New Jersey: Solar Saved from its Own Success
On Monday, Gov. Christie of New Jersey signed into law S-1925, a bipartisan bill designed to save the state's ailing solar subsidy system from its own success.
New Jersey's permit trading based solar subsidy program has propelled it to the forefront of renewable energy adoption in recent years, making it the fastest growing solar installation base in the nation during the first quarter of 2012 and second only to California in number of existing solar panel installations. New Jersey utilities are required to produce a certain percentage of their total energy production from solar power sources; otherwise, they need to offset their shortfall by purchasing solar energy credits (SRECs) from solar energy producers or pay a steep fine known as the alternative compliance penalty.
The system, which was originally set at 1.55% solar energy for 2014, was so successful in spurring new solar installations around the state that vastly more SRECs were generated than the utilities needed to purchase in order to avoid being fined. This glut has driven down prices for SRECs by more than 80% since the introduction of the program.
Without the anticipated income flow from SREC sales, many existing solar installations are struggling to make ends meets, while some 4,400 planned installations remain up in the air.
The bill fast forwards the previous permit quota by four years, increasing the proportion of solar energy in the utility mix to 2.05% in 2014, and all the way up to 4.1% in 2028, while introducing an SREC price cap at roughly three times their current value. S-1925 also eases restrictions on net metering and provides incentives for solar installations built on brownsites and landfills.
Proponents hope that the law will generate new demand for SRECs from utility companies without driving up electrical rates dramatically in the short run, but even solar industry proponents see the bill as little more than a temporary patch. While it reestablishes supply and demand equilibrium, there is nothing in the bill to prevent the same overbuilding situation from occurring again.
Industry and economic experts generally agree that a permit trading system with a throttling mechanism is the best long-term solution to the problem, but while he has not ruled out such a device Christie has stated that any such system will be a couple years in the making.