In January, New Jersey unveiled its Energy Master Plan, a strategy document meant to put teeth behind Governor Phil Murphy’s goal of 100 percent clean energy by 2050.
The release of the 148-page plan followed numerous smaller efforts in the state to encourage renewables, including the establishment of a community solar program designed to pull more residents into the clean-energy future Murphy has pitched since claiming the governor’s office in 2018.
Though the overall capacity of New Jersey’s community solar program — a minimum of 225 megawatts spread over three years — is relatively small, it carries outsize importance for Murphy’s clean-energy agenda. The state’s master plan includes seven main goals, including advancing community energy planning and making solar more accessible through programs like community solar.
To that end, Murphy and state regulators have made environmental justice a “cornerstone” of New Jersey’s community solar program. In choosing winning projects, the state’s board of public utilities has weighted the inclusion of low- and moderate-income customers above all other factors. The state doubled down on that mission when it selected its first 45 projects from 252 applications; though New Jersey required that 40 percent of projects set aside the majority of their subscriptions for low- to moderate-income (LMI) customers, 100 percent of the projects selected will meet that criterion.
Now comes the work of building them — and actually signing up consumers.
The goal of making solar more accessible has often been met with underwhelming results. Policymaking meant to include LMI solar subscribers has been “an abject failure,” Austin Perea, a senior solar analyst at Wood Mackenzie Power & Renewables, told Greentech Media last year.
For that reason, the rest of the market will be watching to see how New Jersey’s pilot unfolds.
The first challenge: Finding enough LMI subscribers
Among state community solar programs, New Jersey’s efforts to include customers at different income levels are an outlier.
By comparison, Colorado’s community solar program — the country’s first — requires that low-income subscribers account for just 5 percent of each project (with the exception of Xcel Energy, which has a settlement allowing the utility to own and operate projects with 100 percent LMI participation that qualify to count as part of that 5 percent total). Maryland’s pilot, as another example, sets aside 60 megawatts of which 20 percent of the subscribers must be LMI customers.
Community solar developers have had trouble reaching even those lower numbers. In Colorado, companies have admitted giving away subscriptions for free to meet requirements.
The same concerns about achieving program mandates have arisen in New Jersey.
“I can tell you without a doubt that quite a few of the community solar awards are highly unlikely to get built, primarily because a lot of these awards went to [companies] that have no idea how to subscribe LMI subscribers,” said Jim Spano, managing partner at Spano Partners, a firm awarded two community solar projects in New Jersey’s pilot.
Speaking to GTM, many developers working within the pilot reiterated that sentiment, noting the possibility that other developers may fall short of the subscribers they need. Yet all noted their own progress toward LMI subscription goals, even in the face of delays related to the coronavirus.
Much of that progress has come through partnerships with community groups. Spano Partners partnered with the Gateway Regional Chamber of Commerce, which already offers discounted, clean retail power through its members. Solar Landscape, which was awarded eight of the pilot’s projects, told GTM it worked with affordable housing providers to reach potential subscribers.
Hartz Mountain Industries, a real-estate developer based in the state that also develops solar, will build four of the pilot’s projects and plans to work with local housing authorities to find eligible subscribers. Because Hartz owns buildings, the company can also approach its own affordable housing tenants. In one of Hartz’s buildings in Secaucus, New Jersey, 94 of 469 units are designated affordable.
“Those are existing people we have relationships with,” said the company’s Executive Vice President Larry Garb. “It’s an easy connection for us to make.” That pool of potential subscribers led Garb to believe that Hartz may have a “potentially easier time” signing up LMI customers compared to other developers.
It's also possible that the extra attention New Jersey developers have paid to LMI subscriptions from the start — due to the state's requirements — will help alleviate problems around getting people signed up.
Potential knock-on effects in other states
The results of New Jersey's community solar pilot won’t be clear for some time.
Leslie Elder, regional director for the Mid-Atlantic at the Coalition for Community Solar Access, said it’s too soon to tell if New Jersey’s procedures for project scoring and selection “will actually see those projects come to fruition.”
The state appears unfazed by concerns about potential failure. From the start, Board of Public Utilities President Joseph Fiordaliso expressed confidence that New Jersey’s pilot will succeed — even as some criticized its low barriers to entry and modest capacity.
“The nice thing about pilots: You can make changes midstream; you can see what’s working,” Fiordaliso told GTM.
If developers in New Jersey succeed in building profitable LMI-based community solar projects, they could help ease concerns that subscribers in that income bracket pay their bills with less consistency than do more affluent customers. Financiers have traditionally been wary of such projects, despite arguments from community-solar advocates that LMI customers don’t necessarily equate to greater economic uncertainty.
“It’s all perceived risk,” said Nick Baudouin, director of business development at PowerMarket, a subscribing and project management organization that’s working with Spano Partners on its New Jersey projects. “There’s no data that you need a [certain] credit score and [that] that’s going to be an indication that people are going to pay their utility bill.”
Reasons for coronavirus concerns — and optimism
As New Jersey’s pilot gets off the ground, the coronavirus pandemic presents a complicating factor. New Jersey is second to only New York in its number of cases and deaths from the disease, with the U.S. now reporting the highest number of cases in the world. State-, county- and city-level shutdowns have halted construction of projects in all sectors of the solar industry.
Following the lead of New York, New Jersey released new construction guidelines last week. The governor’s office told GTM the order only allows construction to continue on residential solar projects already underway that involve five or fewer workers.
Shutdown orders have also knee-capped community solar companies working to secure thousands of subscriptions, since many rely on community events, in-person meetings or door-to-door sales.
“It’s a pretty common way to go about getting subscribers in an urban area like Perth Amboy: just knocking on doors,” said Shaun Keegan, CEO at Solar Landscape, referencing a city in New Jersey where the company is working to subscribe customers. “We’re not allowed to do that now — but that’s just one way to get subscribers.”
Like their colleagues in the residential business, community solar developers and subscribers are having to learn virtual sales techniques, and quickly.
Despite that hurdle, community-solar developers may have more reason for optimism compared to their industry peers. Community solar is a “virtual transaction,” as Jim Spano explained, meaning face-to-face interaction isn’t necessarily required if a customer seeks out the product.
One of the principles of community solar is guaranteed savings compared to a customer’s regular utility bill, which may give the product a boost as Americans tighten belts during an economic downturn. New Jersey developers cited discounts ranging from 8 percent up to 15 percent.
“In terms of getting customers, I think people are going to be looking for ways to save money,” said Garb at Hartz Mountain. “I think a lot of people will probably jump at that. So I’m hoping the subscription side of these projects is not going to be impacted.”