By most accounts, New Jersey’s use of renewable energy is one of the most aggressive in the country.
This push to use renewable energy sources is partly driven by popular demand to reduce dependency on fossil fuels, but also by a broader statewide Clean Energy Program mandate, approved by the Board of Public Utilities in 2006. The Renewable Portfolio Standard (RPS) calls for an overall 20 percent conversion to renewable energies, such as wind, biomass and geothermal technologies, by 2020.
Included in the plan is a minimum 2 percent requirement for solar energy generation by 2021, with a goal of reaching some 5,300 gigawatt hours of solar power by 2026.
As the term implies, solar generates electric power by capturing sunlight through solar photovoltaic panels. When more power is generated than is used, the excess energy goes back to the electric grid. This ebb and flow of electricity through a solar system, analogous to deposits and withdrawals in banking, is called net metering, whereby the solar energy user is only charged for power “borrowed” from the grid.
The Allure of Solar
Solar power by itself is expensive to produce, which is why incentives such as Solar Renewable Energy Credits (SRECs), federal tax credits, upfront cash through grants in lieu of the credits, plus various manufacturing-related rebates are in place to make solar attractive to developers and users, alike.
The fact is, these incentives have positioned New Jersey second only to California, with more than 10,000 installations going online in just the last decade. This has created a veritable gold rush of sorts.
“Solar energy is very popular here in New Jersey as well as other states where there are residential and commercial incentives, plus a positive regulatory framework in place to encourage production,” observes CEO of Camden-based Blue Sky Power Ben Parvey, a clean energy project developer and system owner/operator.
The economics of solar energy also made sense to Aqua New Jersey, a subsidiary of Aqua America, a privately owned water company.
The company is building on two locations, one in Sicklerville and the other near Phillipsburg. “It’s most economically feasible to have a solar installation where you own the land, so the geography coupled with the state and federal incentives made installing a solar system very practical,” says Aqua New Jersey President William Davis.
Between Aqua’s two sites, more than 500,000 kilowatt hours of electricity are expected to be generated annually. That equates to powering nearly 40 homes a year.
Meanwhile, Pfister Energy has just completed a large three-megawatt, ground mount system in Mount Laurel that links directly to the electrical grid. It’s a collaborative project with Clean Light Energy, which utilizes an abandoned 14-acre site, formerly a farm and nursery.
In this instance, Clean Light Energy bought the property, which is near utility lines, and Pfister Energy handled project development, oversight as well as the application and related administrative work.
“In New Jersey, there are obviously mandates to develop renewable energies and, because of those mandates, not only are businesses and homeowners installing all types of renewables, but there’s also the opportunity for investors to build investor-grade solar projects,” observes Pfister CEO Wayne Pfisterer. “So, in a sense, this is a small clean power plant, not unlike a nuclear or coal burning plant, that will produce energy for our nation’s grid.”
Economics and Job Creation
Clearly, financing system development and installation projects is key, which is where the Solar Renewable Energy Credit component comes into play.
SRECs, which equal one megawatt hour or 1,000 kilowatt hours, are typically owned by the investor or business that generates solar power. Each SREC has a dollar value, which is determined by prevailing market conditions. In essence, they provide a solar system owner with a source of revenue that can offset at least a portion of the cost of system installation.
“SRECs, which expire after 15 years, are bought and sold much like stocks,” explains Scott Downie, of Sustainable Cherry Hill, a nonprofit, grassroots education and environmental advocacy organization.
“They can provide a steady revenue source for the generator of solar power and also help solar energy providers who may fall short of the state Renewable Portfolio Standard (RPS) solar requirement,” Downie continues, adding that if a solar company fails to generate enough energy, they must pay a fine called a Solar Alternative Compliance Payment (SACP).
He goes on to say that companies can either pay the fine of about $675 or buy SRECs, which are often less expensive, to offset the energy shortfall. Ray Angelini, president of Ray Angelini, Inc. in Deptford, notes that in addition to significant energy savings, solar has had a positive impact on an otherwise unstable job market.
“At a time when virtually every other industry is shedding jobs, the solar industry is adding them,” observes Angelini, whose electrical, general contracting and power testing company has added more than 200 employees since integrating commercial solar projects into the mix.
His company is credited with doing solar projects for the likes of Johnson & Johnson, DuPont, The Atlantic City Convention Center and others.
The so-called “solar boom” has been good for Trinity Solar, a company that installs both commercial and residential systems. SRECs were a big enticement to offset costs.
“We were an HVAC firm, but saw an opportunity to get involved with solar in 2004,” explains Ed Merrick, vice president of marketing and business development for Trinity Solar. “What’s significant is that since the first year, when we installed about 100 systems, we’re now installing about 150 per month.”
One of Trinity’s customers is Mount Laurel resident Rich D’Eustachio. He heard Trinity’s radio commercial and decided a move to solar energy just might be a smart investment for his four-bedroom home.
