New Jersey regulators yesterday approved a plan for the state’s largest utility to install solar panels atop 200,000 utility poles across the state. As part of the $515 million “Solar 4 All” program, PSE&G will also develop 40 megawatts (mWs) of centralized solar arrays. All told, 80 mWs of solar will be added by 2013, as outlined by PSE&G’s press release:
The program has two segments, each 40 megawatts in size. The first segment consists of installing a solar unit (small distributed solar system of approximately 200 watts) on 200,000 utility poles in PSE&G’s service territory, which includes the state’s six largest cities and roughly 300 rural and suburban communities. It will be the largest pole-attached solar installation in the world. The solar units will be connected directly into PSE&G’s electric distribution system and the power will be sold into the PJM wholesale grid.
The second segment will focus on centralized solar, with PSE&G developing solar gardens and roof-top installations on facilities it owns and also at third-party sites.
“Our program will effectively double the size of New Jersey’s installed solar capacity,” said Ralph LaRossa, president and COO of PSE&G. “That is more solar capacity than currently exists in any state other than California.”
How will all this added solar generation capacity be paid for? A small surcharge is to be levied on every PSE&G customer, in effect costing the average customer an added 10 cents per month. That charge is set to increase gradually, reaching 35 cents per month by 2028.
Critics of the project will undoubtedly hone in on the per-mW cost of solar, which is, on balance, costlier than other electricity generation technologies. Reuters notes that, at $515 million, the 80-megawatt PSE&G plan envisions costs of $6.4 million for each megawatt of solar. This compares with “$500,000/mW for natural gas power plants, $2 million/mW for coal plants and $4 million/mW for nuclear power plants.” Supporters, in turn, will maintain that such projects are key to meeting NJ state renewable portfolio standards — and that, because costs are borne across a large number of customers, aggregate gains outweigh marginal cost hikes.
One of the key incentives in the NJ solar market is SREC program. The value of SREC’s relates to the compliance penalty that utility companies have to pay when they fail to meet the Solar component of the Renewable Portfolio Standard (Solar RPS).
One concern is as to what will happen to SREC prices if the utility companies meet their Solar RPS through projects like the one mentioned in this blog. If they don’t need SREC’s then the commercial solar market will collapse as the SREC’s will have little to no value.
It is helpful to understand the project size as it relates to the Solar RPS. As of June 2009, there are approximately 96MW of solar installations in NJ. This represents approx. 0.07% of the total electricity supply in NJ. The Solar RPS level is set at 0.22% for 2010 utility year (June 2009 to May 2010), and increases by 30% each year. So, nearly 200MW of additional solar needs to be installed to meet the NJ Solar RPS for 2010. And another 100MW the following year and so on.
The 80MW PSE&G project spread over 3 years will still leave an additional 400+ MW that will need to be installed to meet the Solar RPS. That still leaves plenty of room for the market for SREC’s to remain in strong demand.