NJ May Call On Electric Utilities to Revive Solar Sector

Tom Johnson | January 17, 2012 | Energy & Environment
Office of Clean Energy mulls two options to halt slide in prices of solar certificates

It appears more than likely that the state’s electric utilities will play a key role in trying to revive New Jersey’s sagging solar sector.

Under a staff proposal developed by the Office of Clean Energy at the Board of Public Utilities, the two options now under consideration both envision the electric utilities expanding existing programs that help promote solar through long-term contracts with businesses and homeowners.

Each aims to halt a disconcerting slide in prices owners of solar systems earn for the electricity their arrays produce, a trend which some say could dry up investment in the sector, one of the few still growing segments of New Jersey’s economy.

The two options are similar but less aggressive than a bill the solar industry unsuccessfully sought to push through the lame-duck legislature earlier this year. The staff proposal, however, more closely dovetails with recommendations made in the recently adopted state Energy Master Plan.

That plan sought to stabilize the price of credits owners of solar systems earn for the power they produce, which have fallen by more than half since this past summer when they were being traded in the mid-$600 range. Its recommendations include requiring power suppliers to ramp up how much electricity they buy from solar systems.

If that happened, solar industry executives believe it would soak up an oversupply of credits, or solar renewable energy certificates, which have swamped the market because of lucrative federal and state incentives leading developers to invest heavily in the sector until the crash in prices.

New Jersey is second only to California in the number of solar installations, but the number of systems installed by the state’s four electric utilities account for less than half the overall capacity, which is in excess of 500 megawatts.

Nevertheless, the utility-sponsored projects, except for grid-supply projects developed by Public Service Electric & Gas, mostly involve systems installed under long-term contracts, which have yielded lower prices for the solar credits, a trend that is beneficial to utility customers, who end up paying for those credits in the end.

Under the staff’s proposal, if the state ramps up the rate that suppliers must purchase solar credits, the increase would be set aside exclusively for the utility-sponsored programs, a proposal proponents say would help drive downward pressure on credits owned by owners of solar systems, thus saving ratepayers’ money.

In the other option, the staff is suggesting the state not ramp up how much solar power electricity providers supply, but instead increase the capacity of the utility-sponsored programs, a measure it believes will also drive down the price of solar credits.

“We can throw in capacity and keep this market going,’’ said Michael Winka, director of the Office of Clean Energy at a meeting with solar executives last week.

There is much uncertainty about which option the state will choose. The staff is still conducting discussions with solar industry officials over what steps to take and any recommendation out of that effort would have to be approved by the five commissioners at the BPU. Complicating those discussions is the possibility the legislature might try to step in and propose its own solution to the problem.

In the next couple of weeks, there is likely to be much debate about locking ratepayers into long-term contracts as long as 15 years, given the volatility of energy markets.

In the past, it has not worked out to the benefit of consumers. During former President Jimmy Carter’s tenure, utilities locked into long-term contracts with independent power producers to buy electricity from plants aimed at lessening the nation’s dependence on foreign oil. The result is ratepayers will end up paying more than $5 billion in electricity costs higher than what the market delivered if those deals had not been in place.