NJ’s Solar Market Starts to Heat Up, Pushing Power Prices Higher

Analysts voice long-term concerns about lagging deployments, possibility of another crash like 2012

Four years after the state’s solar market collapsed, it is now thriving — at least in one important respect.

On Monday, the amount sellers receive for the electricity their systems produce hit the highest level since the end of 2011 — $282.81. That’s well above the $150 range for solar credits some consider necessary for homeowners and others to invest in installing the technology.

In the short term, that bodes well for the solar sector, once one of the more robust aspects of the New Jersey economy, creating thousands of jobs, leading many businesses to install panels, and attracting big investments into a rapidly growing industry.

Several factors are contributing to the increase in solar credits. With prices high now, sellers are helping to drive the cost of solar credits up, and there is a comparatively low rate of solar installations. Finally, power suppliers, who are required to provide a portion of their electricity from solar, are competing in the market to buy credits, further pushing prices upward.

Many credit a 2012 state law aimed at stabilizing volatility in the market and flattening the wild price swings of solar credits with helping to revive the sector.

“The law fixed things in the short term,’’ said Michael Flett, president of the Flett Exchange in Jersey City, which buys and sells solar credits. “Something needs to be done in the longer term.’’

Long term, the prospects are more unsettled, because state requirements on the amount of solar that needs to be installed starts falling off dramatically in 2018. If investment in new solar systems falls off, some fear there could be another crash similar to the one that occurred in 2012. Too much new solar capacity was being built in the state, resulting in a steep drop in prices for solar credits, and a decline in investment in the sector. Credits that once sold for as high as $600 fell below $100.

[related]“In another year or so, we may see another crash unless we expand the RPS,’’ said Jeff Tittel, director of the New Jersey Sierra Club, referring to state mandates that require a certain amount of electricity to be produced from renewable energy systems, such as solar panels.

The future of the solar sector is likely to be taken up by lawmakers in the new legislative term, which begins next week. There have been proposals to sharply increase the state’s dependence on renewable energy. Clean-energy advocates argue it is among the best ways to curb emissions causing global warming.

Those efforts, however, are controversial. In part, that is because utility customers end up absorbing the cost of solar credits, an expense that exceeded $5 billion over the past decade, according to the state Division of Rate Counsel.

Concerns about the additional cost to customers in a state that already has high energy bills led the Legislature to decrease solar requirements, beginning in 2018. But some solar proponents now worry that a decline in the number of solar installations will fail to take advantage of a new, five-year federal investment-tax credit approved by Congress last month.

“That is not going to create the demand,’’ said Fred DeSanti, a lobbyist who represents solar clients. He said the state needs to ramp up how much solar is required to benefit fully from the tax credit.

Flett and others, like Lyle Rawlings, owner of solar firm Advanced Solar Products in Flemington, are puzzled that even with the high prices of solar credits, the number of installations has not kept pace.

“I would have hoped it would have led to more rapid construction,’’ Rawlings said.