Archive for the ‘Comments’ Category

Letter to the Solar Transition Work Group in Response to the OCE Staff Straw Proposal released on March 6, 2012

Thursday, March 8th, 2012

Submitted March 7, 2012

Dear Mr. Winka,

Thank you for your efforts to date in facilitating the Solar Transition Working Group. We are writing to you in order to make several suggestions to the OCE Staff Straw Proposal released on March 6, 2012, as well as to voice several concerns regarding issues we did not see mentioned in the Straw Proposal. We understand that the purpose of this Straw Proposal is not to fix all obstacles facing the New Jersey solar industry, but we believe this is as good a time as ever to address the following issues:

  • Treatment of usable farmland – As you may know, Southern New Jersey is home to substantial farmland acreage. A portion of this farmland is currently not farmed, and a small percent of this unused portion had been approved for housing developments before the economic downturn. However, most of the developments never came to fruition, and now New Jersey farmers are eager to participate in the burgeoning solar industry, but farmland classification and zoning procedures are unclear. We would like to see clearly established procedures defining which organizations, and what criteria will be employed to identify “usable” farmland.
  • Adjustable SREC Scale – We believe extending the EDC SREC program by the suggested capacity will do little to support a suffering, but determined solar industry. This does not eliminate the static demand curve that was partially responsible for the downturn in the New Jersey SREC market? The Board and OCE should take this opportunity to re-examine the SREC market structure, and create a mechanism that will prevent future market collapse. As proposed by the Rutgers CEEEP team several months ago, an adjustable SREC target that uses past years capacity installation data to determine the upcoming SREC target, combined with a reduced ACP, will prevent future SREC market collapse, and allow New Jersey to hit its RPS target in an economically responsible manner.

Solar PV has the potential to save New Jersey cities and towns a significant amount of money on utility bills. This should not be overlooked when examining the SREC market, especially in a world of constrained budgets. We believe a provision for “community solar” should be included in the SREC carve-out.

  • Community Solar – Cities and towns should be encouraged, via a community solar carve-out to host solar arrays. Contracting solar power is an effective way to hedge against future electricity price increases, and save money in the present as well. This will allow municipalities to spend less on utilities and more on vital, municipal programs.
  • In order to give New Jersey cities and towns the lowest energy price possible, long-term SREC contracts should be available to community project developers.

Thank you for your time,

Regards,

Clay Rager

Rager’s Comments in Response to Senate Bill 2371 Concerning Solar Renewable Energy Portfolio Standards

Thursday, March 8th, 2012

Rager’s comments in Response to “An Act concerning solar renewable energy portfolio standards, energy efficiency and renewable energy and amending P.L.1999, c23.”  Submitted January 9, 2012

  • Renewable Energy Classification
    • Efforts to create requirements for different sized solar projects are welcomed. The large-scale solar industry is fundamentally different from the small residential industry. While language in the revised Bill places a ceiling on the allowed percentage set aside for systems under 20 kW, a floor percentage is also advisable.
  • Registration Program
    • A registration program for the purposes of ensuring power reliability is certainly appropriate so long as the administrative process is not overly burdensome and that information requested is reasonable.
    • Will unsatisfactory information submissions prevent a project from interconnecting and how will the EDCs be involved? What is the ultimate purpose of this registration process?
    • What purpose does the filing fee serve?
    • Is this related to Interconnection Fees?
    • Why was March 2012, Impact Study parameters arbitrarily chosen as the Grandfathered Date?  If selecting a date it should be Either Prior to January 2012 or “those who have entered the PJM “queue” and have an interconnection point of connect as scripted in the feasibility study as “PJM” states after you have a connection its yours to lose.  PJM has determined a project has a connection as stated in the first study “Feasibility”, not “Impact”.  The project owner runs con-currently with the remaining studies by submission to township, county and state agencies approval is to say as stated in the ASSEMBLY COMMITTEE SUBSTITUTE FOR ASSEMBLY, Nos. 4226 and 3731 per Impact study is not acceptable.
  • ITC
    • Efforts to supplement the 30% ITC at a state level should it not be extended is applauded.
  • Long-term Contracts
    • Long-term SREC contracts will certainly help developers and system owners obtain low interest financing for solar projects. The language in revised Bill is vague as to what percentage of the total GWhr requirement can be purchased under contract and what size facilities will be eligible for contracts.
    • The language needs to be explicit in how an electric public utility will offer contracts, to whom, at what price and for how long.
    • Will the “competitive process” be uniform throughout the state, or will utilities be able to devise their own process?
    • Would like to see 10MW and under offered
  • Public Utility Project Ownership
    • Efforts to monitor the impact of utility owned, SREC generating projects is applauded.
  • Revised SREC Schedule
    • The accelerated SREC schedule shows commitment to a robust solar industry in New Jersey
    • Parameters for adjusting the SREC schedule in the future are important.
  • Revised SACP Schedule
    • In combination with the ability to engage long-term contracts, the revised SACP schedule is reasonable.
  • COMMUNITY SOLAR  (Township’s Host)
    • Add Provision for Community Solar for the Municipalities who host the larger solar farms of systems ((A proposed solar facility that is greater than five megawatts in capacity)) of 5MW to 10MW within 5 miles of municipal consumer to have a bilateral agreement with generator to offer a 30% reduction of the town’s electric bill, which in effect will benefit the town, ratepayers and all parties:
      • When power is wheeled to town The EDC will charge fees according for the distribution, for example, .02 cent/kWh
      • SREC generating long-term contract to apply to their RPS
    • This should be the only Community Solar provision offered in the bill for providing a vehicle for the State to reduce taxes indirectly to the rate payers through offering the town the freedom to allow solar farms in their area to reduce budgets
    • This also will help and can be added to the efforts of the Sustainable Jersey Clean Energy Program

