Solar Power Industry Shifting to Larger-Scale Projects
Economics and energy policies come into play as NJ utilities, environmentalists, state officials stake out positions
Most solar-energy systems installed around New Jersey in the future likely will be grid-supply projects, rather than the mostly residential and small-business projects of the recent past.
That trend reflects a dramatic shift in the nature of New Jersey’s solar sector, which as recently as early last year usually involved projects behind the meter, producing power for homes and small businesses, with owners getting credit for electricity they do not use.
The change in direction comes at a time of turmoil in the solar sector. The prices owners of smaller systems earn for the electricity their arrays produce have fallen dramatically, making it less profitable for solar-energy developers to invest in such projects.
Financial investment in larger grid-supply projects can yield better returns, in part because of economies of scale.
At the end of 2012, nearly 80 percent of all solar-energy systems installed in New Jersey involved so-called behind-the-meter projects, according to data compiled by the state Office of Clean Energy. Grid-supply projects, which supply electricity from large solar arrays directly to the power grid, accounted for only 20 percent.
But new solar projects in the pipeline identified by a consultant to the Board of Public Utilities suggested that trend could reverse. Behind-the-meter systems now account for only about 32 percent of the projects in the pipeline, while direct grid-supply projects make up 68 percent of the new systems.
Even that projection may be off the mark. Scott Hunter, renewable energy administrator for the Office of Clean Energy, noted that the grid-supply projects do not include those already in the queue at the PJM Interconnection, the regional operator of the electric power grid.
Charles Garrison, a consultant from Honeywell, one of the administrators of the clean-energy program, agreed.
“There is still a substantial pipeline,’’ Garrison said at a meeting in BPU’s offices in Trenton.
The concern is that big, new solar projects will come on line, further exacerbating an oversupply of SRECs (solar renewable energy certificates, which determine the price owners of systems earn for the power they produce), which have depressed the prices owners of the systems earn for the power they produce. The state has tried to deal with that issue by ramping up how much solar electricity power suppliers must buy in the next few years, a strategy yet to prove successful.
The trend poses some challenges for state regulators.
Many conservation groups strongly oppose converting existing agricultural land into large-scale solar farms. Many developers have invested large amounts of money in trying to secure approval for their projects – many of them on farmland -- from the PJM Interconnection, operator of the regional power grid.
This is at odds with the Christie administration’s energy master plan], which aims to discourage large grid-supply projects on farmland.
The issue may come to a head at the end of April when the BPU is expected to decide how many of more than 50 grid-supply projects, many on farmland, may move ahead by earning lucrative credits for the electricity their systems produce.
The energy master plan recommends those larger-scale projects be built on brownfields—contaminated sites which have laid fallow for years—or old garbage dumps, most of which have yet to been properly closed. A bill passed last summer directed the BPU to come up with financial incentives to encourage such projects, but the agency is far from reaching a consensus on the issue, as a meeting held yesterday in Trenton demonstrated.
Without new financial incentives, some solar-energy developers argue the energy plan’s target -- 80 megawatts of new solar capacity on landfills and brownfields -- will never be met.
Others noted that larger-scale projects tend to produce electricity at lower costs, an important factor for consumers.
The increased cost of aggressive renewable-energy goals has become a divisive issue in Trenton, with many business interests questioning an approach they say is driving up energy costs in a state already saddled with some of the highest electric bills in the nation.
“We are not doing smaller projects as much because prices for SRECs have fallen and there are no more rebates,’’ said Jeff Tittel, director of the New Jersey Sierra Club.
The state originally tried to jump-start the solar sector by offering lucrative rebates to homeowners and businesses to install solar arrays, but the program was so successful that the state decided several years ago to switch to a market-based system involving SRECs, a strategy believed to be less costly to utility customers.
“It’s not necessarily a bad thing,’’ Tittel said. “It was expected to happen when the state phased out rebates.’’
