Stakeholders Look to Get Solar Sector Off Roller Coaster

Tom Johnson | February 19, 2013 | Energy & Environment
Initial meeting of state officials, industry executives explores ways to tame price fluctuations that have scared off investors

With growth in the solar industry possibly slowing, executives and state officials have begun debating how to end the boom-and-bust cycle that has characterized the sector in recent years.

The discussions, mandated by a law enacted last summer, directs the New Jersey Board of Public Utilities to determine how to stabilize the market, which has seen wildly fluctuating prices in the past 18 months.

That rollercoaster ride is drying up investment in solar in New Jersey, worrying policymakers and advocates that the once-flourishing industry that created thousands of new jobs and hundreds of new businesses across the state is in peril.

The issue is not only important to those businesses, but also could affect consumers, who end up subsidizing solar installations with tariffs added to their utility bills. Depending on the state’s actions, those bills may rise or fall.

So far, no clear answers have emerged — at least not from the first stakeholder hearing convened last week.

In part, the uncertainty is caused by recent trends in the sector over the past few months, a timeframe some industry executives say is far too short to draw any firm conclusions.

“The market is really young,’’ said Katie Bolcar-Rever, director of the Mid-Atlantic Solar Energy Industries Association, a trade group representing solar developers.

“We don’t have a lot of data,’’ she noted.

At the end of January, 17.8 megawatts of new solar installations were deployed in New Jersey, according to the BPU’s Office of Clean Energy, a slight increase over December’s total, but far off the 40 megawatts of new capacity added when the sector was red hot.

In another apparent sign of slowing, the number of projects in the pipeline dropped by 13 megawatts in January.

The primary factor in the slowdown is the steep drop in prices that owners of solar systems earn for the electricity their arrays produce. Known as solar renewable energy certificates (SRECs) in the jargon used by the state, their prices have plummeted from well above $600 to as low as $80, before rebounding to as much as $120 this month.

This volatility has made it much more difficult for industry salespeople to convince homeowners and businesses to risk an investment in solar systems, according to industry officials.

Some suggest that the way to stabilize the sector is to encourage more long-term contracts, as the state’s four electric utilities have done. These deals typically pay much lower prices to owners of solar systems, a trend that reduces costs to utility customers .

There are other concerns that have yet to be addressed. The nature of the solar systems themselves appears to be shifting dramatically, a trend that could have important consequences for the sector.

As of the end of the year, nearly 80 percent of installed solar systems were “behind the meter,” a designation essentially meaning they were deployed on residences or commercial buildings. In contrast, most of the solar systems in the pipeline, according to the BPU, are direct grid-supply projects, a category that includes large installations on farmlands, brownfields, and other locations.

Only one-third of the projects now in the pipeline are behind the meter, a trend that might indicate the sector no longer believes residential and commercial installations are profitable, because of the falling price of solar credits.

Another provision of last summer’s solar bill could accelerate that trend. It aims to ramp up how much solar power electricity suppliers must purchase to meet the state’s renewable energy goals, specifically carving out a provision encouraging the development of the technology on old garbage dumps and brownfields, and directing the agency to create incentives to spur investment in those projects.

“We still have to define what is too fast and what is too slow,’’ said Lyle Rawlings, president of Advanced Solar Products, Inc., one of the leading solar development companies in New Jersey.