Can Legislators Prevent Solar Sector From Flaming Out?

Little optimism that new bill can help stave off a crash in NJ's once vital solar industry

For the second time this year, lawmakers will take up a bill this week that industry advocates hope will stave off a collapse of the solar market in New Jersey.

The legislation (S-1925), in the works for several months, is up before the Senate Environment and Energy Committee on Thursday, the first step in what clean energy advocates hope is a legislative solution that will prop up prices for the power solar systems produce.

“If we don’t do something by June 30, then the game is over,” predicted Sen. Bob Smith (D-Middlesex), the chairman of the committee and a co-sponsor of the bill. “The chance of new solar being built in the next year or so is slim or none.”

At this point, however, there is not much optimism in the sector that the bill will stave off a crash, which will dry up investment by solar developers in the state.

The widely diverse solar sector has a range of problems with the bill — described as a work in progress by Smith — mostly dealing with whether the measure could stabilize the market so that it can continue to grow and create thousands of jobs in the state, second only to California in the number of solar installations.

For the first time this year, the price owners of solar systems get for the electricity their units produced traded for less than $100 last month, a steep drop from the more than $600 the so-called solar renewable energy certificates were earning last summer.

If New Jersey’s solar sector is going to continue to grow, many industry advocates say the price of the certificates needs to approach $250 at the least. How to achieve that goal, however, remains a major source of contention.

There also is growing concern over the cost of solar power, which has dropped dramatically in recent months, but is still more expensive than electricity produced from conventional sources. It is expected ratepayers, who ultimately pay off the price of the certificates, will spend $90 million for the credits in 2012, which will rise to $190 million by 2015, according to analysis by the state Board of Public Utilities submitted to the Office of Legislative Services.

The issue has been before lawmakers and the Christie administration for months, but little consensus has emerged. An effort to forge a legislative solution stalled at the eleventh hour of the lame-duck legislative session, largely over how many utility-scale solar projects to allow. That issue remains contentious.

The steep decline is blamed on an oversupply of the certificates because so many solar developers have rushed to take advantage of lucrative state and federal incentives to install the technology. The solar industry also is suffering from competing with cheap natural gas prices, which have made the technology even more uncompetitive with more conventional forms of electricity.

“The overriding dark cloud for solar is the cheap cost of natural gas,” Smith said.

The bill up for discussion this week tries to stabilize the market by a number of means, including accelerating over the next three years the amount of electricity power suppliers must buy from solar systems.

Under the bill, it also would allow up to 100 megawatts of grid-supply projects on landfills and brownfields in each of the next three years, a priority of the Christie administration, which wants to shift big solar farms away from agricultural land and open space.

To some in the sector, the state needs to throttle the rapid buildout of solar systems, not promote bigger projects that will continue to create an oversupply of solar credits.

Fred DeSanti, a spokesman for the New Jersey Solar Energy Coalition, is urging the committee to impose a two-megawatt cap restriction on the sector for the next three years.

“This market has to be disciplined,” DeSanti said. “Without that I have no confidence the market will not crash in another six months.” He described the bill as the industry’s last shot at getting it right. “In our opinion, we get it right this time or it is really over.”

Others were more optimistic. “The proposed pull forward seems to be a reasonable middle ground,” said Katie Bolcar, director of the Mid-Atlantic States Solar Energy Association. “A pull forward is important, but it is also important that we maintain a smooth growth curve to avoid boom-and-bust cycles every few years.”

Lyle Rawlings, a vice president of the Mid-Atlantic Energy Industries Association, a separate organization, however, has qualms about the bill, among them a concern about the ramp up over the acceleration of solar over the next three years.

“Our current analysis indicate the amount of acceleration isn’t quite enough,” Rawlings said. He also believes the 100-megawatt carve-out for large grid-supply projects is too much, making it difficult for others who cater to residential and small-business segments to survive.

The large grid-supply projects are a big hurdle in efforts to reach a consensus. Union officials have been pressing hard to secure support such projects, hoping they will provide employment for many of their idled members. Others say many of those proposed projects may never get off the ground because they are located on farmland in Atlantic City Electric’s territory and would require expensive upgrades to the power grid to move forward.