For much of the past year, state officials have been struggling to come up with a system to finance new solar projects in New Jersey, but not at too steep a cost to electric customers who foot the bill.
In what has been its third revision of a draft proposal, the staff of the Board of Public Utilities has come out with an incentive plan, which may finally end a long-running dispute with most solar developers who had argued previous incentives were much too small and could have led to a collapse in the sector.
The latest proposal, say many solar developers, raises incentives enough to encourage investments in various types of solar projects in New Jersey, rather than lead to an exodus to neighboring states where solar development might be more profitable.
The issue is important because a recent study found the state might require solar systems to produce 34% of its electricity by 2050 to achieve the Murphy administration’s goal of 100% clean energy by midcentury.
In the past, solar has been by far the most successful renewable energy program in New Jersey, a state that ranks sixth in the nation for the number of solar installations (117,893 systems, as of the end of October).
But it also has been costly, with ratepayers ponying up $2.6 billion since the current program was initiated about a decade ago. It relies on a market system that pays owners of installations for the power the solar panels produce, an expense which utility customers end up absorbing on their monthly bill.
To address the problem, a new law was enacted in 2018, mandating the closure of the current financing system and directing the BPU to come up with a less costly system, but one that still supports a robust solar sector, which employs about 7,000 people.
Finding the balance
The challenge was to arrive at a proper balance between those conflicting goals, which are complicated by the law’s inclusion of a cost cap that eventually limits increases in incentives for solar projects. Without some relief from the cap, solar developers say investment likely will dry up in the state, even with the modest increase in incentives offered by the BPU’s draft proposal.
“I think we’re heading in the right direction,’’ said Fred DeSanti, a lobbyist who represents the New Jersey Solar Energy Coalition. ‘’These moves were very helpful, but we need statutory relief from the cap.’’
What many solar developers are seeking is to shift dollars ratepayers will not spend in the next couple of years — when the cap won’t be exceeded — to later years when the likelihood of busting the cap will be more likely. By the developers’ projections, in the next three years, the cost of solar will be approximately $800 million cumulatively under the cap established by the 2018 law.
“It’s clear the cap is still the restraining issue,’’ agreed Scott Weiner, a former president of the BPU and now a lawyer in the sector. What the solar developers are seeking is to manage the cap, not eliminate it, Weiner said.
But Stefanie Brand, director of the New Jersey Division of Rate Counsel, steadfastly opposes eliminating the cap. “We will vigorously fight any effort to get rid of the caps,’’ she said, acknowledging frustration over the lingering dispute concerning incentives for the solar program over the next few years.
Some solar developers are skeptical the new incentives, even with the modest increases, will be enough. “The effect is killing certain sectors,’’ said Lyle Rawlings, founder of Advanced Solar Products in Flemington. The result will hurt many institutions that have taken advantage of incentives to install solar, he said, citing schools, hospitals, and municipalities.