In New Jersey Solar Decision, Economics Trumped Ideology

A law in New Jersey requiring more use of solar power was approved with virtually no opposition—which speaks to the growing importance of solar to the state’s economy, according to industry experts.

Late last month, Gov. Chris Christie, a popular Republican party figure, signed into law a bill that aims to break the state’s boom-bust solar cycle by tweaking its broken incentives program. The move could double its 800 megawatts of solar capacity by 2014.

Christie’s signing of S-1925 comes as Congressional Republicans and conservative groups ramp up opposition and ad campaigns attacking Pres. Obama’s support for clean energy—especially for solar, in the wake of the bankruptcy of Solyndra, a recipient of federal loan guarantees. The governor’s move was heralded by some as a sign of him breaking with his party on clean energy policy.

But solar energy advocates say Christie hardly had a choice, because the economics of the state’s solar industry have become too compelling to turn away from. 

“He [understands] the practical benefits of having good policies in the state,” said Carrie Hitt, vice president for state affairs at the Solar Energy Industries Association, in an interview. “But he’s not going to campaign to promote renewables across the country.”

The program, the Solar Renewable Energy Credit (SREC) system, took the state’s solar installations from close to zero in 2005, to nearly 16,000 today. Hundreds of solar companies flocked to New Jersey turning it into the second-largest solar market behind California. The industry supports about 10,000 local jobs, according to industry estimates, and attracted $1.2 billion in investments in 2011 alone.

But last year, when utilities began to meet the program’s quotas for solar energy, demand stifled and explosive growth leveled off. To rev it up, the new law increases the amount of solar power that utilities must purchase, among other adjustments. 

As a result, construction activity in the sector could increase 30 percent in the next two years creating about 3,000 jobs, according to the Mid-Atlantic Solar Energy Industries Association, a trade group.

Andrew Krulewitz, a solar analyst at GTM Research, said it would have reflected poorly on Christie to “let the bottom fall out” of the solar market. “He didn’t want to see all these new jobs leave the state.”

At a press conference following the bill signing, Christie said that building the solar economy is not a Republican issue or a Democratic issue. “It’s an issue that the people of our state demand we work on together,” he said.

“I think it’s important for conservatives to hear the message from a credible source like Gov. Christie that solar energy is not liberal—in fact, it’s not conservative either. It just makes sense from an economic development standpoint,” said Jim DiPeso, policy director for ConservAmerica, a conservative policy group. Last year, approximately 100,300 Americans worked in the U.S. solar industry, says The Solar Foundation, a nonprofit group.

The solar bill was in the works for six months and received five “no” votes, all from Republicans. Policymakers wrangled mainly over how to limit the program’s costs to ratepayers—and how to prevent another boom and bust.

The program will work essentially the same as before: For every megawatt-hour of electricity that solar owners generate, they’ll earn a SREC (pronounced es-reck) certificate that they can sell on an exchange market. New Jersey’s utilities will be obligated to buy a certain amount of SRECs each year to meet the state’s solar electricity quotas.

In 2014, utilities will be required to source about 2.2 percent of their power from solar—up from 1 percent today—and 4.2 percent by 2028.

The regulatory certainty will help jumpstart solar projects very soon, said Krulewitz of GTM Research. Solar companies “may begin developing and installing again later this year, or into early 2013,” he said. The state has 600 megawatts of capacity in the pipeline.

Cap and Trade Vetoed, Christie Not Alone

Just three days after signing the solar bill, Christie vetoed legislation to reinstate New Jersey in the Regional Greenhouse Gas Initiative (RGGI), a nine-state cap-and-trade program. The governor withdrew the state from the pact in late 2011.

“RGGI did nothing more than impose a tax on electricity to be borne by New Jersey’s overburdened taxpayers and ratepayers,” Christie said in his July 26 veto address. Conservative Republicans have vehemently opposed cap and trade.

According to an independent analysis of RGGI from last year, New Jersey raked in more than $113 million from RGGI’s quarterly auctions between 2008 and 2011. The proceeds helped to spur $150 million in economic activity and create nearly 1,800 jobs in the state.

Larry Hajna, a spokesperson for the governor’s office, told InsideClimate News that economic growth from RGGI was minimal compared to its costs.

“This administration has been focused on practical solutions that will drive growth,” he said. “Key to this is development of solar and wind power.”

Hajna noted that the governor was able to back the solar bill because it cut the cost of the program to utilities, and thus to ratepayers, by setting a price ceiling on SRECs. At one point last year, a single SREC cost utilities $685—more than four times what it costs today. Hanja said ending price volatility could save consumers $1 billion on their utility bills over the next 15 years, compared to a program without a price cap.

Christie’s not the only prominent GOP state leader embracing solar while toeing the party line on cap and trade and other government clean economy programs.

In her three years in office, Arizona Gov. Jan Brewer has kept in place tax breaks and other state subsidies meant to nurture the state’s booming solar sector that boasts nearly 1,000 companies. Last year, she launched a solar energy task force comprised of local solar executives, industry advocates and city officials to develop strategies to expand solar development in Arizona.

At the same time, Brewer withdrew her state from the Western Climate Initiative’s cap and trade program. In January this year, she pulled Arizona from California’s Advanced Clean Car program, which would have required the state to put thousands of electric cars and other zero-emissions vehicles on its roads.

Hitt of the Solar Energy Industries Association said there is tension in the states over clean energy policy. Both Brewer and Christie “get the positive benefits [of solar] and have taken deliberate steps to find a good balance—given what’s going on in their party and in their states,” she said.