The prices that power companies pay for solar power have all but collapsed, curtailing future development and leaving those who installed systems struggling to repay their loans.
A glut of power has meant that prices have fallen by more than 80 percent in the span of a year.
In response, solar power advocates are pushing for state legislation that would limit the amount of solar power that can be produced by large companies, while mandating that power companies buy more solar power.
“It could affect a lot of the industry,” said Jennifer Washburn, programs administrator for Brite Idea Energy of Egg Harbor Township, one of a number of green-power companies to open in the region in recent years. “There are a lot of companies that are struggling,” she said.
The solar power market in New Jersey has been driven in part by the mandate that utility companies derive an ever-increasing percentage of their energy from renewable sources — or face penalties.
For the first 15 years of a solar project, the power they generate is sold as credits, in 1,000-kilowatt blocks, on the utilities market to the highest bidder up to three years after they are generated.
Fueled by state and federal incentives, prices for these credits passed $600 in 2008, eventually nearly reaching $700.
But the credits’ high prices attracted investors and others, dramatically expanding the volume of solar power available and flooding the market with credits.
The prices of those credits began sliding last year, finally bottoming out about May 19, when they were sold for $88.94 on the Flett Exchange, a popular trading site for the certificates. Prices rose on talk of state legislation, and now trade at about $122.
Considering the same credits sold for about $655 a year ago, Washburn said, “It’s just insane to think about what it was last year and what it’s like today.”
A collapse in the price of solar energy comes after the combination of tax incentives and state mandates made New Jersey’s solar industry among the nation’s most robust.
So-called clean energy is a priority of the Obama administration, which listed “Invest in Clean Energy Manufacturing” as an objective for Congress before it adjourns for summer recess.
The state saw 260 additional megawatts of solar power in 2011, according to statistics from the Board of Public Utilities. By the end of March, BPU stats showed the state had about 669 megawatts of solar power-generating capacity — enough to power 150,000 to 188,000 homes for a year — almost 18 times its capacity five years ago.
By comparison, the B.L. England Generating Station in Upper Township can generate 450 megawatts of power. One megawatt of generating capacity can mean between 2.4 million and 3 million kilowatt hours of power every year, according to the U.S. Department of Energy. The average family consumes 10,655-kilowatt hours of electricity per year, meaning the generation station can, on average, power between 101,000 and 126,000 homes for a year.
Federal tax incentives have included the ability of to write off all of the costs of the project faster than usual, and project builders who started before 2012 can take 30 percent of the cost as a federal tax credit. State incentives have included an exemption from sales and local property taxes, a requirement utilities buy excess power generated by homeowners and preferential zoning treatment.
Proponents of solar power have sought to modify the credit system, in hopes that it would boost prices and encourage further development.
“We’ve been too successful,” said state Sen. Bob Smith, D-Mercer, Middlesex, who chairs the Senate’s Environment and Energy Committee.
He sponsored introduced legislation that would increase the amount of solar credits that utility companies would be obligated to buy, while requiring the BPU to sign off on solar credits.
While private investors have been instrumental, Smith said, “We’d like to have an industry that is not a boom-and-bust industry.”
He anticipated a legislative hearing Thursday.
Fred DeSanti, a utilities lobbyist and spokesman for the New Jersey Solar Energy Coalition, said the legislation is needed.
“If this doesn’t get done by June 30, then this industry will be all but dead for the next three years in New Jersey,” DeSanti said.
Bettie J. Reina, who lives in the Milmay section of Buena Vista Township, installed a 10-kilowatt system on her 8-acre property in March 2010. Her system generates about one credit per month on average.
“If I had my way, every building going up in the United States would have a solar panel on the roof,” Reina said.
She and her husband, Nick, paid for the project with a home-equity loan, hoping to repay that with money from the solar credits over the next half-dozen years.
With the crash, that timeframe has extended. She remains optimistic. Her electric bills are nominal throughout most of the year, and while they have elected to hold the credits, rather than sell at reduced prices, she said she still feels good about contributing less air pollution.
“The worst thing is that I’m afraid it’s going to destroy the solar industry in New Jersey,” Reina said.
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