SOLAR TODAY - November/December 2011

perspective New Jersey: Growing Beyond the Incubator By JEFF LYNG

New Jersey has had spectacular success in creating a thriving renewable nergy sector. The solar jobs census conducted by the Solar Energy Industries Association estimates that at the close of 2011, the state’s solar installers will employ about 4,000 workers, up from 3,100 at the close of 2010. Larry Sherwood’s annual report on photovoltaic (PV) installations for the Interstate Renewable Energy Council puts New Jersey’s 2010 installs at 132.4 megawatts (MW), up 131 percent from 2009. At half that growth rate, the business will generate a billion dollars of revenue in 2011. New Jersey even got its first solar module factory this year, employing another 200 people.

By the end of this year, New Jersey’s PV capacity should be able to produce more than 7. 2 gigawatt-hours for the grid, saving ratepayers $1 billion. On top of that, there’s the value of solar renewable energy credits (SREC) to the system owners.

Falling SREC prices and the disappearance of direct installation rebates are signs that the industry is charging toward grid parity.

New Jersey’s solid progress has been driven by a progressive renewable portfolio standard (RPS) of 22. 5 percent by 2021, with a significant solar carve-out. The RPS and SREC markets have been supplemented by direct solar rebates funded by the state’s Clean Energy Program. These direct incentives have declined in a more-or-less orderly manner as the market has grown. Under the new administration of Gov. Chris Christie, direct rebates have been discontinued this year, and now project incentives are driven largely by the electric generation from the system, tax benefits and

SREC revenues. The direct incentives helped to create market conditions under which utilities and other investors now offer creative financing solutions for solar customers. In short, New Jersey has created a vigorous, broad market that appears to be fully self-sustaining even at reduced levels of incentives.

Jeff lyng is the chair of the American Solar Energy Society board. Contact him at chair@ ases.org.

For the past five years, spot market prices for SRECs have generally been a relatively high proportion of the Alternative Compliance Payment, typically more than $600 per megawatt-hour.

Recently, due to the growth of the market in general and especially to the boom in large projects (of more than 1 MW), the supply of SRECs appears to exceed next year’s demand. This has put downward pressure on SREC spot market prices. Some analysts predict that the market will continue to build projects without restraint, and that the SREC market will crash. Another school of analysts believes that market dynamics will bring the supply and demand for SRECs into balance. This would mean further downward movement in SREC prices.

So, what does all of this mean? Falling SREC prices and the disappearance of direct installation rebates are signs that the industry is charging toward grid parity. Arguably, this is in fact a sign of vigorous health: The solar industry is coming out of its incubator.

Sustaining distributed solar markets doesn’t require high incentives. Solar markets require disciplined energy policy and orderly, transparent incentive reductions in order to create a predictable environment for investment, and drive prices lower toward grid parity. Solar incentives are not the end game: market competitiveness is. ST

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