Cautious optimism about the state’s proposal to overhaul
program that has been faulted for costing ratepayers too much in subsidies
The state is giving the solar sector more time to figure out
how to overhaul the current system of financing the installation of solar
arrays on homes and businesses, a program widely criticized as too costly.
Despite ranking as one of the most successful solar programs
in the nation — more than 100,000 solar arrays have been installed in New
Jersey — it has long been faulted as too expensive to utility ratepayers who
subsidize it. The sector employs more than 7,000 people in the state, with an
investment topping $10 billion.
Worried that rising costs of solar would hinder development
of other clean-energy technologies, Gov. Phil Murphy signed a bill last spring
to scrap the current system for financing solar and place a cap on future
expenses to ratepayers. Over the past decade, those costs have exceeded $2.8
billion and continue to rise.
Curbing costs
Reining in those costs without disrupting the state’s most
robust renewable energy program, however, is proving difficult. State officials
are hoping to redesign the program in three phases.
In a straw proposal, or draft plan, issued by the New Jersey
Board of Public Utilities over the holidays, the state gave the industry
general principles and guidelines on how it will shut down the existing
program, transition to an interim system, and eventually move to an entirely
new way of promoting solar energy.
The proposal leaves many key
details of the process unanswered, but generally won endorsement from
representatives of the state’s thriving solar sector. New Jersey ranks fifth in
the nation for the number of solar installations, according to one recent
ranking.
The law left it up to the BPU to hammer out when the
existing program will end and how the new system will work. Those details have
yet to be determined, but the proposal issued last month establishes a
framework that gives state officials and industry stakeholders more time to
come up with a new interim program and successor program.
That proposal will likely end the existing program in the
first or second quarter of 2020, according to industry officials. “There’s more
runway to develop a new program,’’ said Dave Gahl, a senior director at the
Solar Energy Industries Association, a national trade group, adding the transition
will take place over a longer period.
Trying to ‘ensure business continuity’
“It’s a terrific foundation,’’ agreed Scott Weiner, an
attorney who represent clean-energy companies, “but there’s a lot of work ahead
of us. The immediate issue is how to structure the transition to ensure
business continuity.’’
One key issue determined by the BPU is defining when the
existing program will end. According to the straw proposal, the current
financing system, dubbed SRECs (solar renewable energy certificates), would end
when 5.1 percent of the kilowatt hours sold in the state is generated by solar
arrays.
For projects already in the pipeline, that deadline could be
reached in the first half of 2020. After that any new projects in the pipeline
that are not yet operating would need to be funded by yet-to-be-determined
incentives in either an interim transition program or a successor program.
That poses a potential critical problem. If developers do
not know where they will get new financial incentives to build solar systems,
banks will not provide the financing for new installations, developers say. And
that could lead to layoffs within the industry.
“We need to know what the metrics of the transition program
will be,’’ said Fred DeSanti, executive director of the New Jersey Solar Energy
Coalition. He and others support creating a system modeled after the existing
SREC program. The certificates are sold by owners of solar systems to
electricity suppliers, based on the power they produce, and the costs are
passed on to utility customers.
‘…a slow-moving train wreck’
“The cleanest and easiest form is to continue an SREC
incentive structure,’’ agreed Thomas Lynch, executive vice president of KDC
Solar LLC. “The challenge is in the details.’’
Whatever the details are, the next program has to be roughly
equivalent in value to the existing program, according to Gahl.
More problematic, others say, is the board’s intention to
comply with a cost cap embedded in the new clean-energy law. The cap requires
the state to achieve 50 percent renewable energy by 2030 while not increasing
energy costs to consumers by more than 7 percent initially and eventually by 9
percent.
Once the state shutters the SREC program, some fear there
will be no room left to develop new incentives for the sector to build new
solar, according to Jeff Tittel, director of the New Jersey Sierra Club. “It’s
a slow-moving train wreck,’’ he said.
Others said, because there is still so much uncertainty
about both the transition and successor programs, some new programs likely will
be hard to get off the ground, such as a pilot community solar effort to bring
renewable energy to urban areas.
“Without knowing they will be getting SRECs and what the new
value of incentives will be, I don’t see anyone doing any Community Solar,’’
said Michael Flett, who runs an exchange that trades SRECs.
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