Collapse of NJ Solar Industry, Big Layoffs If No Interim State Plan — Warning

Executives suggest urgent need for temporary system to incentivize solar development before transition to Murphy administration’s new approach

solar installer
With less than six months to act, the state needs to quickly transition to a new way of promoting solar energy or risk a collapse in one of its fastest growing sectors, industry officials warned yesterday.

In what is shaping up as one of the most difficult tasks the state faces in achieving the clean-energy goals of the Murphy administration, policymakers must agree on an interim system for incentivizing solar development, probably as soon as next March.

Unless there is a seamless transition, the industry could shut down, solar executives told state regulatory officials at a stakeholder meeting in Newark yesterday. If that happens, it could cause massive layoffs in a sector that now employs more than 7,000 and has invested in excess of $10 billion in New Jersey.

The collapse also could leave many solar projects — including those undertaken by school systems, municipalities, hospitals and others — as money-losing ventures. Loans and bonds used to finance them would be difficult to repay as revenues from the solar systems would fall short.

By almost any accounting, solar energy has been New Jersey’s most successful effort in moving away from global-warming fossil fuels and toward a clean-energy future. There are more than 99,000 solar installations here, the fifth largest number in the nation by some rankings.

High cost to utility customers

But it has come at a high cost to utility customers, who have provided up to $2.8 billion in subsidies to make it happen over the past decade. The state sought to rein in those costs by overhauling its renewable energy law this past spring. The law mandates ending the current system of financing solar, an approach that even solar advocates contend is too expensive.

But before the state can move to a new and cheaper system of promoting solar, it needs to come up with an interim plan to prevent a collapse in the sector.

The current system incents investment in solar by giving owners of solar arrays credits (dubbed Solar Renewable Energy Certificates) for the electricity they produce. While the credits are highly effective in encouraging investment, critics say solar developers are reaping a windfall because the price of those credits (currently trading about $200) far exceeds their costs in developing projects.

The dilemma the state is wrestling with is what transitional solar program does it come up with, once it scraps the current system. With time so short, solar executives yesterday told officials it probably needs to be relatively simple and incorporate components of the SREC system.

An interim program can be established quickly and should be modeled after the existing SREC program, according to Scott Weiner, an attorney (and former president of the Board of Public Utilities) representing NextEra Resources, a solar developer.

Advice to keep interim program simple

Larry Barth, director of corporate strategy for New Jersey Resources, another major solar developer, agreed. “Let’s keep that interim program as simple as possible,’’ he said.

“It is the lowest cost solution that can be implemented quickly,’’ added Lyle Rawlings, founder of Advanced Solar Products in Flemington, urging establishment of a fixed-price SREC program.

In the long term, however, others predicted the state BPU will have to take another look at cost caps included in the Clean Energy Law that aim to limit how much ratepayers pay to promote renewable energy.

Those caps require achieving the state’s goals of having 50 percent of renewable energy by 2030 while not increasing energy costs to consumers by more than 7 percent.

“I can’t make the cost caps work with any math,’’ Barth said, urging the board to take a hard look at adjusting those caps. “In a clean energy world with a lot of moving parts, you guys (the BPU) are going to need a lot more flexibility.’’

Michael Flett, who runs an exchange trading SRECs, was even more pessimistic. When he finished, Ken Sheehan, head of the BPU’s office of clean energy, asked him: “You have anything positive to say?’’

Flett replied: “We’re kind of boxed in.’’