“When you come to a fork in the road….Take it.”
– Montclair NJ native Yogi Berra
“We are the victim of our own success.”
– New Jersey Senator Bob Smith (D-Piscataway) testifying today before the Assembly Telecom & Utilities Committee supporting legislation on solar power
“[Today’s proposed legislation] would have a devastating impact on the economy of the state.”
– Stephanie Brand – Director of the NJ Division of Rate Counsel
We have come to a fork in the road with regard to the deployment of solar energy in New Jersey. Today, Assemblyman Upendra Chivukula (D-Somerset) and his Telecom & Utilities Committee took a big step in deciding which path to take.
More, including an interview with Assemblyman Chivukula, after the fold…
Depending on whom you talk to, the Garden State is either first or second (to California) in the use of renewable solar energy. This is due, in no small part, to the incentives that have been promoted by state and federal government to exploit the virtually unlimited source of power that we get from the sun.
One form of these incentives is called Solar Renewable Energy Certificates, or SRECs (pronounced ESS-rex). In New Jersey, you receive one certificate for each megawatt-hour of power generated from solar energy. Utilities are required to produce a certain percentage of their power using clean technologies, and they can satisfy all or part of this requirement by purchasing SRECs. SRECs are sold on the open market, so their price varies based on supply and demand for these credits.
What Senator Smith was referring to in the opening quote, above, is that with the tremendous deployment of solar energy projects in the state, there’s a glut of SRECs on the market, and consequently their price has dropped – from a high of $700 to around $225 today. Consequently, the incentive for investors to build solar energy facilities has dropped as well, since the SRECs they will generate are worth fewer dollars today than they were last year.
There are other factors that influence the price of SRECs. The technology of solar power generation has become less expensive. It’s almost like the gold rush, with lots of people entering the market, spurring competition, and taking advantage of the government subsidies, and further driving down the value of SRECs along with return on investment.
Where does the state get money for SRECs? Not surprisingly, from you. There’s a part of your utility bill that goes to fund the SREC pool. That’s why, in the eyes of the state’s Rate Counsel, lower SREC prices would be a good thing. (If I were cynical, I’d point out that the current administration is in the pocket of the Koch Brothers and other dirty energy industries, and there’s certainly some truth to that. But although Director Brand works for the Christie crowd, she was appointed to her position by Jon Corzine.)
With the value of SRECs as low as they are today, there is little incentive for further investment in solar power, which is not only clean, but is also one of the largest creator of jobs in the state. The legislation before the committee would stabilize SREC prices. Senator Smith pointed out that without this legislation, the solar industry here would come to a screeching halt.
Director Brand asserted that the proposed legislation would cost ratepayers $7 billion over the next 15 years, a figure that was disputed by solar proponents. The chief naysayer on the panel, outgoing Assemblyman Joseph Malone III (R-Bordentown), said the money would be better spent on infrastructure. Of course, this is a red herring, because there’s no chance that an equivalent tax increase to fund much-needed infrastructure projects could pass in the legislature, let alone survive Governor Christie’s veto pen.
At today’s hearing, the room was packed with lobbyists and other advocates from both sides. Proponents of clean energy argued for the proposed legislation, which is predicted to bring the SREC price to the $400 range, resulting in the incentives needed to continue our state’s leadership in solar energy. Organizations opposing the legislation (including many from the dirty energy industries) asked when the subsidies will end. Of course, they did not bring up the fact that the oil, gas, and nuclear industries have been heavily subsidized from time immemorial. In the end, the bills passed the committee (with some amendments) and Chivukula’s hope is that the full legislature will vote to approve on Monday, the last session of the current legislature. Then the question is, will the governor sign it? Or will we come to a new fork in the road when the next legislature convenes on Tuesday?
Of course, solar is not the only path to reduce our carbon footprint and generate clean energy. After the meeting, I spoke with Assemblyman Chivukula on this legislation and other energy initiatives. Here’s the interview: