BPU Straw Proposal Unnerves Developers of Residential Solar Systems

Developers warn state agency’s lowball incentives of $10 to $30 will drive out investors, decimating New Jersey’s solar sector

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The state is moving closer to deciding how to fund new solar projects but raising fears its model may disrupt a big segment of the sector — putting solar panels on single-family homes.

In offering a straw proposal laying out details of how New Jersey will move to a new system for funding solar projects, the state Board of Public Utilities did little to calm concerns among solar developers. That is particularly true in the residential sector, where up to 45 percent of the estimated 7,000 employees in the industry work.

They argue the proposed financial incentives to be given to developers of residential solar projects in a transition program are far too low to attract investments in those projects, generally the most expensive to build. Without the proper incentives, developers may leave New Jersey for more lucrative solar projects in neighboring states, some industry officials warned.

“We drive prices down too far, there will be no new investment in this state,’’ said Thomas Lynch, executive vice president of KDC Solar in Bedminster, noting New York is seeking to build 5 gigawatts of new solar capacity in the Empire State.

Reining in solar subsidies

The issue underscores the dilemma facing the Murphy administration, which must come up with a new program to rein in subsidies to incent solar projects, a system that costs utility customers significantly more than a half-billion dollars every year. At the same time, solar is projected to be a key component of the governor’s plan to transition to 100 percent clean energy by 2050.

The straw proposal released late last month by the BPU staff delivered no final decisions on its solar transition program, but instead offered options about how solar developers would be compensated to invest in new projects. Many developers said the incentives are likely to lead many to look in other states willing to invest more lucratively.

For residential projects, the incentives would drop dramatically, according to solar developers. Currently, the incentives (dubbed SRECs, or solar renewable energy certificates) range about $230; under the straw proposal, residential projects would receive subsidies between $10 and $30, developers said.

“That number is surprisingly low and it’s not workable,’’ said Katie Rever, director of legislative and regulatory affairs at IGS Energy.

Trimming incentives too deeply

Lyle Rawlings, founder of Advanced Solar Products and president of the Mid-Atlantic Solar & Storage Industries Association, said the incentives in the straw proposal are far too low to finance not only residential projects, but also grid-supply and ground-mounted large commercial projects (that are net metered).

“It’s bad, but fixable,’’ Rawlings said of the straw proposal, asking for a meeting with staff and others to dissect how they came up with the proposed incentives for solar developers. “This is all about the math.’’

Others argued otherwise. Kurt Lewandowski, an attorney in the New Jersey Division of Rate Counsel, said any new incentive should lower costs to ratepayers. “It must be competitive and the least cost to ratepayers,’’ he said.

The difficulty in arriving at a consensus is partly driven by a more than year-old law dictating the closing of the existing solar-financing program. The law also included a cap on how much ratepayers would have to pay in future years to finance solar energy, a provision some clean-energy advocates say will be difficult to achieve given the administration’s renewable energy goals.

In recent weeks, the uncertainty led to so much uproar that BPU president Joseph Fiordaliso appeared at a stakeholder meeting, primarily to assure solar developers the state would not allow the sector to collapse, which occurred about nine years ago when the market was overbuilt.

“Where this is headed is not a good place,’’ warned Fred DeSanti of the New Jersey Solar Energy Coalition at a meeting last week. “No one is going to build at $10 or $30. This is New Jersey’s solar program. It’s really on the brink here.’’

The discussions on the new proposal continue tomorrow in New Brunswick. Once the state decides on a transition program, policymakers must craft a successor program for the long term, a potentially more difficult process.