New Jersey Governor Chris Christie recently released the state’s 2011 Energy Master Plan (EMP) with an overarching goal of trying to promote energy solutions that are cost-effective as well as efficient, particularly in a time of economic uncertainty. “The Administration is committed to the formulation of incentives that promote a renewable energy portfolio that is comprised of cost-effective energy alternatives…[and] resources that generate “bang for the buck,” the report states. As a result, the 2011 EMP makes certain policy changes designed to lessen the state’s utility providers’ financial burden of promoting clean energy. How this plan impacts future clean energy initiatives remains unclear but New Jersey’s role as a leading provider of solar power could be in doubt.
The first major change in the 2011 EMP is the development in-state electricity sources, potentially to the detriment to other renewable sources, including solar. According to the report:
“The only carbon-free technologies are renewables and nuclear power. Solar photovoltaic (PV) power is expensive and intermittent. While New Jersey has high quality, harvestable offshore wind, it too is intermittent and expensive. In addition, there are practical limits to the heavy concentration of offshore wind in one location. The potential for importing wind from other PJM states raises additional concerns about reliability, the siting of new high voltage (HV) transmission lines, PJM’s ability to integrate intermittent generation, and the export of green industry jobs out of New Jersey. Hence, solar and wind require the addition of other conventional or innovative technologies to ensure grid security.”
Accordingly, the 2011 EMP advocates for full development and exploitation of the states’ natural gas resources and a continued consideration of the role of nuclear power in the states energy profile. The 2011 EMP advocates an expansion of PSEG’s Salem nuclear power plant and Governor Christie has already signed legislation that will subsidize the construction of four new natural gas generation plants.
The second major change (or more specifically, omission) in the EMP relates to the states renewable portfolio standard (RPS) where the report states that “[t]he high cost of electricity coupled with New Jersey’s current fiscal challenges reminds policymakers that the method for achieving the RPS should be flexible, not rigid or absolute.” Accordingly the 2011 EMP continues to maintain an RPS of 22.5% renewables by 2021…what is absent, is more telling. The 2008 EMP mandated a similar 22.5% goal but also proposed a renewable energy goal of 30% renewables by 2030, which is not in the 2011 EMP. According to Jeff Tittel, President of New Jersey Sierra Club:
“Christie is slashing our clean energy target from 30 percent of our energy generated by renewable sources by 2020, as outlined in the previous master plan, to 22.5 percent by 2021, a target required by BPU regulations. New Jersey currently is on track to meet the 30 percent goal and should be striving to go beyond it.”
The report also takes aim at current New Jersey solar incentives and sees continued government support of the solar renewable energy certificate (SREC) market and solar alternative compliance payment (SACP) unrealistic and unnecessary. As background, a SACP is a payment that an electricity provider must pay if they fail to meet the New Jersey RPS. One of the ways that an electricity provider can satisfy the state requirement, and not pay the SACP, is by purchasing SREC’s on the open market (an SREC represents 1 megawatt-hour of electricity generated from an eligible renewable system). Any resident who owns a qualifying solar power system produces, on average, one SREC every two months which they can then sell on the open market to a electricity provider looking to avoid an SACP payment.
Since SACP payments have been set very high by New Jersey, they have helped produce high SREC values which have helped the lower the cost of solar and promote adoption across the board. According to the 2011 EMP, “…SRECs have been high enough to support the installation of solar with a low cost for the homeowner or business.” In the end, electricity providers effectively wind up subsidizing the adoption of solar power in the state.
The 2011 EMP states that SACP prices are no longer practical to inflict on the state’s utility providers, particularly in an economic downturn. The report states that “[t]he ability to recoup rapidly investment on solar installations has doubtless benefited the solar industry and the participating household or business, but has not created significant benefits to the cohort group of non-participants who ultimately bear the cost of solar technology,” while also adding that New Jersey’s SACP levels are the highest in the U.S.
Under the guise of saving state taxpayers money, Governor Christie called for a reduction of the SACP by 20% in 2016, with further reductions of 2.54% each year thereafter, until 2025. The report claims that these cuts align with projected decreases in the installed costs for solar. With lower SACP’s, New Jersey SREC’s will come down in value as well.
The combined effect of the above could be disastrous for solar in New Jersey. First, with additional resources being allocated to natural gas and potentially nuclear power, government funding for solar power will no doubt be compromised.
Second, and even more problematic, is the potential combined impact of a smaller RPS and lower SACP payments. The RPS is the primary lever that requires New Jersey utility providers to support the development of clean energy technologies in the state by either investing in renewable energy sources or by purchasing SRECs. An RPS that is 7.5% lower necessarily means that state utility providers won’t have to invest as much in either projects such as solar farms or wind farms or purchase as large a number of SRECs. With less demand to buy SRECs on the part of electricity providers, SRECs will go down in value and re-sale price. Furthermore, if the state follows through and lowers the state SACP, the value of SRECs will go down as well. With lower SRECs, New Jersey residents will have substantially less money to purchase a solar power system forcing consumers to finance an increasing amount of the cost of installing solar.
Seeing the potential harm to the New Jersey’s clean energy programs, opponents of the administrations plan were quick to criticize. According to Jeff Tittel, President of New Jersey Sierra Club:
“By cutting the renewable targets and promoting fossil fuels, Christie is sending clean energy jobs and investments out of New Jersey and into environmentally friendly states that offer more incentives to set up shop. The renewable energy industry will continue to grow in America. Christie is sacrificing in-state jobs and investment dollars to promote his national political profile.
New Jersey had some of the most robust goals for clean energy in the country. The revised energy master plan not only undermines these goals but also clean energy programs.”
Creating a more a cost-effective state energy profile is certainly a worthwhile goal particularly in light of the current economic downturn. However, such efforts may end up severely harming a burgeoning industry that not only helps to create clean, renewable energy for all of New Jersey but also jobs and economic vitality.