Mixed Reviews for Office of Clean Energy’s Solar Plan

Tom Johnson | January 27, 2012 | Energy & Environment
Utilities balk at agency’s options for stabilizing solar sector

sola panels
If a state agency was expecting to quickly reach a consensus on how to fix New Jersey’s solar market, it may prove as elusive as legislative efforts turned out to be earlier this month.

The Office of Clean Energy’s two options for stabilizing the solar sector won mixed reviews at best from some of the state’s utilities, which would be asked to extend programs that helped residents and businesses put solar systems in place through long-term contracts.

Specifically, the agency plans to advise the expansion of solar loan programs and that suppliers increase the amount of solar electricity power they buy.

The office is preparing a recommendation to the Board of Public Utilities whether to expand the solar loan programs for the state’s four electric utilities, but only Public Service Electric & Gas is enthusiastic about the prospect.

Both Atlantic City Electric and Rockland Electric flatly oppose any efforts to extend the program, which some in the solar sector believe holds the best chance of halting a slide in the price of solar credits. The credits, or solar renewable energy certificates, pay owners of solar systems for the electricity they produce, but the price they fetch on the spot market have fallen dramatically since this summer.

The steep drop in prices — they have fallen from the mid-$600 range this past summer to less than $200 in recent days — worries many in the industry that investment could dry up in what has been one of the few sectors experiencing job growth in New Jersey.

It is not happening yet, however. In December, 36.3 megawatts of new solar capacity were installed in New Jersey, bringing the total installed capacity to more than 565 megawatts, well above what the state has mandated as how much of New Jersey’s electricity should come from solar systems. Another 622 megawatts of capacity is in the pipeline, according to data from a consultant hired by the state.

All of this activity spurs concerns from business and consumer advocates who question what this build-out means to ratepayers, who ultimately bear the brunt of the cost by paying for the credits on their electric bills.

Most blame the decline in prices on an oversupply of the credits created by a rush to take advantage of the steep prices the certificates were earning until this summer and lucrative federal tax incentives to promote development of solar, some of which expired last year.

But in comments filed with the agency, there are still wide fractures among industry officials, utility executives and other stakeholders on what the state should do to stem the drop in prices, if anything. The divide also was apparent at a stakeholders meeting yesterday in Iselin.

The New Jersey Division of Rate Counsel, an agency that represents the interests of utility customers, cautioned that the state should move slowly, if at all.

“Recent decreases in SREC prices are not a problem, but instead represent a clear and viable sign that New Jersey’s past policies in developing competitive solar energy markets are bearing fruits and providing rewards to those that have taken the biggest and made the biggest investment: ratepayers,’’ said Stefanie Brand, director of the division in a filing with the agency.

Brand also took issue with the other option suggested by the Office of Clean Energy — to ramp up how much solar electricity power suppliers must buy in the immediate future. Unless, there is a corresponding decrease in how much suppliers buy solar power in the future, her office could not agree with a so-called increase in the renewable portfolio standard for solar, considering ratepayers are committed to a potential exposure of between $6 billion to $7 billion under the current law.

The Sierra Club argued otherwise. It said the decline in prices of solar panels, which dropped nearly 70 percent between 2009-2001, according to some estimates, will lower prices and benefits to New Jersey customers.

That downward price spiral worries some utility executives. Rockland Electric, in its comments, said long-term contracts under the utility programs, typically running at least 15 years, shift the price risk to customers.

In its filing, it cited the experience of long-term contracts entered into in the 1980s with so-called non-utility generators, which ended up being significantly more expensive than market power prices, raising costs for consumers.

“Continuing or enlarging the electric distribution company SREC program risks a similar outcome,’’ the utility said.

Atlantic City Electric also opposes extending the solar program by the utilities, saying the solar market in New Jersey is now capable of moving forward without additional support and subsidization by ratepayers.

Jersey Central Power & Light was more ambivalent. It said it did not “formally oppose’’ expanding the programs, providing they are similar in structure and form of the current utility-run programs.

PSE&G backed the extension, no surprise given its already half-billion dollar investment in solar energy. It, however, faces its own problems, with the BPU recently deciding to launch an inquiry into whether its Solar 4 All program defrauded customers by billing them for inappropriate expenses.