On July 23 New Jersey Gov. Chris Christie (R) signed into law legislation that will save the second largest solar market from collapsing—for now. But the law is seen as a short-term fix because the underlying issue that led to the market’s demise, an oversupply of Solar Renewable Energy Credits (SRECs) was not addressed in way that keeps the same problem from reoccurring.
“In plain language it’s [i.e., the new law] is going to save the solar industry from oblivion, which is were it would be for now if not for the bill,” said Lyle Rawlings, CEO of Advanced Solar Projects and Vice President of the Mid-Atlantic Solar Energy Industries Association (MSEIA). The group supported the legislation, but called for more legislation to ensure the long-term viability of the industry. “It falls short of solving the fundamental problem,” he said. He alluded to 2011, when the solar industry built 3 times more new installations than the SREC market could support.
To encourage the development of more solar installation projects in New Jersey the state imposed legislation requiring the state’s electric distributers to purchase SRECs from photovoltaic installations throughout the state. But since there was and is no limit on how much solar can be built out in a year, only how many SRECs a distributor must purchase. When there were too few solar installations and SRECs available, SRECs were valued at roughly $600 per credit with each credit being worth 1,000 kilowatt hours generated by an array. Seeing the value and the payback a solar system represented, the market heated up, installing more solar and creating more SRECs than suppliers had to purchase, dropping spot-market prices to roughly $100, according to The Star Ledger.
“Seven states use SRECs, nearly all of them have crashed or are headed to a crash,” Rawlings said. As the market has heated up in each, SREC oversupply has become a problem.
The new law in New Jersey aims to correct this by expanding the number of SRECs utilities in the state must buy over the next three years. “But it didn’t solve the problem of how this oversupply happened,” Rawlings said. “Our solar industry association was pressing for some controls on construction of new solar, but that didn’t happen,” he said.
That’s not to say Rawlings and MSEIA aren’t happy with the law. “We’re extremely grateful.…Now we’re going to work to put something in place to prevent a recurrence,” he said.
One interesting new option was proposed by the New Jersey Division of the Rate Counsel. That proposal would split how utilities in the state purchase their SRECs, which are currently bundled with other electricity generation and sold at auction for three-year periods. Rawlings explained that under the proposal, utilities would have to buy some SRECs through the auction and others through longer-term contracts outside of the annual auctions.