Posts Tagged ‘Utility Scale Solar’

Governor Christie throws support behind NJ SREC program

Posted March 18th, 2011 by SRECTrade.

Many wondered what might happen to the New Jersey SREC program when the state Governor’s office shifted into Republican control. Since taking over, Governor Christie has initiated a review of all the state renewable programs to understand the effect they have on ratepayer costs. SRECs make up such a small percentage of the overall electricity market, that the cost increases should be relatively minor across the ratepayer base. Furthermore, as a cornerstone of the solar industry in New Jersey, the impact that the SREC program has had on the growth of investment and jobs in the Garden State will likely overshadow any nominal increase in electricity rates.

To this effect, New Jersey has out-distanced every other state in the region, particularly in establishing an SREC market that can support an industry – not a few utility scale solar projects. The primary driver of this success has been the emphasis on smaller, distributed projects and accessibility to a market of buyers. In the early years of the SREC market, New Jersey had a cap of 2 MW, limiting the size of any single entrant in the market and ensuring that many stakeholders could benefit from the program. This is in stark contrast to a state like Ohio, where the SREC program has been tripped up out of the gates by large projects that have cornered the market for SRECs.

The divergent stories of AEP and FirstEnergy in Ohio demonstrate a perverse incentive set up by a poorly designed SREC program. With no cap on the size of projects eligible for the SREC market in Ohio, AEP chose to make plans for utility scale projects. The first was a 10 MW project in Upper Sandusky Ohio and the next project is slated for 50 MW by 2015 in southeastern Ohio. Meanwhile, FirstEnergy chose not to develop these utility scale projects in favor of sourcing SRECs from the in-state solar industry. The RFPs (requests for proposal) they issued with the help of Navigant Consulting were ineffective and at the end of the year FirstEnergy was unable to find any supply of SRECs. In their request to the Ohio Public Utilities Commission to be relieved of their SREC obligation in 2010 due to a shortage of supply, FirstEnergy accurately cited that AEP was successful in sourcing SRECs because it went with utility scale projects, whereas FirstEnergy attempted to purchase from distributed projects. The problem in Ohio with SRECs is that a robust market for spot transactions or bilateral contracts was not developed early on because a few utility scale projects corner most of the market, while the rest of it is made inaccessible by bureaucratic RFPs that just don’t cut it in a burgeoning solar industry filled with startup entrants.

This is where New Jersey has been successful. Since the beginning, the SREC market was established in a way that made it accessible to homeowners and businesses, local installers and upstart developers. The New Jersey Office of Clean Energy has meticulously reported statistics on a monthly basis of how many SRECs are created, traded and the prices at which they are trading. Combined with the knowledge that the market was secure from the threat of utility scale entrants, the installation companies and solar development firms that entered the industry were able to make informed decisions that ultimately led to investments in solar. This is why New Jersey has a legitimate solar industry with a diverse group of entrants that will eventually be self-sustaining as the cost of solar continues to come down. Governor Christie gets this.

In the passing of AB 2529, a New Jersey Bill that would expand the eligibility of the SREC program, the Governor rejected a change that would allow utility scale projects to bypass the scrutiny of the BPU in being accepted into the SREC program. As the New Jersey market stands, a utility scale project can be accepted into the SREC program only if the BPU deems that it will not have an adverse impact on pricing in the SREC market.  This Bill would have created an exception to that rule that could have jeopardized the SREC market. Governor Christie writes:

Accordingly, I recommend that this exception be eliminated. I am concerned about the impact that these solar facilities may have on ratepayers, the impacts these facilities may have on the solar power and SREC market and, the impact these facilities may have on the land use. The role of the BPU and DEP is vital in determining the impacts that large scale solar facility projects will have in New Jersey and should not be by-passed.

This is a major vote of confidence in Governor Christie’s support of using the SREC market as a cornerstone for building a solar industry in New Jersey. It demonstrates that he sees the value of protecting this market for the entrepreneurs and small businesses that have made a living on solar in New Jersey. Many of those businesses have taken their expertise into other markets, creating more opportunities in nearby states. As a result of the SREC program, the state has created opportunities for its solar-smart residents both at home in New Jersey and beyond the state line.