Controversial New Funding Plan for Solar Sector Could Cause Big Disruption

Tom Johnson | October 9, 2019 | Energy & Environment
Developers are concerned that incentives under a new system would be too low to keep large portions of the sector from leaving New Jersey
EnergyCredit: Pixabay
Are incentives too low to attract financing from investors and customers?

The state has revamped a controversial proposal to fund new solar projects in New Jersey, but the changes may not go far enough to quash developers’ concerns that the new incentives could disrupt a good portion of the sector.

The dispute, simmering for months between solar developers and the New Jersey Board of Public Utilities, stems from a requirement under a 2018 law that the agency end the existing incentives to promote solar, a system many deem too expensive to ratepayers who largely foot the bill.

In making changes to a draft proposal that would transition to a new way of financing solar projects, the agency sought to address concerns that the incentives given to developers under a new system were too low to attract financing from investors, and, in some instances, customers.

The issue is important because solar is projected to be a vital component of the Murphy administration’s goal of transitioning New Jersey to 100% clean energy by 2050. New Jersey ranks sixth in the nation in the number of solar installations.

Most lucrative incentives for landfills and brownfields

The program, affecting projects already in the pipeline, would establish a tiered system of awarding incentives based on the type of solar facility. Generally, the most lucrative incentives would be targeted to projects built on landfills, brownfields, rooftops and carports — and, to a lesser extent, community solar systems.

Incentives would be far less (although the latest proposal increased the original proposed subsidy) for residential projects and ground-mounted, net metered solar facilities and grid supply projects, or solar systems that provide power directly to the grid. The agency defended the recommendation as having the potential to reduce the total cost of the program to ratepayers, while also providing the opportunity for the projects to earn a tailored set of returns.

For example, the solar consultant hired by BPU estimates that “net metered projects under 25 kilowatts (typically residential) and eligible for net metering need a lower additional subsidy because net metering already allows most of these projects to earn a large part of its required financial return via avoiding retail rates or receiving a net metering credit.’’ Net metering allows owners of solar systems to be compensated for the electricity the panels generate, but is sent back into the electric grid.

Lyle Rawlings, a longtime solar developer and founder of Advanced Solar Products in Flemington, argued the state’s changes still will make it difficult to finance all types of solar projects, including residential and ground-mounted solar systems with net metering.

“The vast majority of those projects won’t get built,’’ Rawlings said. Ground-mounted, net metered projects include those systems built by schools, municipalities, municipal authorities and corporations all across the state, he said. “The incentives are too small.’’

Could solar sector depart?

If most developers agree with that assessment, it could lead to an exodus of large portions of the sector to other states, some said. By most accounts, the solar industry employs about 7,000 in New Jersey, more than 40% in the residential sector.

Other solar developers declined to comment, saying they were still running modeling on how the consultant came up with the new incentives, dubbed Transition Renewable Energy Certificates. A stakeholder meeting is scheduled Friday in Trenton on the latest proposal, but the state is moving to wrap up discussion on the dispute by closing public comment a week from Friday.