Solar In NJ Not So Dim After All, As Installations Boom

Tom Johnson | June 20, 2012 | Energy & Environment
Trade group: In first three months of year, New Jersey installed more systems than any other state in nation

Despite all the gloom and doom talk about the solar sector, New Jersey installed more solar systems in the first three months of the year than any other state in the nation.

New Jersey installed a total of 174 megawatts of solar systems in the first quarter of 2012, or nearly one-third of the total arrays put in across the country, according to the U.S. Solar Market Insight, a publication put out by the Solar Energy Industries Association, an industry trade group.

More than 18,000 solar systems came on line in the first three months of the year, the report said, or a total of 506 megawatts in the U.S. It marked the second highest quarter ever in the U.S., according to the study.

So much for talk about a crash in the solar sector in New Jersey, a prediction many solar advocates have voiced in the wake of a fall in prices of solar credits owners of so-called photovoltaic systems earn for the electricity their arrays produce.

The drop in prices has triggered a legislative response to help prop up the sector by accelerating the amount of solar electricity that must be purchased by power suppliers, a move clean energy advocates say will stabilize the market but critics say will only increase electric bills for consumers.

While industry executives said the amount of solar installed in the state was stunning — given the economics underlying the sector — critics who complain about the cost of solar were not surprised.

“It’s because we’re giving ratepayers’ money hand over fist to them,” said Hal Bozarth, executive director of the Chemistry Industry Council, one of the more vocal critics of the solar program, which relies on electric customers to pay for the solar credits on their utility bills. “It’s not because the sun is shining more here.”

Those costs will increase under legislation now pending in both houses. The bills would essentially double the amount of solar electricity power suppliers must buy, a step that would increase costs to consumers by at least $300 million a year, and possibly as much as $400 million, according to estimates by the Retail Energy Supply Association.

The association is worried the legislation’s accelerated ramp up in how much solar will be required in New Jersey will fall largely on their members, who sell electricity to customers who shop around for cheaper power. Most of their contracts tend to be three years in length, which factor in how much renewable energy they must purchase to comply with state mandates. When those mandates change, so do their costs, which ultimately fall on their customers.

There was some good news in the solar study. Costs to install solar continue to drop, falling by an overall average of 17.2 percent nationwide, although solar executives said the decline in New Jersey is more in the range of 30 percent because of the intense competition here.

“Certainly, people are still building and the costs are going down,” said Stefanie Brand, director of the New Jersey Division of Rate Counsel, which supports the solar program, but has expressed concerns over the cost to ratepayers. New Jersey has more than 15,000 solar systems at a total cost of $363 million.

The rapid build-out in New Jersey, in spite of the fall in prices by more than two-thirds in solar credits, begs the question of whether the market will correct itself, a proposition some in the solar sector believe will never happen.

“It’s astonishing,” said Lyle Rawlings, a vice president of the Mid-Atlantic Energy Industries Association. “The pace of construction is out of control. It needs to be brought under control.”

Rawlings and other solar industry officials have urged lawmakers to include in the pending solar bill a mechanism to throttle new installations if the industry continues to overbuild, a trend that has led to an oversupply in the number of solar credits.

“Some believe the market will cool off on its own,” Rawlings said. “We don’t believe that.”

Michael Flett, president of the Flett Exchange, a brokerage firm that buys and sells solar credits, believes a lot of the current work going on in New Jersey stems from contracts signed at the end of last year, as well as long-term contracts with local electric utilities.

Even though the returns on the solar credits are not as high as they used to be — they ranged in the mid-$600 range last summer and have fallen to around $130 — Flett said some developers probably believe other incentives are enough to make the project profitable. They include federal tax incentives and an accelerated depreciation rate.

In any event, the Assembly may amend a bill (A-2966) on the floor tomorrow, according to its sponsor, Assemblyman Upendra Chivukula (D-Somerset).

“We’re happy the industry is still strong,” Chivukula said when asked about the institute’s report. “We want to keep giving them incentives so they continue to build.”