The state is floating a straw proposal to help accomplish a couple of its key clean-energy goals: lower the costs electric customers pay to transition to solar energy while retaining a robust solar sector and its 6,625 jobs in New Jersey.
Doing both is no small challenge. The state, once a leader in promoting solar energy despite its small geographic area, today ranks seventh in the nation in the number of solar installations.
The mandate now is to grow that industry to where it will provide 34% of the state’s electricity by 2050. The sector provides just 5% of the power today.
Even so, the solar program, subsidized by electricity customers with more than $800 million a year, is projected to grow rapidly in the next decade. The state’s solar program now generates roughly 320 megawatts (MW) of new solar capacity a year, based on a five-year average. If New Jersey is going to reach its mid-century target of 34% of its electricity generation, it needs to have 32 gigawatts of generating capacity — roughly 10 times what it has now.
In a 60-page straw proposal by staff of the New Jersey Board of Public Utilities, the state said it needs to scale up quickly to meet its long-term goals for relying on that much solar energy. At the same time, it needs to cope with cost caps imposed by the Legislature to restrain costs of solar energy.
“The (Solar) Successor program represents the next step in the history of New Jersey’s fight against climate change and a new opportunity for New Jersey’s economic growth and support for clean-energy development in the state,’’ the report said.
The program adopts many of the features of a transition program established a few years ago, but also creates a competitive solicitation program for larger solar projects — a mechanism policymakers hope will drive down costs for solar paid by ratepayers.
New clean-energy cost calculations
The document was noteworthy for providing some new rough calculations on what the cost of the Murphy administration’s push to transition to 100% clean energy will be.
For instance, it projected the cost of ratepayer subsidies for New Jersey’s offshore wind program will boost electric rates about 1% once the state’s initial 1,100-MW offshore project Ocean Wind begins operating in mid-decade, while other offshore wind farms will boost the cost to 3% to 5% over the next three to five years.
Current subsidies paid by consumers to underwrite the state’s three nuclear plants, currently pegged at about $300 million a year, could increase electric costs by approximately 3% a year. Some of the nuclear and offshore-wind cost increases could be offset in future years by new energy efficiency projects that reduce how much electricity customers use, the report said.
As for the solar sector, the report aims to reduce those costs by shifting to building more grid supply projects, the cheapest form of solar projects to build largely based on economies of scale.
The BPU has repeatedly promised to provide public estimates for how those costs will impact ratepayers. But it has delayed issuing a study on potential effects and, more importantly, how customers may see their monthly utility bills change.
In the initial phase of the Solar Successor program, the state aims to build 300 MW of such projects. By 2030, it hopes to develop 900 MW of grid supply projects — about three times all solar projects that have been built on average over the last five years.
“The least cost way of meeting the EMP (Energy Master Plan) targets is generally to allow large projects with a broad geographic scope, which typically is less costly than smaller, distributed projects,’’ according to the report.
Big challenges ahead
Still, the cost caps reflect big challenges for the solar sector. Initially, the caps were set at 9% of total state electrical expenditures but fall to 7% in future years. The total costs of electricity expenditures have declined a bit in past years, but generally remain about $10 billion a year.
For the most part, solar developers declined to talk about their responses to the straw proposal, which will be the focus of an extensive stakeholder process with at least four workshops over the next month.
New Jersey Ratepayer Counsel Director Stefanie Brand liked some aspects of the new program, particularly the move to competitive auctions to drive prices down. “The board is trying to do what it can do to expand solar and still keep it within the price caps,’’ she said.