Jamie Hahn of Solis Partners Calls for Legislation to Support the N.J. Solar Industry at Distributed Solar Summit East in Franklin Township, N.J.
FRANKLIN TOWNSHIP, N.J. (April 30,2012) – New Jersey’s thriving solar industry is in danger unless the Legislature acts to increase the state’s Renewable Portfolio Standard or RPS, which mandates the amount of solar electricity that utilities must purchase from solar producers, says Jamie Hahn, co-founder and managing director of Solis Partners, a leading developer and integrator of commercial solar systems based in Manasquan, N.J.
Hahn made his remarks during a panel discussion on the New Jersey solar market at the Distributed Solar East Summit that was recently held in the Somerset section of Franklin Township, N.J. Distributed solar refers to solar systems that are installed on site by the entities that will be using the power, such as businesses or homeowners, as opposed to utility-scale projects that are designed to serve large populations of electricity users.
In New Jersey, solar producers earn Solar Renewable Energy Certificates, or SRECs, which represent the environmental benefit of solar, with each SREC being the equivalent of 1,000 kilowatt-hours of electricity. Utilities buy SRECS from solar producers in order to satisfy the RPS requirement. The potential to generate income from the sales of SRECs functions as a financial incentive for the installation of solar.
Over the past few years, the New Jersey solar market experienced a bit of a perfect storm as a result of overlapping federal and state subsidies, Hahn said. The combination of rich SREC valuations, along with federal incentives such as the now-expired Section 1603 cash grant and the 100 percent bonus depreciation allowance, contributed to a rapid proliferation of solar over the past three years. The result was a significant increase in the supply of SRECs, which in turn contributed to a long market with dramatic declines in SREC prices — from $650 a year ago to $85 today.
Since most solar projects rely on income from the sale of SRECs to reduce payback periods, the decline has threatened the health of the solar industry.
“We currently have approximately 14,500 systems in the ground and it is estimated that we may have 800 megawatts of installed capacity by the end of Energy Year 2012 [May 2012],” he said. “We are so overbuilt [in terms of meeting the RPS] that if everything were to remain status quo, the solar industry would most likely go dormant for the next three years.”
Legislation to increase the RPS would soak up the oversupply of SRECs, restoring SREC prices to a level that would create a “sustainable market with sustainable growth,” Hahn said. Such legislation has been proposed, he said, but disagreements among industry groups over policy priorities have made it difficult to get it passed. “We must present as a unified front to push a bill across the line,” he said.
One area of disagreement is over how many large utility-scale solar projects that supply power directly to the regional grid should be allowed. Hahn spoke in favor of placing a hard cap on systems sizes – perhaps at 2 megawatts – in order to avoid exacerbating the SREC oversupply problem, and promoting distributed generation projects that provide power behind the meter, lowering electricity costs for businesses, schools and residences throughout the state.
In addition to increasing the RPS, the Legislature should also lower the Solar Alternative Compliance Payment (SACP), which is the penalty paid by utilities for not meeting the RPS requirement, Hahn said. Lowering the SACP would reduce the exposure of the utility ratepayers who ultimately bear the expense of financial incentives to promote solar and whose interests have been a concern in the Legislature.
Hahn also participated on a panel that examined the integrator’s perspective on creating value in the marketplace for distributed solar. He addressed the subject by describing how integrators must create value that does not currently exist in the market today. “By offering entirely new products and services to your customers you can differentiate yourself in an increasingly crowded marketplace,” he said.
“Sometimes as a business leader, you need to become a disorganizer,” he continued. “You have to be willing to disrupt internally what has become very comfortable, safe and familiar. You also have to be willing to disrupt externally from what has become conventional wisdom for an industry. And to do that, you have to have a sound understanding of your market and your customers.”
Hahn also touched upon how the industry needs to continue to bring costs down by looking beyond the panel to transaction and BOS (balance-of-system) costs.
“You need to systemize processes and make them more repeatable and scalable,” he said, adding, “The industry needs to simultaneously take steps to lower permitting, siting and interconnection costs. It is the combination of these that will allow us to achieve grid parity.”
About Solis Partners
Solis Partners is a leading turnkey provider of solar power systems for commercial, industrial, utility and nonprofit clients. Solis specializes in financing, constructing and operating distributed solar power plants that enable clients to meet their long-term energy needs while reducing operating costs and addressing their carbon liabilities. Solis is committed to providing its clients with the most efficient and cost effective path to solar. Solis Partners is headquartered in Manasquan, N.J. For more information, please call (732) 800-0052, or visit www.solispartners.com.