TRENTON – They talked of SRECS. They talked of the spot market and the SACP.
But at Thursday’s Board of Public Utilities meeting concerning the future of solar energy in New Jersey and how to pay for its growth, one industry executive put the problem into very human terms.
“People have taken loans from their retirement accounts to pay for solar panels on their roofs, and because the prices of the SRECs have crashed, they can’t make the payments,’’ said Lyle Rawlings, president of Mid-Atlantic Solar Energy in Hopewell.
“There are school districts whose loans are underwater,” he said; they can’t pay off the bonds used to finance solar projects.
“There is a level of pain,” he said.
BPU convened a stakeholders meeting including more than 100 industry and utility representatives, environmental advocates, and financial experts Thursday to discuss how New Jersey – the nation’s second leading solar energy user – should proceed in an environment in which the state must decide how and to what degree it should subsidize the solar industry.
The price of the SRECs, solar renewable energy certificates, has fallen steeply from more than $600 on the spot market to less than $200 just a week ago. The credits are purchased – often by utilities – and can be sold through spot-market or long-term sales.
But New Jersey’s solar industry has become something of a victim of its own success. Those falling prices are the result of there being too many certificates, and Michael Winka of BPU said the meeting’s purpose was to begin to draw data from the various parties that will help the state formulate policy moving forward.
The Department of Energy says the price for an SREC is expected to average approximately $100 per megawatt hour lower than the SACP (Solar Alternative Compliance Payment), during a given year, although that is subject to market forces.
And although the cost to the ratepayer may be small, about $1.70 a month, according to some speakers, the cumulative impact is huge.
“New Jersey is on track for oversupply based on the capacity projection in terms of megawatt hours,” Winka said.
BPU figures showed that in 2010, there were 81 megawatts in 2,123 projects installed. This year so far, there are 171 megawatts in 3,527 projects.
Suggestions offered during the four-hour give-and-take included a renewed emphasis on long-term contracts and possibly having the state establish a price floor to provide some stability.
Katie Bolcar, Mid-Atlantic Region director for the Solar Alliance, said they view New Jersey’s program as a great success functioning reasonably well that does not need a major redesign.
In fact, any major policy intervention could create greater uncertainty and greater inefficiencies, she told the BPU.
Those high SREC prices in the formative years spurred the state’s solar effort. “We are not excited about the slower rate of development, but we understand this is part and parcel of the program,’’ she said.
A price floor concerns them, she said, because it would signal increased regulatory risk and raise issues about how the state would provide a “backstop’’ to the floor; what would give investors confidence that floor is supported?
Paul Flanagan, deputy public advocate with the Rate Counsel, also spoke against a price floor. “Unlike utilities, where they ask for a rate of return, we don’t know who is making the money in this market. We don’t see the contracts.”
But, he pointed out, the ratepayers are footing the cost. “People are struggling to pay their bills,’’ he said. “We’re told by utilities that ‘slow-pays’ and ‘no-pays’ are going up.”
Mark Solomon of Policy Capital Advisers phrased the issue for BPU: “Look at what kind of industry and supply you are looking for. Every SREC supports a hot water heater and a utility-scale project.”
He asked whether it was time to start making distinctions between the residential and larger projects.
Rawlings talked of the legislation under consideration – S2371, sponsored by Sen. Bob Smith, (D-17), Piscataway – that would actually accelerate the solar renewable energy portfolio standards by one year, beginning in energy year 2013.
The bill, which passed the Senate and is now in the Assembly’s hands, was amended to remove a provision that would have required 15-year contracts for SRECS.
Murray Bevin of the Retail Energy Supply Association told the BPU that suppliers entering the market don’t have the wherewithal to endure 15-year contracts.
Still, Smith’s bill drew praise from Rawlings and some others. It would emphasize long-term contracts and programs operated by utilities.
Susanna Chu of PSE&G said the solar program has created jobs, spurred manufacturing, and helped the economy. Even though the SREC market is volatile, she said, PSE&G would hate to see it stop and start again, sacrificing jobs in the process.
But in addition to the market forces at work that are causing pain for solar suppliers and ratepayers at the moment, Steve Morgan of American Clean Energy reminded everyone to factor in the societal benefits achieved by New Jersey’s solar program.
“They can be substantial,’’ he said, because every solar installation helps offset the need for additional capital investment in transmission or distribution infrastructure.