On a recent trip a distributor in New Jersey, we saw solar panels sprouting on dozens of utility poles where none had been before.
As a company (Croton Energy Group) that works on installing solar in New York, we had heard about this program. Here is some background and an update.
By 2008-2009, New Jersey established a solar renewable energy credit (SREC) market of tradable certificates. An SREC represents the environmental benefits of producing one megawatt-hour of electricity using renewable solar technology in a given year.*
In states, like New Jersey that adopt Renewable Portfolio Standards, electricity suppliers are required to purchase a certain portion of the energy from clean, renewable energy sources. One method for complying is buying SRECs from someone producing clean energy.
That SREC market started out with each megawatt of solar energy capacity installed carrying a tradable value of well over $600.
PSE&G, whose service area covers about three-fourths of the Garden State, decided to get into the clean energy business itself in a big way to comply with the Renewable Portfolio Standard.
In 2009, PSE&G got authorization from the New Jersey for its Solar 4 All program. This initiative would invest more than $500 million in 80,000 kilowatts (80 megawatts) of solar projects. That much solar capacity would generate about 96,000 SRECs.**
At the 2009 SREC prices, the SREC value of that much new solar would have been about $57,600,000, recouping about one tenth of the project investment in year 1 (using $600 per SREC).
As all of us in the clean energy field have learned, a major consideration–some would say hurdle–for renewable energy is gaining access to suitable sites.
PSE&G solved the "Where to put it?" question with a really smart idea, based on what they knew in 2009: Let's put solar panels on the poles we already maintain.
Since the utility already had access to tens of thousands of local street poles, it decided to install half of the entire Solar 4 All project–40 megawatts of solar capacity–on its own poles all over New Jersey. PSE&G would install the remaining 40 megawatts in centralized locations as roof or ground mounts.
The pole-panel installation would be simple.
Each pole that met the criteria would get one solar panel with one micro-inverter with the power feeding into the lower voltage local distribution line above.
The checklist for whether a pole qualified for a solar panel was short: Did the pole have a good southern exposure? Did it carry the lower voltage line for interconnection? Could the solar panel be mounted without blocking existing equipment? About 1 out of 4 poles met these criteria.
The Solar 4 All “panel-on-pole” installation began in 2011 and will be completed in 2013. Meanwhile, no good deed goes unpunished as the to the visual impact of the panels.
But New Jersey has been so successful with installation of solar capacity that the SREC market prices have tumbled.
Today, SREC prices for solar installed in 2012 have now fallen to below $150, for reasons we will save for another day. So the value of each SREC earned by the panels-on-poles installed today has tumbled as well.
As SRECtrade put it earlier this week, “The New Jersey SREC market is oversupplied.”
SRECtrade further explains, “New Jersey SRECs recently traded at $115.16 per SREC in SRECTrade’s May 2012 auction. This follows the dramatic decline in prices that the New Jersey SREC market has experienced since the beginning of the 2012 energy year.”
The SREC approach means the “price may vary significantly,” which in turn creates high uncertainty and hesitancy in the market.
There are better ways to spur private investment in clean energy technology, such as a system.
*Note 1: New Jersey Clean Energy Program has a good website. The explanation below is from NJCEP’s SREC page:
How do SRECs work?
Each time a solar installation generates 1,000 kilowatt-hours (kWh) of electricity, an SREC is earned. Solar project owners report the energy production to the SREC Tracking System. This reporting allows SREC’s to be placed in the customer's electronic account. SRECs can then be sold on the SREC Tracking System, providing revenue for the first 15 years of the project's life.
Electricity suppliers, the primary purchasers of SRECs, are required to pay a Solar Alternative Compliance Payment (SACP) if they do not meet the requirements of New Jersey’s Solar RPS. One way they can meet the RPS requirements is by purchasing SRECs. As SRECs are traded in a competitive market, the price may vary significantly. The actual price of an SREC during a trading period can and will fluctuate depending on supply and demand.
**Note 2: 1 SREC = 1,000 kWh of solar electricity = 1 MWh of solar electricity; 10 kW solar capacity = about 12 SRECs per year