Opinion: What Can Be Done to Help New Jersey Get Its Solar Mojo Back?

R. William Potter | June 11, 2014 | Opinion
NJ was a shining example of the industry's growth, but some developers have had to lay off workers, while others have moved out-of-state

Credit: Amanda Brown
R. William Potter
How did New Jersey lose its solar energy mojo? And what must be done to get it back?

Until two years ago the Garden State was the most “solarized” state in the Union on a per capita basis. Over 25,000 solar photovoltaic (PV) units have sprung up in the past five years. As a result of this rapid growth, our little state lagged behind only massive and sun-drenched California in the amount and pace of solar development.

But no more. New Jersey has tumbled to fifth place and will fall further, unless something decisive is done — and soon. We are now behind California, Arizona, North Carolina, and even Massachusetts.

At one time solar was being developed here on a pace of more than 450 megawatts per year, hitting a peak of 463 megawatts in 2012. That was equal to adding a large nuclear power plant every two years. That pace has sunk to about 200 megawatts a year, a decline of nearly 60 percent and falling fast.

As a result of this slide in new solar installations, some developers — despite recent signs of a mini-uptick — have had to lay off skilled workers in droves. Others are shutting down or moving operations to other states and taking their expertise with them.

So what’s to be done to reverse this negative trend? Or, as some solar skeptics might argue, has solar simply run its course?

The second is easiest to answer: There are plenty of developable sites for solar panels — thousands of eligible rooftops, or canopies shielding parking lots, or reclaimed landfills, among a seemingly endless variety of possibilities.

Also, the cost of solar panels has declined while its value-add has risen — especially when its benefits to the environment are taken into account — making solar a true bargain.

In short, New Jersey is far from saturated with solar.

Trying to jumpstart a solar renewal is a coalition of environmentalists, good government groups, faith-based congregations, and solar energy companies. They have formed NJFREE — New Jersey for Renewable Energy and Efficiency — to promote much-needed legislation, called the Renewable Energy Transition Act (RETA).

The centerpiece of RETA is a mandate that by calendar year 2050, 80 percent of electric power use must be supplied by renewable energy. In addition, total electric energy use must be reduced from 2012 levels through cost-effective energy efficiency. Included with the 2050 goal are five-year milestones for renewable energy and energy efficiency, to show steady progress, and a mandate to add 425 megawatts per year of solar.

While ambitious, these are pragmatic goals. A recent study by the Rocky Mountain Institute, headed by alternative-energy pioneer, Amory Lovins, called “Reinventing Fire,” supports the 80 by 2050 goal as not only achievable but also a producing a net saving to the national economy of $5 trillion by 2050.

At the same time, much of Europe is already well on its way toward meeting and even exceeding the 80 by 2050 goals. These include the Scandinavian countries, plus Denmark, Iceland, and Germany, not exactly optimal areas for renewable power, especially solar, but with an abundance of wind resources.

Put simply, if Europeans can do it, including cloudy Germany, so can we — thereby regaining New Jersey’s national leadership and at the same time, yielding vitally needed job growth and economic investment.

So what’s holding back the NJFREE legislation? For starters, it has not been introduced yet. But State Sen. Bob Smith, the sponsor, has made it clear that he will introduce some version of RETA following a 60-day period of intensive stakeholder sessions involving a Who’s Who of energy experts, environmental advocates, government officials, lobbyists, and utility representatives. While Smith’s stated goal is to seek consensus among “the best energy minds in the State,” if no consensus emerges after 60 days of negotiation, he has pledged to craft and introduce his own version of RETA.

What are the main points of contention raised by solar skeptics in these stakeholder sessions? Oddly enough, much of the opposition comes from few developers of very large grid-scale solar projects who voice a fear that moving from a “commodity-based market to competitively bid long-term contracts,” as RETA provides, will “upset financial markets” and their expected profits.

As it turns out, by the end of this year New Jersey will be the last state among the top 10 solar markets still pricing the electric output from solar on a commodity-market model. In this system, developers depend on the fluctuating market value of the SRECs — Solar Renewable Energy Credits — produced by their facilities. (1 SREC is equal to 1 megawatt hour of solar electric output.)

Since a commodity market is an inherently risky method of financing capital projects, solar firms need a higher return on their investments to attract project financing. Not so with multiyear contracts paying set prices that are derived from competitive bids; these minimize risk and thus lower overall cost because the payback is known in advance.

Numerous studies confirm the superiority of as-bid contract pricing. These include the 2006 “Summit Blue” report commissioned by the Board of Public Utilities and largely ignored since then, and the most recent Meister Report, also sponsored by the BPU. They show that low bid contracts are far better for solar companies and utility consumers than unpredictable commodity-based systems.

Better yet, real-world experience in states that have adopted this model — such as Delaware and Connecticut — confirm the benefits of contract bidding over the commodity market system that the BPU stubbornly clings to.

Moreover, as Lyle Rawlins, President of MSEIA (Mid-Atlantic Solar Energy Industries Association) points out: “RETA envisions a very gradual transition to low-bid contracts, so enacting RETA shouldn’t ‘destabilize’ SREC markets,” as some developers fear. In RETA, not until 2017 would as-bid contracts start replacing SREC-based pricing, reaching a 50/50 split between the two systems by 2023, after which low-bid contracting would begin to replace solar financing and development.

Getting RETA introduced is of course only the beginning of what promises to be an extensive political review of the role of renewable energy in New Jersey’s and the nation’s future. Among RETA’s most likely detractor is the Division of the Ratepayer Advocate, whose statutory mission is to protect the “interests of electric and gas utility ratepayers.”

In the face of strong public support for more renewable energy to substitute for fossil fuels, and evidence that solar reduces consumer’s bills — while combating global warming — the ratepayer advocate remains one of solar’s staunchest deniers, arguing that its costs are “excessive” and a “burden on ratepayers.”

How so? As Rawlings figures it, the cost impact of all solar projects to date (which add up to nearly 1,300 megawatts more than the peak capacity than the Hope Creek nuclear plant) comes to approximately 2 percent of total electric utility bills. That’s about $3.00 a month or around 10 cents per day for the average ratepayer, a lot less than the price of buying a daily newspaper. Plus, because solar lowers overall peak demand — when wholesale costs of electricity are highest — can actually reduce customers’ bills.

Some burden.

Getting the solar mojo back is partly a matter of advocates of the alternative source of energy confronting the doubt purveyors holding back RETA. Like opponents of President Barack Obama’s plan to cut carbon pollutants from power plants by 30 percent by 2030, they are certainly not evil — or comical — but they are standing in the way of progress.