Rate Counsel Faults New Solar Subsidies for Not Reducing Costs to Utility Customers

Tom Johnson | October 21, 2019 | Energy & Environment
Director Stefanie Brand says latest proposal from the Board of Public Utilities would not achieve expected cost-savings for ratepayers
Stefanie Brand, director of the Division of Rate Counsel

The Division of Rate Counsel is advising regulatory officials that a new proposal to reduce subsidies utility customers pay to promote solar energy will end up maximizing value to install new solar panels, rather than minimizing costs to ratepayers.

In a rebuke of the latest proposal by the New Jersey Board of Public Utilities to transition to a new scheme for incenting solar projects, Rate Counsel director Stefanie Brand argued the new system fails to achieve the objectives of a 2018 law that aimed to curb costs to customers who subsidize new projects.

The issue is becoming a major stumbling block for the Murphy administration, which wants to rely 100% on clean energy for New Jersey’s energy needs by 2050. Its proposal to transition to new incentives for spurring solar investments is generating opposition, however, from various sectors, including solar developers.

Solar developers are lobbying against the proposed BPU transition proposal, but from a wholly different perspective of the Rate Counsel. They contend the new incentives are far too low to convince solar companies to invest in new projects in New Jersey, a prospect that could dry up investment and lead to layoffs in a sector employing more than 7,000 people.

Brand argues otherwise, saying the Legislature and Gov. Phil Murphy recognized that the state was over-subsidizing solar installations when it approved the 2018 Clean Energy Act, which she argued sought to reduce and ultimately eliminate subsidies for solar projects.

The current system of incenting solar development has been highly effective, according to some clean energy advocates. More than 116,000 solar installations have been installed in New Jersey, which typically ranks among the top ten states in relying on solar energy.

But Brand, in comments submitted to the BPU, noted those projects have cost ratepayers $2.6 billion since the inception of the current program for financing solar, which gives owners of systems credits for the electricity that solar panels produce.

Trying to curb costs

To rein in costs, the Clean Energy Act created a cost cap to prevent new solar installations from pushing bills for utility customers higher, according to Brand. The transition proposal developed by the BPU fails that basic threshold, according to the Rate Counsel.

“The development of any solar incentive mechanism should be focused on establishing the lowest price necessary to stimulate investment and encourage development, rather than determining the highest price we can allow without exceeding the cost cap,’’ Brand said.

In her comments, Brand noted that a report from Monitoring Analytics, the independent market monitor for PJM Interconnection, the operator of the regional power grid, showed that New Jersey paid approximately $606 million in compliance costs to achieve renewable energy goals in 2017. That compared to a total of $809 million for all of PJM, which is the nation’s largest power grid.

“We believe this fact was recognized by the Legislature when it called for changes to New Jersey’s solar programs in the Clean Energy Act and the establishment of hard caps on RPS (renewable portfolio standards) compliance costs going forward,’’ according to the Rate Counsel’s comments.

The dispute may end up being decided by the Legislature. Solar developers met Friday with Sen. Bob Smith (D-Middlesex), the chairman of the Senate Energy and Environment Committee, a step toward convincing lawmakers to resolve the dispute during the lame-duck legislative session after next month’s Assembly elections.

The issue is complicated by the Murphy administration’s clean energy goals, some of which rely on new subsidies to jump-start new clean energy technologies, including offshore wind and energy storage. This past spring, utility customers began paying $300 million a year to subsidize the state’s nuclear power plants, which provide 90% of the carbon-free energy in New Jersey.