Can NJ entice solar developers while reining in costs? Latest round of arguments

Growing concerns over cost of state’s draft plan when up to 1M customers are in arrears on utility bills
Credit: (AP Photo/Toby Talbot)
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The Murphy administration’s draft plan to revamp the way solar projects are funded in New Jersey needs to be modified to avoid unnecessarily large rate increases for ratepayers, according to the state Division of Rate Counsel.

Rate Counsel Director Stefanie Brand urged the New Jersey Board of Public Utilities on Friday to focus and place a stronger emphasis on minimizing the rate impact through the still-developing solar successor program.

The proposal is the latest aimed at advancing Gov. Phil Murphy’s clean-energy goals, a policy running into increasing concerns over the costs at a time when up to 1 million customers are in arrears in making payments on their utility bills because of the COVID-19 pandemic.

“New Jersey has a long history of overpaying for solar,’’ Brand told the five BPU commissioners. “The industry has a long history of claiming they need more and more subsidies and that if they don’t get them the sky will fall down and the industry will come crashing down.’’

Her comments reflected, in part, what BPU staff mostly heard in a much different context over the past two weeks in a series of workshops, as many solar developers urged them to increase incentive levels from ratepayers to make solar usage on carports, on commercial and industrial properties financially viable.

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“In the past, the Legislature and the Board fell prey to many of these threats and kept increasing the subsidies to the point where New Jersey ratepayers have spent billions of dollars for what is now a little over five percent of our load,’’ Brand said.

The Legislature passed a law in 2018 that sought to give direction to both the sector and policymakers. The law, dubbed the Clean Energy Act, aimed to rein in costs of solar — now projected to cost ratepayers about $750 million a year — while simultaneously developing a program with enough incentives to more than double the amount of solar capacity built in New Jersey.

Difficult to reach consensus

By 2050, the state’s Energy Master Plan projects 34% of New Jersey’s electricity will come from solar energy, a dramatic increase given the state only gets about 5% of that power from solar today. The current debate over the proposed solar successor program suggests how difficult it will be to reach a consensus.

In Friday’s hearing, solar developers countered criticisms of the program’s expense, arguing solar is more expensive in New Jersey for a variety of reasons — higher land costs, higher wages paid to solar workers because of prevailing wage laws, and less land available for solar development.

The BPU staff’s straw proposal creates a two-tiered program. The first establishes an administratively set program, with fixed-level financial incentives depending upon the type of solar project. The other program would have developers bid to build solar projects in a competitive proceeding, a system most agree would drive down solar costs.

There are many differences between the board’s staff and solar sector over the proposed incentive levels in the administrative program. The more contentious dispute revolves around a cost cap in the energy act that strives to restrain solar costs to no more than 7% of total electricity costs in New Jersey.

“The most concerning aspect of the staff straw [proposal] is it undermines the one protection afforded by the Legislature in the CEA to New Jersey ratepayers, which is the rate cap,’’ Brand said. “The proposal attempts to create additional ‘head-room’ to spend more on solar energy programs.”

‘Sweet spot’ for solar growth

Others were more optimistic. “The ‘sweet spot’ that provides for continued solar growth, rapid and deep emission reductions, and affordability will be a combination of New Jersey solar, offshore wind, and regional wind and solar,’’ said Barbara Blumenthal, research director for the New Jersey Conservation Foundation.

The chief argument in this dispute concerns efforts by solar developers to lump the potential benefits of decreased emissions, improved air quality and job creation into what many view as the social benefits of reducing carbon. So far, these are not included in calculating whether the cost cap is exceeded by new solar projects.

“This manipulation of the rate cap is nothing more than an end-run around the legislative intent of the CEA and its rate impact protection,’’ Brand said.

Solar developers argued otherwise. Fred DeSanti, executive director of the New Jersey Solar Energy Coalition, noted the environmental and health benefits of clean-energy projects were among the reasons why the BPU earlier last week approved $300 million in subsidies to avert the closing of New Jersey’s three nuclear plants.

Scott Weiner, a former president of the BPU and now an independent energy consultant, agreed. “No one is urging to eliminate the cap,’’ Weiner said, but he suggested the commissioners have to get the formula right.

If the incentive levels are not increased, others in the sector say the state will never achieve the governor’s aggressive solar goals. “The current solar successor program threatens the collapse of the program,’’ said Tom Leyden, an executive with EDF Renewables.