Will Nuclear Subsidy Bill Kill Solar Sector?

Tom Johnson | February 8, 2018 | Energy & Environment
Latest version of controversial bill dramatically changes way state promotes and incents solar, with potentially lethal results

nj nuclear
A controversial bill to bolster the fortunes of nuclear power in the state may achieve that aim, but it could also deal a crushing blow to New Jersey’s thriving solar sector.

The latest version of the legislation (S-877), still not publicly available, contains dramatic changes in how the state promotes and incents solar that could, in effect, kill the industry in New Jersey, according to even one of its own sponsors.

The amendments essentially would alter the economics of investing in the sector and potentially erase much of the $9 billion in investments made in New Jersey over the past years, representatives of the solar industry said.

“If that amendment goes through, the solar market is busted,” predicted Thomas Lynch, executive vice president of KDC Solar, a company that has built many commercial solar projects throughout the state.

For now, the solar industry is quite robust. A new study released yesterday by the Solar Foundation found that New Jersey, with 7,106 jobs, ranked ninth in employment in the nation. The sector grew by more than 1,000 jobs last year, an increase of 17 percent. Nationwide, employment fell by nearly 4 percent, the report said.

“The moral of this story it is an ill-conceived amendment, and no one wants to take credit for it,” said Sen. Bob Smith, a Democrat, who has been helping steer the bill through the legislative process, if you can call it that. The bill has had several public hearings, but only recorded one vote, which occurred in the previous session in January.

Nuclear roots

The bill began its legislative life two months ago as a proposal to boost the economics of three nuclear power plants in South Jersey operated by the Public Service Enterprise Group. To that end, it proposed and still envisions ratepayer subsidies of up to $300 million a year to keep the plants open.

But the proposal ran into resistance from environmentalists and the Murphy administration for providing a handout to PSEG without doing much to advance the new governor’s ambitious clean-energy agenda. It led to a series of initiatives being added, including a Smith bill, previously vetoed by former Gov. Chris Christie, to expand solar requirements in New Jersey.

The solar amendment is motivated by increasing criticism that the current system of funding solar is way too expensive, costing ratepayers a total of about $500 million last year. By reducing the cost of solar, the state could accelerate its reliance on the technology, according to some clean-energy advocates.

In trying to bring down costs, the amendment substantially changes payments power suppliers make to comply with state mandates to increase use of solar. But by cutting the payments in half, solar executives fear it will dry up investment in the sector by reducing the value of solar credits owners of solar systems receive for the electricity they produce.

“You can’t build it for that,” said Fred DeSanti, a lobbyist representing the New Jersey Solar Energy Coalition. The average residential ratepayer pays about $4 per month for solar, DeSanti said, not a huge cost when considering the benefits in lowering peak electricity demand and congestion on the power grid, factors that increase energy prices.

“Everyone knows we have to shave costs,” added Lyle Rawlings, president and founder of Advanced Solar Products in Flemington, a longtime critic of the present system based on solar renewable energy credits (SRECs). “But this would be catastrophic.”

Solar ‘underwater’

Abruptly changing the current system, however, will put many of the 86,000 already completed solar projects “underwater,” Rawlings said. The projects were built under the assumption the value of the solar credits would remain steady over 15 years. SRECs sell in the $240 range; the compliance payments (dubbed solar alternative compliance payments (SACPs) would be set at $150 for this year.

“By changing the SACP, it is essentially changing a contract,” said Larry Barth, director of corporate strategy for New Jersey Resources, a company that has invested a half billion dollars in solar in the state. “We all want to get the costs of solar down, but so it will be done in a fair and equitable manner.”

Others, however, dispute the scenario is as dire as solar executives portray it — given the tax credits, depreciation allowances, and declining costs of solar panels that factor into the economics of the current system. Instead of being underwater, they are worried profit margins approaching 20 percent will disappear, some argue.

For his part, Smith does not think the solar amendments will stand. “A bill that kills the solar sector won’t get passed,” he predicted.

A new bill is expected to be made public this week, perhaps as early as today. The legislation is up for a vote next Thursday in the Senate Budget Committee, which postponed action on the legislation Monday.