At the sunset of Gov. Phil Murphy’s administration, those in New Jersey’s solar sector have a lot on their minds.
Especially among lawyers handling the nuts and bolts of solar transactions – which they do on behalf of real estate developers, contracts and the energy’s end-users – there’s equal parts apprehension about what lies ahead and suspicion that there’s already flaws in how renewable energy projects come online right now.
Stephen Kisker, a Chiesa Shahinian & Giantomasi attorney who has been involved in solar energy transactions throughout Gov. Murphy’s term and the decade before it, noted one of the more unfamiliar trends across his time in his practice.
“For the first time I’ve seen, costs of installations are going up,” he said. “It has always been the narrative that the solar market doesn’t need the level of incentives it did before, and that’s 100% true. But the axiom that we can keep dropping incentives and solar is going to keep getting built is, for the first time in New Jersey’s solar life, questionable.”
Kisker, a member in CSG’s Real Estate Group and chair of its Renewable Energy and Sustainability Group, gave an example of how that plays out: A New Jersey school system he represents wanted solar installations on four of its schools, but the client received no bids on either of its attempts to enter into solar purchase agreements. The response was that it just didn’t make sense financially right now, he said.
Meanwhile, he added, the interest level of private capital in solar investments is starting to wane.
New Jersey’s solar market has undergone a transformation in recent years, as the N.J. Board of Public Utilities phased out its Solar Renewable Energy Certificate, or SREC, program in favor of a new incentive framework. During that, the BPU has refrained from including costs of upgrading solar energy systems on the grid into the rate base of electricity customers.
The state’s new focus is on its community solar program, which is an initiative that allows low- and moderate-income households to tap green energy – with the promise of lower utility bills. Those customers have to make up 51% of those served by community solar projects.
The complication for this new process is getting enough of those customers signed up to complete new projects, according to Kisker.
“The thought was that low and moderate folks would be happy to get this energy at a reduced price,” he said. “And it was a big tenant of the (Gov. Murphy) administration to get this energy to those customers. The problem is, those on the ground are having a difficult time getting them to agree to sign an agreement that obligates them to buy electricity from a third party.” When enough customers for the community solar incentive programs can’t be found, it can put solar projects in financial jeopardy, Kisker said.
There are options in those situations, however. John Valeri, member and practice group leader of CSG’s Environmental Law Group, files petitions to the BPU on behalf of solar developers. Sometimes projects need to pull on an expanded service area for customers or require other amendments.
“But that takes time; and time is money,” he said. “The longer you wait for financing, the more financiers start questioning it. (Also), you have a snapshot that continues to move. If you’re waiting months for a board order, that can impact you on keeping customers. … Because even if you get subscribers initially, that fluctuates. Simply because it’s a lower income demographic, people move more frequently. Or they don’t have the money to do it anymore.”
In short, these attorneys express that the process for taking advantage of solar incentive programs has gotten more complex and slowed down – at the same time that inflation and supply chain issues have increased prices for solar developers.
While it’s generally agreed that state officials have been willing to reevaluate what’s working and what isn’t in New Jersey’s solar landscape, Valeri, an advisor under former Gov. Christine Todd Whitman, said priorities can narrow the later it gets into a governor’s time in office.
“I was a staffer (in Trenton) at one time, so I get it – a lot of people are naturally worried about the next step for them,” Valeri said. “They’re distracted. It’s not a criticism. At the end of the day, it’s life.”
A year away from a new governor being elected in New Jersey, there’s also the question of whether the state’s support for solar will soon be built on – or remade.
“Regardless of whether there’s a change in administration that amounts to changes in solar policy or not, there’s going to be a time of transition during which everything is operating slower,” Kisker said. “What we’re facing now is that everyone in Trenton has other things to think about than community solar projects. Whether that changes will depend on where this final year of priorities ends up.”
