The New Jersey Board of Public Utilities is set to launch an industry study to assess whether or not the current structure has outlived its usefulness.
By almost any measure, New Jersey’s solar sector is thriving, but that isn’t preventing many folks from thinking it just may need some big fixes.
The New Jersey Board of Public Utilities is the latest to weigh in by announcing a broad examination of the industry and exploring whether the current structure that has served it so well may have outlived its usefulness — or at the very least needs some significant changes.
In a decision reached Friday at their regular monthly meeting, the BPU commissioners voted to launch a proceeding to study the current system, including whether the existing financial incentives that have made the state one of the nation’s leaders in solar need to be pared back, or replaced with something else.
A matter of timing
The action, as well as the timing, left some solar advocates privately scratching their heads given that the undertaking and scope of the effort are sure to spill over well into the next year, when a new governor and Legislature take over. It also occurs at a time when parts of the solar sector already have offered up their own template for overhauling the current structure with a bill in the Legislature (S-2276).
Despite its success — more than 80,000 solar panels have been installed in New Jersey — there is growing discussion among clean-energy advocates, legislators, and policymakers about whether the progress is being achieved at too high a cost, which is ultimately mostly shouldered by ratepayers.
The current system gives credits — dubbed Solar Renewable Energy Credits (SRECs) — to owners of solar systems for the electricity they produce. The credits are financed by a surcharge on a customers’ bills, but as prices for solar have declined and systems become more efficient, critics have questioned why subsidies are still needed.
Since the state deregulated the energy sector 18 years ago, the solar industry has received billions of dollars in subsidies from ratepayers, initially in the form of rebates to those who installed systems. New Jersey ranks fourth in the nation in the number of solar systems installed, and the sector employs thousands here.
Subsidies too high?
“The New Jersey solar market continues to evolve,’’ said BPU President Richard Mroz. “In the past, we have heard that the current solar subsidy is more than it needs to be.’’
The commissioners directed the BPU staff to scrutinize the entire suite of solar-incentive policies for cost-effectiveness, equity, and efficiency. Furthermore, staff will review rate impacts on residential and business customers, and environmental benefits of solar generation reducing the generation and consumption of electricity produced by conventional sources.
The board also is expected to focus on the price differential between residential projects and utility-scale solar systems, which are much cheaper. As part of the review, the staff plans to examine whether different incentives should be designed for grid-scale projects than what business and residential customers obtain.
In addition, the board decided to suspend approving any new-grid supply projects. Certain sectors of the industry have argued that grid-scale projects could threaten the stability of the market by squeezing out competitors for solar credits.
The move is not a surprise, but left some solar developers miffed.
“Many companies, including mine, spent a large amount of money developing these project and met silence,’’ said Lyle Rawlings, president of Advanced Solar Products in Flemington. “It was money literally down the drain.’’
Rawlings is part of a diverse group of solar developers who joined forces to help cobble together a bill to revamp the solar sector. The legislation, introduced right before lawmakers broke for their summer recess, is not expected to come up until a new governor is inaugurated and a new legislative session begins in January.
The measure proposes significant changes in how the solar market would work, proposing to gradually phase out the existing SREC system, although what would replace it is still undetermined. It also would ramp up how much solar electricity suppliers would have to buy, a step designed to keep the market stable while a new system is developed.
“We believe it will be a new administration that will move forward where renewable energy will be a majority of our electricity supply,’’ Rawlings said.
Besides the solar bill, there also is a push by clean-energy advocates to enact legislation requiring 80 percent of the state’s electricity come from renewable sources. It is expected to be taken up early next year.
Jeff Tittel, director of the New Jersey Sierra Club, welcomed the move to revamp the solar sector. “If we want to expand solar, we can’t keep the same model,’’ he said. “It’s too expensive.’’
By chance, the board’s action came on a day when the International Trade Commission ruled that imported solar equipment has hurt American companies, a ruling that could push prices of solar higher, according some experts in the industry.