Thursday, December 13, 2012

Solar Panels Come To Union County, But Program's Future Not So Bright

A project to put nearly 14,000 solar panels on government buildings throughout Union County will be completed in coming weeks, with arrays installed at 31 facilities ranging from schools to libraries.
Mark Tornillo, working for Star-Lo electric in Bridgewater,
installs a solar panel similar to the 13,800 panels coming to
Union County, in this July file photo.

The panels can produce enough electricity to power more than 1,000 homes. They promise savings on energy costs for the 15 participating agencies, with an estimated $4.9 million in savings over 15 years, according to a report completed this month by the Union County Improvement Authority. New Providence schools, for example, will save about $45,000 in the first year, the report says. Plainfield would save about $1,117 at its public works facility.

"I’m really pleased for the towns. They’re going to save a lot of money at the end of the day," said Charlotte DeFilippo, the chairwoman of the UCIA, which helped finance the project. "I believe that we had as full-blown a participation as I’ve seen in a county project."

But instability in New Jersey’s market for solar energy credits, known as SRECs, has raised concerns about the program’s potential to be expanded in the future. And it also calls into question the revenue streams of a private company, California-based Tioga Energy, which owns the solar panels and is obligated to pay back $15 million in debt that Union County guaranteed.

It’s one of many public-backed solar energy initiatives undertaken in New Jersey in recent years, and the uncertainty that surrounds it is an example of what’s being experienced around the state in other parts of the nation.

The SREC credits, essentially a subsidy, are awarded to homeowners, businesses and utilities that generate energy with solar panels. Prices are set on a market in which utilities buy credits to meet state-mandated quotas.

For the first few years of the SREC market, solar panel owners got $600 or more for each SREC they earned by generating 1,000 kilowatts of solar energy, equal to about two thirds of the monthly electricity needs of the average New Jersey household.

Then, once supply of SRECs exceeded what the state told utilities to procure, prices plummeted to the mid-$100 range on spot markets.

That was bad for anyone who relied on high SREC values to pay off solar panel financing, like Tioga, and bad for solar builders if it brings new projects to a screeching halt.

To save jobs, the state Legislature sharply increased the utilities’ demand for credits over a three-year period, and Gov. Chris Christie signed the bill into law in July.

So far, though, it hasn’t worked: Prices on the spot market dropped from the mid-$100s to $60 or $70 as of last week, according to the SREC trading company Flett Exchange.

In the case of the Union County program, Tioga will generate the majority of its revenue by selling electricity to the agencies that allowed it to install the solar panels. But it will also sell SRECs to generate income, and the low prices are bad for its bottom line.

"We’re going to have to dig in to our own coffers to make the bond repayments," said Marc Roper, the company’s vice president of sales and marketing.

The improvement authority bonded $15 million, or 70 percent of the estimated startup costs, to fund the project at low interest rates. Union County guaranteed those bonds, meaning taxpayers are on the hook if Tioga can’t pay the debt.

In its report on the program, the improvement authority is bullish on where the SREC market will be in 10 years, estimating sale prices at $250, $350 and $450. But even Tioga isn’t that hopeful, saying it hopes the market stabilizes at around $100 to $200 by 2014 and beyond.

"That’s really what’s going to be needed to make projects go forward," Roper said.

DeFilippo, the authority’s executive director, is confident in Tioga’s ability to pay.

"We’re well guarded in terms of there being no vulnerability for the county or municipal agencies," she said.

Indeed, the languishing prices won’t necessarily bankrupt solar panel owners, but some are better off than others, said William Nelson, an analyst of solar credit markets around the country for Bloomberg New Energy Finance.

"In general, the bigger developers, the owners of the larger projects, have probably done something smart to lock in and hedge for a few years," Nelson said. "But the small guys, unless they’re part of (a limited financing program), they’re just selling spot and they’re not hedged."


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