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Pitching solar as a powerful asset for municipalities Law lets towns share generation credits, to cut costs at more sites

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Legislation enacted this summer was designed to put the solar industry on a path to sustainability, but the law could also help local governments benefit from solar in broader ways.

The so-called solar rescue bill included a provision letting municipalities, school districts and counties participate in "aggregated net metering," which could make investments in solar more palatable to local governments that have stayed on the sidelines so far.

Under "net metering," property owners who generate their own solar power, sell excess power back to the grid in exchange for an energy bill credit. Thus, their monthly electric bills are the net sum of grid energy used and solar energy sold back to the grid.

The new aggregated net metering provision would let local governments with solar arrays use that credit to offset power bills at any of their buildings — even those not connected to the solar installation. Therefore, "the output of the solar power system can be shared among a group of utility accounts," said Jamie Hahn, managing director at Solis Partners, a Manasquan-based renewable energy firm.

Several states already have aggregated net metering. In some of them, neighborhoods, low-income housing and nonprofits can participate, also.Hahn said the finances of solar have been difficult for governments lately: The state's chief solar incentive, the SREC, has dropped precipitously in value, while a federal solar grant that expired in January has been replaced by a tax credit that's of little use to nonprofits.

The Board of Public Utilities has until April to work out the details of the program, and Michael Cerra, a senior legislative analyst at the New Jersey State League of Municipalities, said it's too early to know how many towns will take advantage of it. But there are a couple of key reasons to go solar, he said. Solar can bolster a town's green image, and it also can significantly cut operational costs.

"Any time you're operating on a 2 percent hard cap (on property tax increases), any opportunity to lower your costs, any opportunity to bring in revenue, I think, makes a difference," he said.

Fred Zalcman, director of government affairs for solar developer Sun Edison, said the bill significantly broadens the potential upside for local governments.

"Many town buildings may have older roofs, be shaded or have a lot of peripheral equipment on their roofs — so from a structural standpoint, that specific building may not be able to support solar," he said. "But in an aggregated net metering arrangement, you can site solar at another location, and have that system net against the demand of other buildings."

Thus, a county with a landfill can now place a solar farm on top, and use it to offset the electricity bills of multiple buildings. A high school with a large rooftop installation can capitalize on sunny summer days, earning credit for the power it won't use.

Exactly how much credit a local government receives remains an issue of some contention, and the BPU has yet to settle the matter. Zalcman said he hopes local governments are credited at retail power rates, as opposed to the wholesale power rates currently paid to traditional net metering clients.

Terry Moran, director of market strategy and development for solar programs at Public Service Electric & Gas, said sending power from a solar installation to the power grid causes wear-and-tear and other incremental costs to a utility's distribution system. If those costs aren't factored into the credits, he said, the utility would have to ask the BPU's permission to recover those costs.

"When you have net metering and there are distribution costs to serve customers, and utilities aren't able to charge those directly to customers," he said, "what happens is the next time you have a rate case, those costs are borne by all customers."

Moran said that's an issue every state with net metering has had to deal with. In other states, utilities have called for caps on net metering programs or other restrictions.

Zalcman believes a more holistic accounting of aggregated net metering's impact will show it can also save utilities money. For instance, he said solar can replace some of the high-cost power purchased by utilities at peak usage periods. That's convenient because peak usage times — such as hot summer days — also are peak generation times for solar.

Hahn said he hopes the program serves as a launching pad for broader deployment of aggregated net metering and an expansion of solar that further lower costs and decreases reliance on government incentives.

"The benefits are, I think, cross-pollinated," Hahn said. "They can benefit all different parties, and from a solar industry perspective, the most important thing is it will get us to scale much quicker than we will without it."

E-mail to: jaredk@njbiz.com
On Twitter: @jaredkaltwasser

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