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Comments on the OCE Solar Transition – Next Steps: Draft Staff Positions for Discussion Alfredo Z. Matos Vice President – Renewables & Energy Solutions.

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Presentation on theme: "Comments on the OCE Solar Transition – Next Steps: Draft Staff Positions for Discussion Alfredo Z. Matos Vice President – Renewables & Energy Solutions."— Presentation transcript:

1 Comments on the OCE Solar Transition – Next Steps: Draft Staff Positions for Discussion Alfredo Z. Matos Vice President – Renewables & Energy Solutions December 1, 2011

2 2 PSE&G Concerns with Staff Draft Positions – Option 1 (“Do Nothing”) OCE Option 1 – “No new EDC SREC programs and no programs to address the oversupply” –PSE&G: There is significant risk that past performance may be a very poor predictor of future solar installations –The current environment will negatively impact the viability of pipeline projects SREC prices have dropped dramatically Federal tax incentives (Treasury 1603 grants and bonus depreciation) will be expiring There is pending legislation prohibiting solar projects on farmland

3 3 If much of the pipeline never materializes or is placed on hold, a significant capacity shortfall could occur in Energy Year 2013, resulting in devastating job losses in the industry and SREC prices again approaching the SACP From a ratepayer and regulatory policy perspective, erring on the side of being long carries significantly less risk than erring on the side of being short; being short imposes significant costs on ratepayers and works counter to the State’s environmental policy goals The solar industry in NJ is still in transition and continues to require the predictability and stability provided by utility direct investment It is inappropriate to focus solely on short-term oversupply situation; the Board should take a long-term view given inevitable “boom-bust” cycles Therefore, Option 1 is not in the best interest of ratepayers PSE&G Concerns with Staff Draft Positions – Option 1 (“Do Nothing”)

4 4 PSE&G Concerns with Staff Draft Positions – Option 2 Option 2 – “Planning for continuation of the EDC SREC programs,” with conditions *** PSE&G assumes this option includes all EDC programs, including direct investments through loans and utility-installed generation *** –Condition 1 – OCE: Continue the EDC programs with implementation in 2013 Implementation in 2013 will require immediate action. An extension to PSE&G’s direct investment programs would not bring new capacity online until the second half of Energy Year 2013 –Condition 2 – OCE: The EDC programs would be for net metered projects only Grid connection direct investment projects should be included. These projects (i) return benefits to ratepayers, (ii) target underserved markets that do not currently participate in solar, (iii) provide benefits to host sites, and (iv) help achieve long-term RPS targets. –Condition 3 – OCE: EDC SREC programs “would be limited to only a portion of the market including residential systems and small commercial/institutional systems” There should be no limitation placed on utility grid connected projects that address underserved market segments

5 5 PSE&G’s Perspective The Board’s Solar Transition Order in 2007 identified the following goals for the SREC program: –Sustained, orderly market development –Minimizing ratepayer impacts –Minimizing transaction costs –Supporting other policy goals, such as fairness and equity to all ratepayer classes, job growth, improved reliability/security and improved environmental quality These goals are just as applicable today as they were in 2007 The EDCs have and continue to be uniquely positioned to play a critical role in meeting these goals The primary purpose of the 3 types of EDC programs was to have the EDCs provide stability and certainty for long term SREC price risk. This purpose and need has not changed

6 6 PSE&G’s Perspective In addition to federal incentives for solar development, a number of solar subsidies are currently in play in the NJ market Utility Direct Investment is an important component in providing underserved markets access to solar. Such a program can be structured to have market based and competitive elements to provide ratepayers a least cost option for grid-connect projects by returning real value to ratepayers in terms of energy/capacity sold, value of SRECs and tax credits while providing cost transparency. Such a program, like Solar 4 All, can be designed with certain “circuit breakers” to be used if needed to help prevent crashes of the SREC market. PSE&G believes that its highly successful Solar Loan program would enable the continued development of net-metered projects under 2MWs. PSE&G can design a method to provide periodic adjustments in the SREC floor price to better mirror market conditions.

7 7 PSE&G’s Perspective PSE&G believes that EDC participation as a direct investor in solar not only helps the overall industry but also: –Provides market stability by hiring many solar firms across the state and encouraging innovation –Provides a stable and predictable base quantity of solar capacity –Provides cost transparency for SRECs that are ultimately funded by ratepayers –Contains program structure to minimize cost impact to ratepayers –Through the Solar Loan program, provides financing and SREC price certainty for developers –Through the Solar 4 All program, allows all ratepayers, who support the SREC market, to benefit from their investment by returning the proceeds from energy, capacity and SREC sales, along with tax credits to ratepayers –Through the Solar 4 All program, aligns with the Administration’s policy goals by providing the benefits of solar energy to underserved markets and customer segments –The dependability and certainty of the EDC programs have and will continue to provide critical job stability as NJ continues to climb out of the Great Recession

8 8 PSE&G Proposed Recommendation The utility direct investment programs such as Solar 4 All and Solar Loan should be continued. It takes 6-7 months to receive BPU approval for a petitioned program + 6 months for the utility to obtain projects, award, negotiate contacts and obtain permits + 4-6 months to construct. On the fast track, the earliest PSE&G anticipates placing a new Solar 4 All projects on-line would be the latter part of EY2013. Where possible, the EDC programs should be structured to better respond to market dynamics. Now that the SREC market has become more mature, a mechanism can be designed to enable the floor price of a new Solar Loan to adjust to market prices. The EDC programs should include both net-metered (<2MW) and grid connected projects.

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