Comments Submitted to the Solar Transition Work Group

Thursday, March 8th, 2012

The following comments were submitted by Rager Energy Consulting to the Solar Transition Group and stakeholders on December 2, 2011:

My name is Clay Rager and I am submitting comments on behalf of Rager Energy Consulting (Rager). Submitting comments is an important part of the policy making process and I think I speak for the Solar Alliance and the greater stakeholder community when I say thank you for the opportunity to be heard.

New Jersey has become one of the nations leaders in solar installations since the inception of the SREC market. The state has set ambitious solar goals, which the New Jersey solar community has risen to meet and surpass, while simultaneously reducing the cost of solar installations. In the process of meeting ambitious generation goals, the solar community has brought solar investment money into the state, created  white, blue and green collar jobs and developed a healthy industry that is working hard towards becoming independent of subsidies.

While the local solar community is making every effort to bring down the cost of solar installations, most solar projects are still reliant on SREC sales in order to bring project payback periods and PPA prices down to manageable levels.

In the last year, we have witnessed volatility in the SREC price as a result of supply outpacing demand. I fear that less than desirable SREC prices will slow the pace of the development and pump the brakes of a growing industry that is creating jobs and bringing in money during slow economic times while gradually reducing our reliance on traditional generation technologies. Volatility in the SREC market adds risk to solar projects, and ultimately increases the cost of doing business.

The New Jersey solar industry has proven itself capable of meeting even more ambitious generation targets than those currently set. Ramping down the solar industry by allowing the SREC market to govern itself will lead to decreased investments in the solar industry, anemic margins and ultimately unemployment, as too many developers compete for too few jobs.

If a rigid, vertical demand curve in the SREC market is maintained, I fear that it will lead to boom and bust cycles in the New Jersey solar industry, much like the expiration of the federal wind production tax credit in the past has led to detrimental lapses of wind installations in years it had expired. The state of New Jersey cannot afford to slow down one of the few industries creating jobs, as well as environmental benefits in these times.

Volatility not only hurts project owners, developers, installers and financiers, but can lead to frustration from the utility perspective as well. Several solutions have been proposed to reduce volatility in the SREC market, such as price floors, and increasing SREC quotas. Price floors will do little to quell market volatility, and as the price of solar drops, a price floor will artificially inflate the true cost of solar on ratepayers. Increasing the SREC quota is unfair to LSEs attempting to budget for SREC payments.

As proposed by the Center for Energy, Economic and Environmental Policy at Rutgers, I advocate investigating the implementation of a downward sloping SREC demand curve as the primary tool for reducing SREC market volatility. A downward sloping demand curve would limit the impending slowdown of the New Jersey solar industry that is imminent if no action is taken, by creating a market for excess SRECs to sell at a discounted price. Providing the New Jersey solar industry with an opportunity for growth will bring down the cost of solar more rapidly than if the industry were allowed to shrink by enabling innovation and learning.

It should be clear that we recognize the importance of limiting solar subsidies’ burden on ratepayers as well as the need for LSEs to be able to budget SREC payments in the coming years. Employing a downward sloping SREC demand curve can limit the maximum SREC cost to ratepayers by pricing the excess supply SACP based on the amount of excess SRECs. In other words, the more excess generation, the lower the price of the SACP beyond SREC targets that have already been set.

