passed on to ratepayers by their energy suppliers. Businesses and homeowners also pay a surcharge on their electric and gas bills to fund more than $300 million in clean energy programs.

The expense of both has triggered criticism from businesses in New Jersey, which pay about 64 percent of the money raised for the programs, as well as from the Christie administration, which questioned the high costs in a draft energy master plan released this past June.

Still, even according to the draft plan, the cost of the clean energy programs is barely noticed by ratepayers. It raises electricity costs by less than three-tenths of a cent for residential electric customers and far less for residential gas customers.

Weiner and solar advocates told an advisory group to the BPU to not lose sight of the big picture, mentioning the benefits solar systems bring to New Jersey. These include lowering peak load demand at times when energy prices are highest and providing a distributed fuel source, which reduces congestion on the power grid, another crucial way to lower energy prices for consumers and businesses.

Another benefit: jobs. With more than 10,000 installations, New Jersey is behind only California in the number of solar arrays on homes and businesses, a growth over the past decade that has created an estimated 17,000 jobs, according to Lyle Rawlings, vice president of the Mid-Atlantic Solar Energy Industries Association, an industry trade group, and the owner of a solar firm based in Flemington.

Nonetheless, Rawlings said the sector needs help from state government.

“What is happening in New Jersey is a question of whether this is a market correction or a market crash. No one knows,” said Rawlings, who urged state officials to take steps to halt the decline in prices for the certificates.

While many worry about the steep drop in SREC prices, others argue that is a good thing, because as solar costs drop, so does the expense borne by residents and businesses.

Oversupply and Demand

The volatility in New Jersey’s solar market—and the drop in prices– has been blamed on an oversupply of SRECs, a situation most attribute to the lucrative incentives offered by both New Jersey and the federal government in the form of subsidies and tax credits, which have attracted many investors to the state looking for a quick return on their investment.

Against that backdrop, BPU President Lee Solomon has suggested funding clean energy programs from a revolving loan fund, a step he and others have said could lower the subsidies ratepayers pay to finance solar projects and ways to cut energy use. That proposal, however, got little support from a hand-picked advisory group the agency chose to explore new ways of financing clean energy efforts.

The group concluded that such a revolving loan fund would have to be financed by a large infusion of capital, a big hurdle given the state’s current budget constraints and a drying up of federal money, which has helped other states finance such funds.

Rawlings and other industry officials are pushing the board to accelerate the requirement that energy suppliers need to purchase more of the electricity they supply to customers from solar systems, an approach the advisory group endorsed, as long as it is done on a one-time basis. They also want to expand electric utility-sponsored programs that encourage installation of solar systems.

“This is all about jobs,” said Joe Joyce, a vice president at Ray Angelini, Inc., an electrical contracting and engineering firm. He noted that his company has 40 projects that are on hold because investors lack the confidence to invest in solar.

Beyond accelerating how much solar energy suppliers must purchase, Joyce urged the board to begin segmenting big grid-connected solar projects from those that are deployed on small businesses and homes. This, he said, would prevent an oversupply of certificates.

After the conclusion of the meeting, Solomon said the board is considering all options on what it needs to do with the solar sector.