Not long ago, New Jersey's solar market was a gold mine.
Investors flooded the state, fronting money for hundreds of solar installations. A lucrative state incentive meant financiers could quickly recoup their investments and spend the bulk of the following two decades reaping a profit.
Those days are over. And many in the industry say they're unlikely to return.
"The market has been destroyed," said Bill Hoey, CEO of New Jersey Solar Power, one of the state's oldest solar firms, having started in 2003.
The market was set up by the government, but Hoey said a lack of careful management by the Board of Public Utilities and the governor's office allowed a major crash to happen by allowing mega-projects to flood the solar market.
"No one understood that the smaller systems actually create jobs — create local jobs," he said.
The state's solar market was spawned by regulation. In 2004, the state created a renewable portfolio standard, or RPS, requiring power suppliers in New Jersey to include a minimum amount of renewable energy in their portfolios.
Power suppliers could meet the demand by generating or buying renewable power, or by purchasing credits from homeowners and businesses that generate their own green power.
The resulting demand for solar power drove prices of those credits — known as SRECs, or solar renewable energy certificates — north of $600, pushing against the state-set price ceiling. But two years ago, supply caught up to demand, SREC prices tumbled to around $100, and all went quiet.
The state Legislature passed a bill last year designed to goose demand by upping the RPS, but so far it's failed to revive the market.
Hoey said there were some 450 solar companies in New Jersey at the height of the boom. Now there are fewer than 200.
Today, only about 30 percent of the work at his company, based in Bayville section of Berkeley, is solar.
"We've been saved by Sandy, quite honestly, doing electrical work," he said.
Still, not every corner of the solar industry is having trouble.
Kelcy Pegler Jr., co-founder of Roof Diagnostics Solar, said his company, which specializes in residential solar, has work scheduled for the better part of the rest of the year. The company held a job fair last month with the goal of hiring 40 workers.
Roof Diagnostics uses a third-party model, in which an outside firm finances the projects and retains ownership. Homeowners typically pay little or nothing up front, then pay a flat rate for the electricity from the system over the course of a long-term contract.
Pegler said the lower SREC prices have a lesser effect on residential demand in a third-party system. SRECs, he said, are just one of three factors needed for a strong residential market.
"It relies on expensive electricity, which we have in New Jersey and throughout the Northeast; it relies on net metering, which is the utility companies accepting the electric backfeed from the solar system into the grid at a penny-for-penny exchange, and it requires some state incentive, or at least, it benefits from a state incentive," he said.
The third-party financers, like Sunrun Inc., take advantage of government tax credits and accelerated depreciation, along with state incentives, to make a return on their investment. However, those federal incentives are temporary, so Pegler said his firm is racing to lower the price of solar so incentives are necessary.
He's also hoping the state will create a carve-out for residential solar, so large industrial systems and solar farms won't drown the SREC market and kill small projects.
Hoey said he wants a more structured market that would cordon off large "grid supply" projects solar farms.
Bryan Miller, vice president of public policy and power markets at Sunrun, said the status quo won't hold in New Jersey.
"The regulators are going to need to step in to support this market, to keep it going," he said. "It is extremely difficult to make residential solar work."
Aside from residential, commercial and industrial solar continues to be spotty.
While electricity prices here are still high nationally, they have fallen in recent years, widening the cost gap between solar and conventional electricity and making solar less lucrative, said Jamie Hahn, managing partner at Solis Partners, a solar firm in Manasquan.
In such an environment, Hahn said projects need economies of scale.
"Right now, the box (of viable projects) has gotten very small," he said. "And it's usually larger-scale projects that we're looking at predominantly now."
Other projects moving forward include landfill and brownfield solar, part of a push by the state to discourage solar farms on land that could be used for other purposes. The state's largest utility, Public Service Electric & Gas, just won approval to put up 42 megawatts of landfill and brownfield solar farms.
But that won't be helpful to developers like Hoey, who say the best jobs are small and midsized commercial projects. Those are the projects that create local jobs, he said, and those are the hardest projects to finance now.
"The businesses that really need to get the help with their (electricity) rates by putting solar on the roof can't afford to do it, because the SREC prices crashed," he said.
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