New Jersey Rethinks Rebates

You may or may not have heard about the market implosion for New Jersey solar installations that occurred earlier this year. The state offers these amazing incentives to individuals, small businesses and corporations to install photovoltaics systems. For individuals, whose private systems pretty much always fall into the state’s first incentive bracket of less than 10 kilowatts (kw), the incentive amount is 3.50 per watt. That’s a lot of cash back when you’re talking about a 4 kw system. The program was so wildly successful that New Jersey stopped being able to pay for it: funding for the incentives comes from surcharges on everyone’s utility bills, so there’s no way to grab more money for the program without raising people’s energy costs so high that it would become a bit backwards. Spend more on energy…to save more on energy?

Perhaps New Jersey didn’t see the money running out quite so quickly as it did, but the state has been trying to figure out a way to move away from this model of funding. Their solution, approved in September of last year and being fussed over in today’s New York Times, is to transition away from incentives altogether and move into a REC trading market. Here’s what New Jersey has to say about it:

New Jersey is recognized as a solar market leader and a model program that integrates one of the nation’s best set of rules and financing programs for solar energy. The Board decision on September 12, 2007 to move to a market-based Solar Financing Program ensures the continued growth and health of New Jersey’s solar market. New Jersey’s decision to phase out rebates by 2012 and rely on Solar Renewable Energy Certificates (SRECs) to spur private investment and market development sends a strong message of fiscal responsibility and commitment to New Jersey’s solar market and is a model for other states to follow.

Looking at the above statement, one clear question springs to my mind: if you have a highly successful program with “the nation’s best set of rules,” why exactly are you changing it? I see that there’s a need to solve the funding crisis, and that shifting that burden off the government makes them happy and those who can afford to buy and sell SRECs at leisure even happier. The problem is for small and mid-sized solar companies who, under the new plan, will be forced to compete with the big guys when it comes to buying and selling. Sure, competition is healthy, but it’s not a level playing field. Here’s a different perspective, offered by the vice president of the Mid-Atlantic Solar Energy Industries Association (as reported by the NYT):

…[These] attempts to make the solar market more competitive could backfire, actually hindering competition by squeezing out smaller companies…the state’s proposed safeguards did not go nearly far enough. While a portion of new projects would be subject for a few years to caps on how many credits one company can control, he said, those caps would not apply to existing solar installations.

A representative for SunEdison, one of the nation’s larger installers and certainly one of Jersey’s, doesn’t demur, although SunEdison is enthusiastically in favor of the shift to an open market for solar: he admits that “very small players will probably go away” and that most others will be bought out by larger companies. On one level this is fine; but on the level of a robust local economy, it’s not so hot. Those small companies are local jobs, and place holders, in a way, for communities who will become bigger players in the expanding green sector.

It’s not like New Jersey is asking for anyone’s opinion at this point–they’ve made their decision to move towards RECs and away from government funding, with a few provisions to see residential installations supported under the current structure for the next few years. It may be the right choice for the state, or it might not be. Either way, it will be the first program of its kind in the U.S. and the other 49 states will have the luxury of watching how the experiments turns out before having to make the choice for themselves.