As State Ramps Up Reliance on Solar, It Looks at New Ways to Meet Goals

One possibility, renewable energy will get its own auction, increasing transparency for ratepayers

With the state ramping up its reliance on solar energy, there is now a push to overhaul how New Jersey goes about meeting its aggressive goals to increase its dependence on renewable energy.

The proposal, first floated by the New Jersey Division of Rate Counsel, would no longer require power suppliers to meet mandates, known as Renewable Portfolio Standards (RPS), in the electricity they supply to utilities in an annual auction conducted each February.

Instead, those mandates would be met in a separate auction solely focused on renewable energy. In testimony before the BPU, Division of Rate Counsel Director Stefanie Brand said the change would increase transparency, allowing ratepayers to get a better idea on how much they pay for cleaner, but more expensive sources of renewable energy, such as solar power.

The proposal also potentially could lead to lower prices, according to Brand, a stance backed up by a consultant to the BPU. The consultant, Boston Pacific, suggested a separate auction draws a different crowd of bidders than the one held in February designed to meet electricity needs for utility customers who do not shop.

“By directly challenging these suppliers to offer lower costs, we could see lower overall costs to ratepayers,” according to Boston Pacific.

The proposal apparently is backed by the BPU, which is expected to study the issue later this year.

“As the RPS increases, it will be all the more important to have more transparency about the costs,” said BPU President Bob Hanna at an agency meeting last month. “I think a thorough study is called for.”

The concerns are, in part, driven by a bill (A-2966), which aims to prop up the solar sector by increasing how much of the state’s electricity should be supplied by solar systems. The bill, now awaiting action by Gov. Chris Christie, would essentially double the amount of solar power needed to be purchased by suppliers, a move some suggest could increase costs to ratepayers by up to $400 million a year.

Under the current system, power suppliers must include in the electricity they bid in the annual auction in February the cost of purchasing renewable energy to meet the state’s aggressive RPS standards. The concern is no one knows what suppliers project the cost of meeting the RPS mandates is.

Suppliers can meet the mandates by purchasing Solar Renewable Energy Certificates (SRECs), which owners of solar systems earn for the electricity the arrays produce. Or they comply by making a payment, in lieu of purchasing an SREC. The payments, however, have become a non-factor since the price of SRECs has dropped by more than two-thirds in the past year.

In the past, the payments were viewed as setting a ceiling as to how much energy suppliers must pay to comply with strict solar purchase requirements. Others, including Brand, question whether they constitute a windfall payment to solar developers on the back of utility customers.

The Division of Rate Counsel also proposed shifting the RPS requirement to the state’s four electric utilities, a move Brand said could promote stability in the markets for renewable energy and allow the state to meet its goals at the lowest cost to ratepayers.

The proposal seemed to be endorsed by BPU Commissioner Jeanne Fox at the agency’s June meeting. “If I had to do it over again, I would move it to the EDCs [electric distribution companies],” Fox said, saying it would reduce the risk to suppliers.