Going green has meant saving green and plenty of it for D’Eustachio, who estimates he’s saved at least 80 percent or more since switching to solar less than a year ago.
“Without a doubt, saving money was certainly a big incentive, but in the larger context, I also wanted to do my small part for the [environment] by investing in a renewable energy source like solar that would decrease our dependency on fossil fuels,” says D’Eustachio.
D’Eustachio and several others were the beneficiaries of a unique arrangement in which an investor fronted money to Trinity to cover the entire cost of installing several solar systems. In return, that investor gets regular income back through SRECs.
In this case, D’Eustachio does not get the monthly income generated by SRECs, but by the same token, he had no out-of-pocket expense and therefore received the system at no cost to him.
Like D’Eustachio, Cherry Hill resident Jeff Kirk opted for solar energy for his home back in 2009 under a different arrangement. While his initial installation cost for the system framework, panels and other expenses related to tree removal for maximum solar output ran upward of $40,000, the final cost came down to just less than $30,000 after the 30 percent federal tax credit.
The real savings will be ongoing through solar power generation and SRECs, which Kirk owns and trades through an online company called SREC Trade.
With all the positives about solar energy and growing interest in the business and residential sectors, there is also concern about the dramatic fluctuation in the price for Solar Renewable Energy Credits.
While SRECs have been providing a good source of revenue, in just the last couple of years, their values have plummeted dramatically. Values have gone from a high of about $650 to lows of about $165 due to a certificate surplus—a direct result of the solar boom.
This instability, akin to the ups and downs on Wall Street, can mean thousands and even millions of dollars in lost revenue.
Also of concern is growing numbers of solar projects coming online and the potential to overtax the grid. But that’s an issue cited by some that doesn’t seem to bother Susanna Chiu, PSE&G’s director of business development and policy.
“We’re always concerned about safety and reliability, so before any system is interconnected, an application for each new system needs to be submitted for review and a determination is made as to whether or not it can be seamlessly absorbed into the grid,” Chiu says.
She adds that more often than not, when there are reliability concerns, rather than deny an application, the utility will put safeguards and upgrades in place before interconnection is permitted.
PSE&G is heavily invested in solar initiatives. As an example, its Solar 4 All program, launched in 2009, allows them to be the installer, owner and operator of solar systems as the utility company. The ambitious initiative is designed to add some 80 megawatts of solar electric generation to its system by the end of next year, which would power some 13,000 homes. Constructing solar systems on brownfields, former industrial and commercial sites that may have low concentrations of contamination, plus using utility poles that would have otherwise taken up nearly 170 acres of open space are creative ways PSE&G is generating the power.
Its solar loan program completely finances solar projects, using SRECs as a means of loan repayment.
“It’s a win-win scenario, because we build the systems on sites that fit in with state land use policy, and all the investments, the tax credits and SRECs are returned to the rate payer and it becomes a way for them to share in system development,” notes Chiu.
As for employment, Chiu says the nearly 78 megawatts developed to date under PSE&G initiatives have resulted in 1,000 jobs in project management, engineering, administrative and other support areas.
Atlantic City Electric, JCP&L and Orange and Rockland have also jumped on the solar energy bandwagon with programs of their own, including setting up separate companies to engage in the SREC trading business.
There are clearly a multitude of stakeholders in New Jersey’s solar energy market who, despite the potential for market instability, remain positive overall.
“I’m not overly concerned at this point, but stabilizing the solar energy market is definitely an issue deserving of some extra attention,” notes Parvey. “I think we’ll all be looking to the Board of Public Utilities, the state legislature and the governor for ideas.”
Enter Assemblyman Uprenda Chivukula (D-Middlesex), who chairs the Telecommunications and Utilities Committee.
“Many investors who had put money into the solar business are saying the solar market in New Jersey is too volatile and are thinking about taking their investments and projects to other states,” says the assemblyman. He anticipates at least a temporary slowdown in solar projects, due to the expiration of the upfront cash federal grant incentive at the end of the year. He hopes that will help stabilize the SREC market.
He’s also hoping several other provisions within his recently proposed legislation will bolster overall investor confidence and stabilize the solar energy market.
“Financing is always needed for any solar project, so one of the things we’re hoping to do is get all the utilities involved to offer extended 10-year power purchase agreements versus the existing three-year agreements,” he says. “Having this extension will ultimately make it much easier for banks and other financial institutions to finance those loans.”
Chivukula also points out that there is no uniformity in distribution systems between the state’s four utility companies, which is another issue he hopes will be resolved through his legislation.
“The reason this consistency is so important is that, in order to qualify for SRECs, you need to be able to connect to the distribution system,” he explains.
Ultimately, Chivukula says his main goal is to ease overall uncertainty and send a strong message to those involved with solar technology that New Jersey is a good place to do business.
Published (and copyrighted) in South Jersey Biz, Volume 1, Issue 11 (November, 2011).
For more info on South Jersey Biz, click here.
To subscribe to South Jersey Biz, click here.
To advertise in South Jersey Biz, click here.