By James Osborne, The Philadelphia Inquirer
Feb. 1--New Jersey has become one of the country's leaders in solar energy, but renewable-energy advocates fear that reductions in subsidies that spurred the growth may cast a shadow over the industry.
The program that once gave homeowners 70 percent of the $40,000 average cost to install solar panels has significantly scaled back its grants to home and business owners, signaling to some that the program may soon end.
"New Jersey has switched to a market-based program," said Assemblyman Upendra Chivukula (D., Middlesex), chairman of the Assembly Telecommunications and Utilities Committee. "The current rebate program expires in 2012, and I don't expect it will be renewed."
State energy officials hope a new, market-based mechanism will provide an incentive for homeowners to invest in solar, while driving down its cost.
But environmentalists worry that solar's future in New Jersey may be slowed by the move away from rebates when the industry is still in its infancy.
"Solar hasn't taken off to the point that you can just eliminate the subsidies," said Jeff Tittel, director of the New Jersey chapter of the Sierra Club. "The market system takes time to work, and we're not there yet."
Over the last eight years, New Jersey has pumped more than $300 million into solar rebates, facilitating the installation of solar panels at 28,000 homes and 68,000 companies. The state now ranks behind only California in terms of total wattage, according to the Interstate Renewable Energy Council, a nonprofit group that tracks alternative-energy development.
Under New Jersey law, power suppliers must generate at least 22.5 percent of their power by 2020 from renewable sources such as solar and wind. If they cannot produce the power themselves, the suppliers must buy credits called Solar Renewable Energy Certificates from producers.
Customers who install solar panels will receive an SREC for each 1,000 kilowatt-hours of electricity they produce (an average system will amount to about $4,400 worth of credits annually at current prices). The credits are sold on the market to electricity suppliers.
Utilities such as Public Service Electric & Gas Co. are offering loans to customers to install solar equipment, which will be repaid with the income generated from the sale of the SRECs. PSE&G has set aside $105 million for the program.
But one question hanging over the market is the value of the credits -- their price will fluctuate depending on supply and demand.
Other leading solar states -- California and Colorado -- also are phasing out direct subsidies, said Neil Lurie, spokesman for the American Solar Energy Society, an industry advocacy group.
"States that offer incentives, a set rebate, or a sales-tax incentive, those sorts of states tend to attract the green businesses," he said. "They offer incentives, and then slowly taper them down over time. It's a way to kick-start the marketplace."
The New Jersey Board of Public Utilities has not decided when state rebates will be phased out completely.
"We support solar, but we want to make sure we're doing this in a way that results in the lowest cost to the ratepayer," said Mike Winka, director of the New Jersey Office of Clean Energy, which oversees the state's alternative-energy programs.
Last year, New Jersey's solar capacity almost doubled, with 56 megawatts added to the grid, despite the recession. And 61 percent of that new capacity came from projects, mostly commercial and industrial, without any state rebate, according to the New Jersey Office of Clean Energy.
But Steve Masapollo, the chief executive officer of SolarWorks NJ, a small solar sales and design firm in Turnersville, worries the SRECs will not prove a sufficient enticement for many residential and small-business customers. For many, the cost of market-price solar panels is still too high, he said.
"The less of a rebate you get, people have to put out more money up front," he said. "A system costs $40,000 vs. $20,000? You'd get a lot more people with $20,000."
Contact staff writer James Osborne at 856-779-3876 or jaosborne@phillynews.com.
Inquirer staff writer Andrew Maykuth contributed to this article.
-----
To see more of The Philadelphia Inquirer, or to subscribe to the newspaper, go to http://www.philly.com/inquirer.
Copyright (c) 2010, The Philadelphia Inquirer
Distributed by McClatchy-Tribune Information Services.
For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
A service of YellowBrix, Inc.