New Jersey's solar boom: The battle between old and new energy

Last Friday, New Jersey Governor Jon Corzine cut the ribbon on an 18-kilowatt solar installation at an apartment complex in Patterson, New Jersey. The event marked a state milestone: According to the governor, 4,000 solar installations, or 90 megawatts of solar power, have been installed in New Jersey. Corzine added that, seven years ago, there were only six solar installations.

When one thinks of the refineries, chemical companies, smoke stacks and toxic waste of the Garden State, it seems surprising that New Jersey has risen to national prominence as a leader in solar power. Even so, according to the New Jersey Board of Public Utilities' Jeanne M. Fox, the state has more solar power installed per capita than California. Indeed, except for California, no other state has installed more solar power.

If that seems strange, it might be worthwhile to consider a parallel example. Worldwide, the top solar country is cloudy, windy, Germany, which receives less sun than the rain-besotted state of Oregon. And the reason that Germany, on a national level, and New Jersey, on a state level, are surprising leaders? It's because they both have passed laws that help encourage the growth of the solar industry and encourage people to use solar power.

This means that, while most of us have been waiting for a revolution in technology to save the day, the true game-changing feature in the renewable energy story has long been old-fashioned, forward-thinking legislation and regulatory policy.

In 1999, when there were only three solar installations in New Jersey, the state passed a law that created the Clean Energy Program, which includes programs that help offset the initial, up-front costs of going solar by offering substantial rebates. In the case of an $80,000, typical residential10-kilowatt system, New Jersey's program grants up to $17,500.

The Clean Energy Program also created a market for solar renewable energy credits (SRECs), which effectively pays users to generate solar power. The state's board of public utilities oversees the SREC market, which is driven by the state's Renewable Portfolio Standard. This program, in effect, requires utilities to purchase an annually increasing amount of energy from renewable sources.

SRECs conveniently monetize this requirement. Every 1,000 kilowatt hours of solar power that an individual generates, earns him or her one SREC, which can be sold on the state's SREC market. The current rate in New Jersey is $670.00 per SREC. For the hypothetical 10-kilowatt system above, that translates to about $8,000 per year.

Also, as of last year, a new federal investment tax credit (ITC) of 30 percent also applies. For the 10-kilowatt system, that's a tax credit of $24,000, for an overall total of $52,000 worth of incentives and savings on electricity bills ($2,500 annually). In effect, the system pays for itself in four years. After that, users continue to save on ever-increasing electricity rates and earn SRECs; while this is probably much less than $8,000 per year, it's still free money.

Is all of this too good to be true?

"Well, yes and no," says Dolores Phillips, Executive Director of the Middle-Atlantic Solar Industries Association. She agrees that the solar market in New Jersey is booming. "People are coming back into the game. They have very large green dollar signs in their eyes," she says, "but it's a very soft market." Remember that $8,000 a year that you could earn in SRECs for a 10-kilowatt system? "That's an anomaly," Phillips says. And, according to other observers of the situation, bureaucratic and political in-fighting has seriously hampered the New Jersey Board of Public Utilities ability to efficiently address the widespread public demand for solar power.

More urgently, Phillips points to the lack of long-term project financing sufficient to truly help the industry grow. The state's largest utility, PSE & G, offers loans of a sort, but the money has dried up for commercial projects and the terms for residential solar are so onerous and cumbersome that few have applied for them. And then there's the "Prevailing Wage" law, a recent bill that Governor Corzine signed that obliges solar installers to charge union labor rates. According to Phillips, this will effectively raise installation costs by 180 percent.

Jersey isn't the only place having green growing pains. In California recently, several utility-scale solar projects have been slowed or brought to a standstill because of stalling or "green-mailing" tactics initiated by union groups. A turf war is emerging, in other words, for the green jobs in America that solar and other green technologies are supposed to bring us. Unions, in staking out their claim for those jobs, may be weakening the nascent industries upon which those jobs depend.

The holy grail for Phillips and other solar supporters is what's known as a "feed-in tariff." Often cited to explain Germany's lead in solar, the feed-in tariff establishes a long-term schedule for utilities to pay a premium above the market rate for renewable energy. The long-term schedule reduces the premium rate over time, to encourage the solar industry to constantly lower its manufacturing costs.

Proposals for feed-in tariff legislation are slated for New York and Florida, while Vermont and California already have the laws in place. According to a recent report from the National Renewable Energy Laboratory (NREL), a feed-in tariff is the simplest and most effective incentive mechanism for solar and renewable energy -- but only if the incentive rate is high enough, as it is throughout Europe.

Proposals for feed-in tariffs have received harsh criticism, however, in the United States for reasons that aren't hard to fathom. Utilities hate feed-in tariffs, and utilities are very powerful forces at the state level. They have an often overwhelming influence upon the public commissions that make all the decisions about renewable energy sourcing and regulatory policy. Feed-in tariffs have, moreover, riled those who believe in completely unfettered, unregulated "free market" economics.

Free market ideologues decry policies that favor the solar industry and renewable energy in general, arguing that the government should keep its hand out of the marketplace. In this perspective, subsidies are evil and, effectively, amount to "social engineering," by encouraging people to change their consumer behavior.

Leaving aside for the moment the fact that rampant deregulation in the name of "free market" economics brought us this past year's near apocalyptic stoppage of the American financial system, the fact is that government subsidies of renewable energy actually work. New Jersey is proof of that, but its Clean Energy Program is slowly being eroded.

The advantage that Asia and Europe seem to have over the U.S. is that their renewable markets are much more directed by government policy, whereas our renewable markets have been shaped from state to state. Our confused patchwork, directed by public power commissions like New Jersey's BPU, are often bogged down by inefficiencies and swayed by fossil fuel interests. With the exception of North Carolina, not a single state in the southeast has passed Renewable Portfolio Standards legislation.

It is also worth noting that, as any credible economist will attest, the free market doesn't exist in the first place. The largest oil companies in the world are nationally owned. They are state actors making decisions often for non-economic reasons. The U.S. government, moreover, has long given massive subsidies to the oil, gas, and coal industries. In fact, it is impossible to think of an industry historically important to the US economy that hasn't at some crucial point in its development been propped up and supported, favored, nurtured by government subsidy.

So the debate in New Jersey and elsewhere is really not about whether energy markets are shaped, tilted, slanted, or rigged. They are. They always have been. It's about the battle over who should receive the government largesse.

To date, the people with the most influence in such matters have been state governors. New Jersey's Corzine is perceived by many to be vulnerable to the Republican gubernatorial challenger, Chris Christie. To many observers of the state scene, Corzine has been front and center at photo-ops like the ribbon-cutting ceremony last week in Patterson, New Jersey, but in every other matter that counts to renewable energy advocates, his mind has been elsewhere.

Meanwhile, Christie seems to be willing to say anything to get elected -- including embracing President Obama's stance on renewable energy, while also making disquieting Bush-like promises to do battle with the EPA.

Christie's renewable energy platform includes tax breaks for renewable industry and a promise to utilize New Jersey farms for solar projects. Given Jersey's miles of unused rooftop acreage and its ever-dwindling amount of farm land, this plan seems almost surreal. According to solar advocate Phillips, Christie's renewable platform "doesn't contain any initiatives that would dramatically increase the use of renewables in New Jersey."

Some view Christie as just another friend of the incumbent fossil fuel regime. If so, and if Christie is elected, New Jersey's solar momentum may falter. And if it does, it may become another example in the argument that the Obama administration needs to take a much greater hand in directing the nation's renewable energy future.

Mark Svenvold, author of Big Weather: Chasing Tornadoes in the Heart of America, teaches at Seton Hall University.

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