Another tool for reducing SREC market volatility is enabling and requiring long-term SREC contracts. SREC prices in long-term contracts have proven to be much lower than those traded on the spot market. Long-term contracts also give investors the confidence they need to invest in solar projects.

If both these elements are implemented into and in support of the New Jersey SREC market, SREC prices will be pushed down due to decreased cost of doing business as well as industry learning. The end result is a decreased dependency on solar subsidies such as the SREC, and a self-sustaining industry that will continue to create jobs and environmental benefits for the state of New Jersey.

If the goal of the SREC market and carve-out was to develop a solar industry, lets allow the market to create the strongest industry possible, and remove market flaws that are holding the industry back.

RPS Acceleration

Saturday, January 7th, 2012

The New Jersey solar industry potentially faces a difficult year ahead while it recalibrates after overshooting the ambitious Solar RPS goals set for the 2010-2011 REC trading year. If the Solar RPS is not increased, solar installations in 2011-2012 energy year will likely be significantly fewer than in 2011 due to a significantly reduced market SREC price and increased hesitation among potential solar hosts.

In order to stave off an industry pullback, which inevitably means loss of current jobs and few new hires if any, the Solar RPS should be increased for the 2011-2012 REC trading year. The amount of the increase should be ambitious, but achievable, considering the New Jersey solar industry’s impressive history.

Increasing the Solar RPS, of course, only offers a myopic and temporary solution. It is quite possible that this problem of installing too much solar PV will happen again, and we then find ourselves in the same situation as we are now. The BPU should take this opportunity to not only review the Solar RPS target and escalation rates, but to also reassess SREC market design.

Until the summer of 2011, New Jersey SREC prices had consistently traded higher than any other SREC market. This was good for developers, but bad for utilities and ratepayers (as evident in the 0.090 cents/kWh attributed to the Solar Renewable Credit Ratepayer Impact to both C&I and residential customers). Now that the market has collapsed, developers are struggling, and fulfilling the Solar RPS requirement is markedly cheaper for utilities. Significantly diminished SREC prices do not just impact new installations, but also existing projects (especially smaller projects) that rely on SREC income. We are confident that SREC price guessing game is not favorable to either developers or utilities.

The SREC market is different than other ‘free’ markets in that there is a predetermined, vertical demand curve supply must meet. In this scenario, the ramifications of utilities not meeting requirements, and solar industry overshooting the target are unnecessarily costly. Neither side need be exposed to such risk. An ideal Solar RPS and SREC market would reduce risk to buyers and sellers, while achieving flexible, ambitious Solar RPS goals.

The major difference between the current design and an ideal design is the ability to engage long-term SREC contracts. Long-term SREC contracts not only reduce the risk to developers and utilities; they will also reduce the burden on non-participants and diminish the importance of the SACP. Long-term contracts will allow utilities and developers to settle on a fair SREC price. Utilities benefits include improved Solar RPS compliance cost forecasting as well as reducing the burden on ratepayers since developers will likely be willing to accept a lower SREC payment in exchange for risk reduction. Banks and other solar lending institutions will likely offer more favorable lending rates to projects that sell SRECs under contract than play in the market, therefore decreasing the need for high SREC prices to cover high risk interest rates. Since the Solar Renewable Credit Ratepayer Impact makes up the majority of the cost associated with Solar Energy Policy, and contracted SREC deals will likely bring the price of SRECs down, the 2.5% figure attributed to Solar Energy Policy on the average residential electricity bill will likely decrease as well.

It is also worth asking how new lease accounting rules proposed by FASB and IFRS will impact utilities’ balance sheets with respect to utility developed solar PV. The new rules may make it undesirable for utilities to develop solar PV, and thus require them to play in the SREC market instead of navigating around the SREC market by leasing Solar PV facilities. While this is mere speculation, the new rules could place increased importance on SREC prices, and heightened importance on market stability for utilities.

The other change to market design is the ability to adjust the Solar RPS target based on a number of factors, including the strength of the market, pace of installations and cost to ratepayers. This may seem unfair to utilities however, there is a greater degree of predictability if all parties are aware of the conditions that would warrant an adjustment to the Solar RPS. Adjusting the Solar RPS also does not have such an impact in a market where the majority of SRECs are contracted because utilities have much more certainty of future Solar RPS compliance costs, and there are fewer developers playing in the market with non-contracted SRECs.

Just two small adjustments to the existing Solar RPS and SREC market could solve many of the challenges faced by the industry today. We recommend that the BPU take this opportunity to examine the future of the Solar RPS in addition to making more immediate adjustments needed to keep the industry afloat. We thank you again for the opportunity to voice our concerns.