At symposium, BPU chief says he's trying to stabilize ‘overheated' solar sector

February 15. 2012 2:09PM

At symposium, BPU chief says he's trying to stabilize ‘overheated' solar sector

The new president of the Board of Public Utilities told an industry gathering Wednesday he's working to stabilize the "overheated" solar market, though he made clear he'll address the problem within the context of working to lower energy bills.

"The state of New Jersey has made a commitment to solar power, to renewable power, and the (Chris) Christie administration will carry through on that commitment," said Robert M. Hanna, who took over as BPU president in December.

That commitment — iterated most recently in Christie's 2011 energy master plan — is for 22.5 percent of the state's energy portfolio to come from renewable sources by 2021.

Hanna was the keynote speaker at the NJBIZ Solar Energy Symposium on Wednesday, in the Somerset section of Franklin. He joins the BPU at a time of some uncertainty for the industry: Last year saw a precipitous drop in the market price of solar renewable energy certificates, which are credits solar installation owners can earn and sell to help defray the cost of their solar systems. SRECs chiefly are purchased by utility companies, which use the credits to meet state renewable energy mandates.

Last year, SREC prices plummeted from a high near $600 to less than $200. The BPU and Legislature are now working for ways to revive the market, but Hanna was blunt in telling the audience that the goal would not be to spike SREC prices back to record levels.

"The days of $600 SRECs are over," he said.

Hanna said the fact remains that solar is more expensive than traditional forms of energy, and he said one of the administration's goals is to reduce the cost of doing business in New Jersey, which includes reducing electrical costs. He said he wants to see new combined-cycle natural gas plants built in the state to help achieve that goal. Last week, he helped break ground on such a plant in West Deptford.

One audience member asked if Hanna would consider setting a floor for SREC prices, something that's done in Massachusetts. Hanna, arms crossed, was clear in his response.

"No," he said, adding that such a move would convert the SREC into a straight subsidy, something he said the administration was not interested in.

Later in the morning, during a panel on the evolving state of the industry, Mark Warner, president and CEO of solar developer Sun Farm Network, said solar should be thought of as a peaking resource, because it provides the most energy at times of the day when energy is in high demand. If one wants to compare the cost of solar to other energy technologies, he said, they should compare solar to the cost of operating peaking power plants, which only come online when high demand warrants it.

"On that basis, solar is a lot more cost competitive than is typically believed," he said.

During a panel discussion about the financial side of solar projects, Michael Flett, president of Flett Exchange LLC, said SREC prices typically swing from high to low. When moderator and Gibbons P.C. partner Frank T. Cannone asked how to manage such swings, Flett said one option is to do a multiyear contract with an energy company. Flett said companies generally agree to one-, two- or three-year contracts. EisnerAmper LLP partner Rich A. Cleaveland noted news reports about corporations having significant cash on their balance sheets, and said firms could try to entice those corporations to invest by communicating the benefits of solar projects.

Robert M. Gerard, managing director of Torcon Energy Services, said, "I think the tax equity investor is risk averse." Gerard said investors feel a need to trust the project's developer.