Solar Growth Spurt: Good News — At Least for Now

Some argue that record installations only reflect a last chance to cash in on federal incentives

Speculation about an imminent collapse in the solar sector in New Jersey seems to be off the mark, at least for now.

Last month, the state set an all-time record for the number of solar systems installed, with approximately 84 megawatts of new capacity developed. That brings the total installed capacity in New Jersey to nearly 654 megawatts.

The development comes at a time when some in the industry worry the flourishing solar business in New Jersey could be headed for a fall, largely due the steep drop in prices for the electricity the systems generate.

The surge in new solar installations raises the question: Is the market stabilizing or is this burst of activity simply a reflection of the fact that profitable federal incentives are running out soon?

Despite a continuing drop in the price of solar renewable certificates, the primary means of financing the installation of solar systems, new projects continued to be built. The price of the certificates, which owners of solar systems earn for the electricity they produce, have fallen from more than $600 this past summer to about $190 on the spot market this year.

Most people in the industry blame the drop in prices on an overheated market, one that lured investors with attractive state and federal incentives, particularly a federal tax cash grant, which expired at the end of December.

With the end of the federal grant, they argue, investment will start to dip, a trend that other data compiled by the state seems to reflect. For the first time in six months, the solar capacity of projects in the pipeline fell in January, dropping from 618 megawatts to 548 megawatts.

New Jersey Board of Public Utilities President Robert Hanna said the jump in the number of solar installations is a reflection of developers taking advantage of the federal tax cash grant. “You’re seeing the tail end of the overheating of the market,’’ Hanna said. “It’s not an indication going forward.’’

Hanna noted that the new Energy Master Plan calls for increasing the amount of solar should be built in New Jersey in the short term. Unless the industry can come to an agreement on that issue, Hanna said the state would likely see a slowdown in the number of solar project.

“What you see now is new projects taking advantage of the federal cash grant rushing to get done,’’ said Fred DeSanti, a lobbyist who represents some solar developers. “At $190 a megawatt, it is not going to support projects.’’

Unless a correction is made in the market, DeSanti said the state could go through a two-to-three-year period when there is little investment in solar projects. “Otherwise a lot of employees are going to be looking for work in the next few months,’’ he said.

Both the Christie administration and lawmakers are seeking to address the issue, but have been unable to come to any agreement, in part, because of the diverse nature of the solar industry in New Jersey. A big hurdle in reaching a consensus is how much solar should be built on farmlands in South Jersey, a push the administration opposes, but is favored by unions seeking to get electrical workers back on payrolls.

On the other hand, the rapid buildout, and possible ramping up of requirements to have power suppliers buy increased amounts of solar electricity as a way of dealing with an overheated market, raises concern among business and consumer advocates. They question what the buildout means to ratepayers, who ultimately bear the brunt of the cost by paying for the solar credits on their utility bills.

Some have argued the state should proceed cautiously, 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 risk and made the biggest investment: ratepayers,’’ said Stefanie Brand, director of the Division of Rate Counsel, in a filing with the BPU. Brand could not be reached for comment yesterday.