Averting Another Collapse in New Jersey’s Solar Sector

Tom Johnson | June 27, 2016 | Energy & Environment
A proposed commission would look at the fundamentals of the solar industry, including whether ratepayers should continue to subsidize it

The future of the state’s solar industry could begin taking shape today, when the Senate votes on a bill aimed at averting a collapse of the sector and mapping its long-term course.

The legislation (S-2276), backed by a broad coalition representing solar firms, developers, and clean-energy advocates, is the latest tweak to a decade-old system that encourages solar installations by giving owners of the arrays financial incentives for the electricity they produce.

Solar advocates warn that without some modifications, the market could crash within a few years, drying up investment in the sector, causing the layoffs of thousands of installers, and increasing reliance on more polluting forms of generating power, such as natural gas.

Beyond ramping up in the short term how much solar should be installed in New Jersey, the bill also would set up a commission to study what steps the state should take to continue to nurture the industry, and perhaps more importantly, whether it should even continue to have ratepayers subsidize its growth.

Currently, the solar market is doing very well. The prices — dubbed solar renewable energy certificates (SRECS) — owners of systems earn for the power their panels produce run in the $265 range, with federal tax incentives making the technology an even more lucrative investment.

Perhaps too much so, according to the state Division of Rate Counsel. The office, which represents ratepayers’ interests, has expressed concern about the measure’s impact on utility customers who pay a surcharge on their bills to subsidize the SRECs. By its estimate, the bill could cost ratepayers an additional $276 million.

That view is disputed by the bill’s proponents, who argue it will not increase costs but only accelerate the requirement that more than 4.1 percent of the state’s electricity come from solar, a mandate largely met by making more SRECs available sooner rather than later.

A similar strategy was adopted in 2012 when the solar market collapsed and the price of the solar certificates dropped dramatically. By most accounts, it worked, leading the tactic to be used one final time, according to Sen. Bob Smith (D-Middlesex), the sponsor of the bill. “That’s it,” he said before his committee voted out the bill earlier this month.

Division of Rate Counsel Director Stefanie Brand worries that when the mandates for solar fall off in 2021, the industry will come back before the Legislature to lobby again to accelerate requirements for more solar installations.

Her office pushed unsuccessfully for an amendment to the bill that would create a market monitor to track the sector and to make sure ratepayers were not paying too much to stimulate the industry. Legislators have rejected the proposal so far.

Instead, many of those issues will be up to the commission established by the legislation. Beyond studying whether the price of the solar certificates is fair, it would also make recommendations to the governor and Legislature about how much solar the state needs to build in the future.

Clean-energy advocates have argued that with state law mandating steep reductions in emissions contributing to global warming, solar needs to play much more of a significant role in New Jersey’s future. Critics, however, say too much reliance on solar will push up already high energy costs.