Coalition Formally Asks State to Extend Utility-Sponsored Solar Installations

Tom Johnson | October 25, 2011 | Energy & Environment
Long-term contracts could bring much-needed stability to price of solar certificates

Echoing an argument heard repeatedly in recent weeks, a coalition of solar energy developers is formally asking the state to extend and to expand utility-sponsored programs to promote solar installations throughout New Jersey.

In a petition filed with the state Board of Utilities (BPU), the Solar Alliance, a coalition of 33 large solar companies, is asking the agency to allow three of the state’s electric utilities to solicit an additional 47.3 megawatts of solar capacity through long-term contracts with customers.

The proposal is the latest made by the solar sector to deal with a precipitous drop in prices for solar renewable energy certificates (SRECs), which owners of solar systems earn for the electricity the arrays produce. The decline has stirred a debate over whether the trend is evidence of a market crash or market correction.

With profitable incentives from the state and federal government, the solar sector in New Jersey has become overheated, with the supply of SRECs outstripping the demand, causing prices of the certificates to drop by more than half. Some argue that the fall in prices, jeopardizes the ability of certain solar system owners, such as school systems, to recoup their costs.

In ongoing discussions with solar executives, BPU officials, and investors, there appears to be a growing consensus that the way to reduce volatility in the market is to promote more long-term contracts for installing solar systems. These tend to hold SREC prices sharply below those sold on the spot market.

In the most recent solicitation offered by the three utilities, the program locked in prices for the certificates between $265 and $422, far below the more than $600 the certificates are selling for on the spot market. However, unless extended the program is due to expire by the end of the year.

While many solar executives have argued to ramp up the amount of solar energy that power suppliers must buy in any given year, they, and others, have said that alone will not reduce volatility in the marketplace. By promoting more long-term contracts, investors will be assured they will be getting their money back when they invest in solar projects, they argue.

That was the argument made by the Solar Alliance in its filing to the board. The utility loan program, involving Jersey Central Power & Light (JCP&L), Atlantic City Electric and Rockland Electric, the alliance argued, is progressively more competitive and delivers costs below the spot market.

Absent continuation of the programs by the three electric utilities, the alliance predicted a return to mostly a reliance on the spot market.

Beyond expanding the three utility-run programs, the solar sector, for the most part, has endorsed a continuation of a Public Service Electric & Gas (PSE&G) program to provide low-interest loans to solar developers to install solar systems around the state.

They also advocate 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 an advisory group to the BPU endorsed, as long as it is done on a one-time basis.

Lyle Rawlings, vice president of the Mid-Atlantic Solar Energy Industries Association, has urged the state to expand electric utility-sponsored programs so they account for 80 percent of solar installations in New Jersey, a step he argues would bring stability to the marketplace.

But he, and others, also want limits on how big grid-connected solar projects are approved in New Jersey. They fear the mega-solar projects would gobble up the finite amount of solar certificates, squeezing out many of the hundreds of smaller solar companies that have helped create a vibrant solar sector in New Jersey.