Administration Offers Solar Sector a Patch — Not a Permanent Fix

Plan should ease residential and small-business market, but legislative solution still sought

The Christie administration yesterday threw a lifeline to the floundering New Jersey solar sector, but even it acknowledges that more needs to be done to fix the once flourishing industry.

In approving an extension of utility-sponsored solar programs, the New Jersey Board of Public Utilities took action to help revive the residential and small business solar market, a sector that has been hammered by a sharp decline in prices owners of solar arrays earn for the systems on their homes and businesses.

While helping stabilize the market for residential and small businesses seeking to install solar systems, BPU President Bob Hanna said the plan reflects a lifeline at best, saying a legislative solution is the real way to right the market.

“I’m optimistic a legislative solution that works for everyone can be achieved,” Hanna said at the agency’s meeting in the Statehouse Annex, referring to a bill with more aggressive targets moving through the Legislature. ”Having said that, it is prudent to move forward [with the staff’s straw proposal].”

The straw proposal, developed over the past several months with the four electric distribution companies, solar executives, and others would expand upon existing utility-sponsored programs that helped homeowners and businesses develop solar installations.

The recommendation to the five commissioners broadened the program from what was originally proposed. The staff initially recommended developing 120 megawatts of new solar capacity through the program, which typically involves long-term contracts and loans, but that level was criticized by industry as falling far short of what is necessary to deal with an oversupply in the market.

Instead, the staff upped the set-aside for new solar from the utilities to 180 megawatts over three years, a level closer to what solar industry officials had been suggesting. They argued the state needs to ramp up how much solar is to be installed in New Jersey — given the rapid build-out of solar installations in the state, a trend driven by lucrative state and federal incentives handed out to the industry.

How aggressive is that build-out? In January, 84 new megawatts of solar were installed in New Jersey. In 2001, when the state first began promoting solar power, 9 kilowatts of solar were installed in the entire year, according to Michael Winka, director of the Office of Clean Energy in the BPU. In January, every five minutes the state installed 9 kilowatts of solar, Winka said.

With so much solar being installed, the price of credits homeowners and businesses earn for the electricity their systems generate has dropped dramatically since last summer from more than $600 to less than $200, even falling below $100 at one point. If prices for the credits continue to fall, the primary source of financing solar will dry up, according to industry advocates.

“New Jersey’s solar industry has been a victim of its own success,” Hanna said, who added a legislative solution presents the best opportunity to develop a comprehensive and durable solution to fix the problems ailing the sector.

Some of the problems with the sector can only be fixed by the Legislature, he noted. Most people agree the state needs to ramp up how much solar electricity must be part of the overall generation mix provided by electric suppliers. It already is about 1 percent of the electricity mix in New Jersey, according to Winka, an amount that might be the highest in the nation for solar generation.

To deal with that issue, a bill approved by the Senate Environment and Energy Committee aims to protect ratepayers, who ultimately bear the cost of the solar program, by reducing penalties paid by those who comply with the requirement to buy increased electricity from solar systems Those penalties serve as a ceiling on the cost of solar, but also influence the price of solar renewable energy certificates.

While the changes will not solve all of the solar sector’s problems, some industry advocates were elated at the board’s move. “That’s awesome,” said Fred DeSanti, a spokesman for the New Jersey Solar Energy Coalition. “This is very important for residential solar development. They will have the opportunity to create a stable source of funding for these projects.”

Other BPU commissioners said the approval of the program will send a strong signal that New Jersey is committed to making its efforts to promote solar succeed. “All we want is the enhancement and growth of this industry,” said Commissioner Joseph Fiordaliso, adding that the agency will not sit back and allow the sector to disintegrate.

It is uncertain how many of the four electric utilities will participate in the program, a concern to Commissioner Jean Fox, who argued it should be made mandatory instead of voluntary. To date, both Atlantic City Electric and Rockland Electric have indicated they would not participate in the program.