Thursday, July 5, 2012

Solar Growth Comes with Cost

Solar energy’s growth in New Jersey is being tested by reluctance from business interests and consumer advocates to keep feeding the industry enormous subsidies and government incentives.

New Jersey ranks only behind California in the number of installed solar units, with 15,778 homes and businesses equipped here.

But that boom came at a price.

Purchasers of systems were attracted by generously subsidized energy credits for generated power. The credit for 1,000 kilowatts of power not long ago reached $600. But systems were overbuilt, crashing the price to $100 recently and bringing new installations to a virtual halt.

The average size of a residential solar system in New Jersey is 7 kilowatts at an average cost of $58,000, according to Public Service Electric & Gas Co. Participants also rely on federal tax credits or grants and depreciation benefits to reduce cost of installation.

Now it’s up to electricity ratepayers throughout the state to chip in to restore the market for the solar renewable energy certificates.

A trade group has estimated the help could bring increased costs to ratepayers of more than $300 million annually in added costs for the next two years, resulting in a 5 percent hike to average $80 monthly bills, with future increases also likely.

Proponents say it’s a worthwhile tradeoff, noting solar energy has the promise of meeting a reasonable balance of environmental, reliability and economic objectives.

There are bills in the state Legislature authorizing increased subsidies. Gov. Chris Christie said: “If they pass, I’ll sign them. It’s going to continue to help the solar industry, which is a big job creator in our state, and also helps us with clean renewable energy (and) management of our entire long-term energy needs.”

But there are naysayers, too.

“Solar energy has always been one of my pet peeves. If you’re in the middle of nowhere and will pay anything to get power, it’s worth it, but it’s not a cost-effective technology for the rest of us,” said Long Branch resident Les Cadigan, a retired chemical engineer who worked on cogeneration and conservation projects. “It drives me crazy thinking about the amount of money used on subsidizing it in this state.”

Cadigan said market forces should be allowed to take over.

“My ultimate point is, if we run out of gas, oil and coal and can’t build new nuclear plants and become desperate to power things, somebody will come up with better designs for wind and solar to make them more cost-effective and reliable. New Jersey has no business raising my electrical rates so we can build the current solar systems that aren’t cost-effective,” he said.

Government-imposed surcharges, subsidies and fees make up about a quarter of a customer’s energy bill in New Jersey. Solar energy policy accounts for about 2.5 percent of the bill.

The lion’s share of government help goes to conventional power markets, such as in a new plan where Competitive Power Ventures will build a natural gas-fueled power plant in Woodbridge and Hess Inc. will construct a plant in Newark. State energy regulators have signed off on incentive agreements that could yield tens of millions of dollars to the two companies through payments under the Long-Term Capacity Agreement pilot program.

“Subsidies are also common with other technologies,” said former Lacey resident David Solan, the director of Boise State University’s Energy Policy Institute. “”But in the states where solar installations occur, it’s incentive-heavy, and the market isn’t competitive unless it’s getting a lot of help. Other states are taking a wait-and-see approach until things play out in states like California and New Jersey.”

President Barrack Obama has promoted an “all of the above” energy policy dependent on multiple fuels, including investment in solar research and development.

“The country is spending on R&D in the hope of making solar more cost-efficient and competitive,” Solan said. “It needs to cut the cost back about 75 percent.”

Ted Pomeroy, who served last year on a state Board of Public Utilities energy master plan work group, doubts solar can ever be weaned off subsidies.

“A utility has a 5-acre solar field in Trenton that powers 134 homes per acres. A conventional power plant in Jersey City on 4 acres powers 738,000 homes. Solar just isn’t efficient,” Pomeroy said.

He said New Jersey’s solar buildup was triggered by policies from Democrat governors. Though Christie supports current legislative fixes for the industry, Pomeroy is hopeful “a gentle disengagement” from solar will be advanced by the Republican governor.

New Jersey Sierra Club Director Jeff Tittel said he’s glad bailout bills are advancing. But, he warned: “We need to pass legislation as soon as possible to stabilize the solar market. Without these bills we might not have any solar in New Jersey after July 1. This is a way to grow our economy and provide jobs while reducing pollution and greenhouse gases.”

“The bill needs to be as simple as possible and each group has to get something and give up something,” Tittel said. “If everyone tries to use this bill to push their own agendas we will end up having no solar in New Jersey. We believe this bill is an important vehicle to keep a robust solar industry in New Jersey and the 5,000 jobs that depend on solar.”

Stefanie Brand, head of the state Division of Ratepayer Counsel, said environmental benefits are important. Yet some ratepayers are “not happy about the size of their electric bills,” Brand said.

“I would like to see a solution to sustain an industry we’ve spent a lot of money to develop,” she said.

A lobbyist for business interests, Sara Bluhm, said raising taxes, fees and surcharges won’t help a struggling economy.

“How is this going to affect the overall business community?” Bluhm said.


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