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Energy burst: Solar industry is starting to show some spark, but it's too soon to say it has a bright future

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Lyle Rawlings, the president and CEO of Advanced Solar Products, is pictured on the roof of Kooltronic in Pennington.
Lyle Rawlings, the president and CEO of Advanced Solar Products, is pictured on the roof of Kooltronic in Pennington. - (PHOTO BY AARON HOUSTON)

It was just two years ago that New Jersey's solar industry seemed headed for ruin, only to be saved by legislation that helped create new demand for an oversupplied market.

But that was just a temporary fix, experts say, and advocates are now searching for a long-term solution for creating a sector that won't be prone to the boom-and-bust cycle seen over the past several years.

The 2012 law rescued what had become a volatile market for solar panel projects — fueled by a state mandate that power suppliers increase their use of renewable energy each year and development subsidies that became too generous. When supply outstripped demand — causing the market to slide — lawmakers stepped in to speed up those requirements through 2018 and place restrictions on future installations.

Lyle Rawlings, co-founder of the Mid-Atlantic Solar Energy Industries Association, said the legislation “seems to have been pretty well-calibrated to balance the market out in the short term.” The result has been enough demand to stabilize the price of SRECs, or solar renewable energy certificates, which utilities can buy from the owners of power-generating solar arrays to help satisfy their obligations.

SREC prices have steadied at around $160 to $175 after peaking at more than $600 in 2011 and falling to below $100 last year.

But Rawlings said his association is concerned that stability won't last, largely because of a “steep decline” in renewable energy requirements that will take hold in 2019. He also noted that SREC prices are still well above the cost of producing solar arrays — possibly even double — meaning utilities may be paying too much for the credits.

“Either the solar industry will come to a screeching halt … as it would have back then, or we'll have to do something to alter the schedule for developing solar and reverse that decline,” said Rawlings, CEO of Advanced Solar Products in Flemington. “What we think is really necessary is to redefine the program so that it's not a boom-and-bust cycle, and so that ratepayers are not paying substantially more than the real cost of the production of solar.”

Those discussions have started in recent months among lawmakers, industry leaders and other stakeholders. Rawlings' group is touting a draft law called the Renewable Energy Transition Act, which outlines New Jersey's goals for green energy and energy efficiency for decades. The state now aims to have 22.5 percent of its energy come from renewable sources by 2021, as outlined by a three-year-old Energy Master Plan, but the proposal would set a target of 80 percent by 2050.

“Defining what our destination is, I think, the most important part of this bill,” Rawlings said, acknowledging that such a plan would have implications for New Jersey's grid infrastructure and how utility companies would operate in the future. But setting the goal now would give stakeholders time to prepare, he said, and he believes it's attainable.

Plans for the measure have changed since the draft was circulated in March, and it's not likely to go without debate. Its lead sponsor, Sen. Bob Smith (D-Middlesex), said stakeholder talks evolved from a focus on renewable energy to an all-inclusive look at the state's energy landscape, touching on areas such as reducing greenhouse gas emissions and utility companies' profit models.

That has resulted in the formation of four stakeholder groups, each made up of about two dozen people, that Smith said will come up with policy recommendations and report back in early July.

“Their job is to work for the next two months and get back to us with their best ideas about what we should be doing legislatively to enhance New Jersey's whole energy profile,” said Smith, chair of the Senate Environment and Energy Committee. “Not just more resiliency and more efficiency and more alternatives, but what we really need to do to make this state a better place with regard to energy.”

The effort to find a long-term solution for the solar market has considerable support, but some favor a more measured approach. Steve Kisker, an attorney with Wolff Samson, said the state needs a “slight increase” in its renewable energy requirements to ensure that the current, stabilized rate of new solar activity keeps pace beyond 2018.

“I think everybody realizes that we still have a couple of years of a solid market, so the SREC value is still decent,” said Kisker, who heads the firm's renewable energy and sustainability group. But investors and developers may look ahead as 2019 approaches and grow concerned that prices will drop to the lows they saw when the market crashed.

“Then, all of the sudden, the investment doesn't make any sense,” he said. “And that's when the brakes are going to be put on, which doesn't help the job market and doesn't help New Jersey's goal of renewable energy.”

Kisker also cautioned against pushing for a sweeping overhaul by lawmakers, following a grueling legislative process that led to the 2012 solar rescue bill. He said the goal of 80 percent renewable energy by 2050 is certainly laudable, but “I think if we ask for too much too fast, we're going to end up getting nothing, and I think the market's really going to suffer.”

Whatever comes of the state's renewable energy requirements, Rawlings' group also hopes for a change in how the solar market is structured. One idea long favored by the group is Delaware's model, in which the government uses competitive auctions and 20-year contracts to control development and meet its own mandates; he said that allows solar builders to lock in stabilized, fair SREC prices over a long term, creates confidence among investors and prevents overbuilding.

“It has no chance of having the kind of boom-and-bust cycle that we've had here — and that we think just will keep getting repeated,” Rawlings said.

E-mail to: joshb@njbiz.com
On Twitter: @joshburdnj

FIGHTING THE FIGHT

    If the most ardent solar advocates have their way, New Jersey would require 80 percent of its energy to come from renewable sources by 2050.
    That won’t be an easy sell by any means, but supporters of such a legislative proposal say there is ever-growing support from all corners of business: environmental, civic and even faith-based communities.
    That coalition now includes about two dozen groups led by the Mid-Atlantic Solar Energy Industries Association, plus corporate giants such as Kyocera Corp. and Mitsubishi Electric U.S.A. There are organizations such as Clean Water Action New Jersey and the U.S. Green Building Council’s state chapter, along with the Unitarian Universalist Legislative Ministry of New Jersey and the League of Women Voters.
    They’re all groups that “recognize that conditions have become ripe for New Jersey to define what its destination is for its energy future and that a majority renewable energy future is the answer now,” said Lyle Rawlings, co-founder of the Mid-Atlantic Solar Energy Industries Association.

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Joshua Burd

Joshua Burd

Josh Burd covers real estate, economic development and sports and entertainment. Before joining NJBIZ in 2011, he spent four years as a metro reporter in Central Jersey. His email is joshb@njbiz.com and he is @JoshBurdNJ on Twitter.

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