Tuesday, August 23, 2011

New Jersey SREC Market Faces Possible Crash


New Jersey Governor Chris Christie
 Since New Jersey first began to put together a Renewable Energy Portfolio Standard in 1999 the state’s solar industry has been growing. Growth expanded into full-on boom as the New Jersey Board of Public Utilities successively increased the size of the solar carve-out over the past decade. This past month New Jersey reached 10,000 solar installations statewide. The only other state with more solar is California.


However, there is an important market factor to consider in the New Jersey solar bonanza. As solar became successful, New Jersey SREC prices soared to over $600 per REC. With the boom in solar installation the amount of renewable energy being generated by solar panels is now exceeding the Renewable Portfolio Standard’s requirement. This means that there is an excess of RECs and consequently the once high prices have steeply declined and there is substantial volatility in the market.

This is to be expected to a degree, as it conforms to the universal economic law of supply and demand. Most experts believe that following the correction, the market will stabilize over the next couple of years. On the other hand, there are steps state governments can take to ease the financial burden of homeowners who are counting on SRECs to help pay for their solar systems. Some legislators in New Jersey are now pushing for measures similar to those in Massachusetts that create a “floor” for SREC prices. However it is unclear how successful these efforts will be.

Pennsylvania's Tom Corbett, which
way will he go.
 While he is not as overtly hostile to renewable energy as his shale-rich counterpart in Pennsylvania, Governor Chris Christie of New Jersey has taken some steps that alarm those in the renewable energy industry. As part of his “common sense” government solutions, Christie has unilaterally decided to withdraw the state from the Regional Greenhouse Gas Initiative, claiming that New Jersey has already done its part. In a 2010 Executive Order, Governor Christie also created a “Department of Environmental Protection Waiver Program”. This allows the state’s Department of Environmental Protection to disregard environmental regulations that it deems “overly burdensome” to the business community. This has been criticized by some as the “ultimate pay-to-play loophole”.

So while the SREC market will likely stabilize in the future, New Jersey’s highly admirable position as a renewable energy powerhouse is precarious at best right now. Hopefully the Governor and legislature will see the benefits of keeping their state as a beachhead of renewable energy on the East Coast and a center of green jobs. Only time will tell.

by Richard Harrod


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1 comment:

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