Slowdown in New Solar-Energy Capacity May Actually Be Bright Spot

Some proponents see trend as evidence of success in effort to foster steady and profitable growth in volatile industry

small solar array
Last month, only 8 megawatts of solar capacity were installed in New Jersey, a dip from the meager 11 megawatts of systems developed the month before.

It is a far cry from the 84 megawatts of solar arrays installed in just one month back in January 2012, a record, which helped propel New Jersey to rank behind only California in the number of solar installations in the nation.

Is this a sign of more bad news for the solar-energy sector, which has been in turmoil for months? Perhaps not.

The slowdown in the market may be a signal that a law enacted more than a year ago to stabilize the once flourishing solar sector may be working, according to some solar energy advocates. If so, it could spur new investment in the industry, which had been one of the fastest growing sectors of the New Jersey economy.

Spending in the sector slowed because the solar industry became a victim of its own success, according to many. So many new systems were installed — primarily because of lucrative federal and state incentives – that income owners of the arrays earned for the electricity they produced fell precipitously. Once ranging in the mid-$600 range, the so-called solar credits fell below $100 before slowly climbing up to the $130 range in recent days.

The legislation to revitalize the solar sector ramped up how much electricity power suppliers must buy from arrays producing electricity from the sun, a step proponents argued would soak up an oversupply of solar credits produced by the systems.

So far, it seems to be working. Since the bill was signed into law last summer, prices for the solar credits have been slowly rising to the point where some industry people say it allows them to make a profit on their projects once again.

“It’s absolutely good news,’’ said Fred DeSanti, a lobbyist who represents several solar developers. “It’s a good signal. The market is starting to correct itself. I think the bill is doing what it was supposed to do. All the yahoos are gone. We have serious responsible people in the sector.’’

Gabe Phillips, chief executive officer of GP Renewable & Trading in Manhattan, agreed in part. Referring to the New Jersey solar sector, he called it the most functional solar-energy market today. “The market is reflective of the prices projects need to be funded,’’ Phillips said.

Charles Garrison, a consultant who helps the New Jersey Board of Public Utilities manage its renewable energy program, said the single-digit growth in solar installations in terms of megawatts was unusual. “It is lower than what we have seen in a while,’’ he said, adding that he expects the number to spike again.

Those numbers could rise based on BPU decisions and provisions in the law enacted last summer. The state agency recently approved a proposal by PSE&G to build 42 megawatts of new solar farms on former landfills, a step aligned with a new energy master plan adopted by the Christie administration.

In addition, the legislation authorizes the state agency to approve up to 80 megawatts over each of the next three years for new grid supply projects, which supply electricity directly to the regional power grid.

The agency also has approved new programs for the other three electric utilities to install solar-energy systems. As with PSE&G, those projects involve longer-term contracts, guaranteeing the utilities a more certain rate of return on their investment and less vulnerability to the volatility of the market for solar credits.

To some, however, the steep drop-off in solar installations is a cause for concern.

“This is taking solar in the wrong direction,’’ said Jeff Tittel, director of the New Jersey Sierra Club, who noted the state had been routinely adding between 24 and 30 megawatts of new solar installations a month. The state used to have up to 10,000 jobs in the sector, Tittel said, but at the current rate it will be lucky to have 500 jobs in the industry.

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