For its own murky and muddled reasons, the agency has decided pandemic-related shortages won’t buy developers more time to finish projects.
“In the long run we are all dead” was John Maynard Keynes’ pithy retort to purveyors of conventional wisdom on the evils of budget deficits. Keynes advised governments to borrow and spend lavishly on infrastructure projects, putting people and capital to work, even if it would drive up long-term deficits.
In short, spend now on projects that yield long-term growth and don’t sacrifice projects and jobs on the altar of balanced budgets. Think FDR and the New Deal, not Herbert Hoover and balanced-budget orthodoxy.
So what does this squib from Econ 101 have to do with the state of solar energy development in New Jersey and the setting of project-incentive levels paid for solar projects? Almost everything — when many projects hang by a thread during the transition from commodity-style competitive pricing of solar power that led to a decade of overpricing of SRECs (solar renewable energy credits) as solar investors demanded higher profits, citing market volatility.
The Board of Public Utilities has placed dozens of solar projects under construction at risk of cancellation due to a June 8, 2022, ruling that granted a heretofore routine request for an extension of time to complete a 1.38 megawatt “net-metered nonresidential solar electric generation facility” in semirural Gibbstown.
Gibbstown-induced panic
To say that the Gibbstown ruling has caused near panic among solar developers and their host customers — including many public school districts — would be an understatement. That’s because the BPU used the Gibbstown ruling to announce, with no advance warning or public notice, draconian new rules for reviewing all solar projects awaiting BPU action on pending time extension requests. These are caused by supply-chain disruptions and delays and make it impossible to complete projects on time. Even over-the-counter circuit breakers cannot be found at any price.
Think infant baby formula disappearing from drugstore shelves overnight for an apt comparison. Federal government agencies, facing angry parents and a frustrated president, mobilized to fix the errant supply chain. Not so the BPU, which seems content to let the solar industry suffer a knockout punch when investors have expended millions of dollars on half-completed projects in reliance on the assumed “goodwill” of the BPU.
Much of that goodwill vanished when the BPU proclaimed in the Gibbstown case that it would no longer apply standard legal principles of force majeure — literally, superior force that “excuses” contract compliance. These include unforeseen shortages of solar panel components and a host of global supply-chain disruptions triggered by pandemic-related setbacks that were unforeseen in their global impact and duration.
So how bad is it? As described by a long-time solar industry leader, Lyle Rawlings, “If the Gibbstown requirements are enforced on partially completed solar projects, the losses will be catastrophic for solar developers and builders and their host customers. These include public school districts, hospitals and reclaimed landfills and other public facilities that will lose the benefits from hosting solar projects.”
In the Gibbstown ruling, the BPU declared that henceforth the only cause of justifiable delay will be delays caused by public utilities unable to interconnect with solar projects, since they are caught in the same supply-chain limbo as the solar providers.
Why the sudden break with BPU precedent of generously granting time extensions based on pandemic-related supply-chain delays?
Equipment in short supply
Rawlings explains that “the main source of project delays is the unavailability of equipment due to pandemic-caused global supply-chain problems. The second most common source of delay are pandemic-related delays in government permits and approval. In Gibbstown the board declares that global supply-chain issues are no longer valid reasons for seeking an extension.
Why is the BPU indifferent to legitimate causes of delay, when solar components from China are stuck in giant container ships anchored in Los Angeles or New York harbors? And what is the public benefit in preventing, for example, completion of a solar project that would serve a high school or hospital with zero-polluting power for the next 15 – 20 years?
The apparent reason for the BPU’s attempt to “strand” these projects is to protect ratepayers who ultimately bear the costs of solar incentives. But the data refutes this oft-cited example of conventional wisdom. The BPU’s Cadmus Report documents the consumer benefits of solar in graphs of “bundled electricity rates” that rose steadily from 2000 until 2009, when hundreds of solar projects were completed and came online.
After that, rates actually declined or stabilized over the next 10 years. As for residential and commercial rates, starting in 2009 and continuing for the next 10 years, by 2019 the benefits were even more dramatic. Residential rates peaked in 2011 at about 16.5 cents/kilowatt-hour before falling to 15.6 cents/kwh. Solar projects are “peak shavers” — they generate electricity during peak periods on hot summer days when power generation is most expensive. By leveling these demand peaks, solar saves money for everyone. Thank you, solar!
Moreover, solar power is an essential part of the increasingly desperate effort to mitigate the most harmful impacts of global climate change, powered by reliance on fossil fuels, especially coal and natural gas.
New Jersey was at one time a national leader in pushing renewables, second only to California. It now lingers far behind the leaders, despite the soaring rhetoric and ambitious goals of the Energy Master Plan and the Corzine-era Global Warming Response Act promising 80% reduction in greenhouse gases.
What needs to be done to get the state back on a more Keynesian path of promoting solar infrastructure and the jobs it creates now, and the pollution it prevents. Senate Bill S-2732 is a start. If will provide some relief for 30 or so landfill solar projects.
Costs keep climbing
Meanwhile, global supply-chain shortages continue to push up project costs. At the same time the BPU seems intent on closing the door to scores of projects somewhere in the construction pipeline. But it’s not their fault that such essential equipment as circuit breakers, panel boards, transformers and cable limiters and the like remain in critically short supply, with costs escalating if they can be found at all.
You get the picture, and it is not a pretty one. John Maynard Keynes would not be pleased.
Will we ever attain the Murphy administration’s much avowed clean-energy goal of providing 100% of renewable power by 2050 — 28 years from now? That certainly qualifies as long term. But the BPU seems to be doing its best to block that goal, inspired more by Hoover’s laissez faire policies than by FDR’s deficits, sharply cutting incentives for previously approved solar projects already in the pipeline in pursuit of nonexistent rate benefits to consumers.
In the long run, to borrow a phrase from Keynes, if the BPU continues its unpredictable policy pronouncements intended to reduce ratepayer costs, there is a clear and present danger of sacrificing both the short- and the long-term benefits of solar development. Not only will solar projects in varying stages of construction around the state be forced to shut down, but also solar developers may close their doors and decamp to more pro-solar states.
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