PSE&G’s Solar-Energy Plans Expected to Get Go-Ahead

Tom Johnson | April 30, 2013 | Energy & Environment
BPU likely to approve scaled-back proposal creating 45 megawatts of grid-supply solar-energy systems in NJ

Public Service Electric & Gas is expected to win approval to expand its aggressive efforts to build solar-energy systems in the state, although on a smaller scale than what the Newark-based utility proposed last August.

The contested settlement, expected to be approved by the New Jersey Board of Public Utilities next month, would allow the utility to spend $247 million to build 42 megawatts (mw) of grid-supply solar-energy systems, most of which would be located on brownfields, landfills and “areas of historic fill.” It also would allow another 3 mw in pilot projects on parking lots and as part of grid-security projects.

Besides the grid-supply projects, the utility also will be able to finance another 97.5 megawatts of new solar-energy systems under a solar loan program for homes and businesses, to be installed by solar developers around the state. The cost of that program is unclear, but it is at the same level of new solar capacity proposed last year, which the utility said would cost $194 million.

The grid-supply systems are unlike most of the solar-energy systems now installed in the state, which serve residential and commercial installations, mostly providing electricity to those structures in order to lower electricity costs, although occasionally supplying power to the grid when they have excess power.

But the Christie administration’s energy master plan wants to promote development of large grid-supply projects, which purportedly build solar at less cost than smaller projects due to economies of scale, on brownfields, landfills, and areas of historic fill. State officials also are trying to tamp down development of new solar-energy projects on agricultural land.

Yesterday, the BPU approved only three new grid-supply projects on farmland. That was out of a total of 57 projects seeking approval to earn solar credits for the electricity the systems produce. A solar-energy law passed last summer required certain solar projects on farmland to obtain BPU approval, even after the developers of those projects had already spent millions of dollars in proceeding through regulatory, state and federal approval processes.

The utility originally proposed, in August, to spend $883 million over the next five years to build an additional 233 mw of new solar capacity. The proposal generated a lot of controversy, in part because prices for solar credits, which owners of the arrays earn for the electricity they produce, have dropped dramatically. Many solar developers want to slow down installation of new systems to help drive up the prices for new projects, a strategy endorsed by most policymakers.

By most accounts, it is a delicate balancing act for the BPU’s Clean Energy Office, which oversees the efforts. Still, some solar-energy developers endorsed the settlement, including two of the most active trade organizations: the Solar Energy Industries Association and the Mid-Atlantic Solar Energy Industries Association.

But others disagreed, and strongly.

“First of all, it was negotiated in a back room between the company and the board reaching an agreement without our knowledge,’’ said Stefanie Brand, director of the New Jersey Division of Rate Counsel, a state agency designed to represent utility ratepayers’ interests in cases affecting their bills. The division has refused to sign off on the stipulation, as have others.

That argument was disputed by PSE&G.

“We had settlement discussions with each of the parties involved in the solar filing, including Rate Counsel,’’ according to a statement by the company. “This is a reasonable settlement that reflects compromises reached during these discussions. While the majority of parties signed the settlement, unfortunately Rate Counsel did not.’’

Others also did not, for various reasons, including some who cited the high costs of the program and others who said it did not go far enough.

“The BPU is basically handing them a blank bill,’’ Brand said. “There’s no limit on how much the company can spend. We don’t know why, because we were not sitting at the table,’’ she said.

Brand and industry lobbyists have been persistent critics of the state’s continuing subsidies to promote solar energy. She noted that the PSE&G proposal would guarantee the utility a 10 percent rate of return on its investment, higher than the 9.75 percent returned by other utility investments in solar.

PSE&G, and its parent company, Public Service Enterprise Group, have been by far the most aggressive company in the state in building new solar-energy systems. It currently is the third largest solar provider in the nation, according to Ralph Izzo, the chief executive officer and president of PSEG.

How much the program will cost customers, who ultimately bear the costs of the solar projects, is still uncertain, although PSE&G is expected to address that issue when its parent company releases its earnings report early this morning.