Renewable energy hits a snag

Despite their penchant for saving money in the long run, renewable energy projects may face a slump during the economic downturn because of high upfront costs.

The two most popular projects in New Jersey - solar panel installations and more recently, wind farms - are expensive even with government incentives, some of which are being pulled back.

"Emerging technology and other long-range investments are often the first to suffer when the economy turns," said Frank Felder director of the Center for Energy, Economic & Environmental Policy at Rutgers University. "If it's harder to get capital, then those [green] projects won't be a priority for either business or consumers."

Those investing in large projects admit that it would be difficult to build right now.

Executives at Garden State Offshore Wind said they would probably have a hard time securing the $1.1 billion needed to build New Jersey's first 96 wind turbines. Environmental studies and regulatory hurdles will push off a huge capital expenditure by 18 months, company executives said.

"Hopefully by then the credit markets will be in better shape," said Paul Rosengren, a spokesman for Newark-based Public Service Enterprise Group, a partner in Garden State Offshore Wind. "It would probably inhibit us if we were in the construction phase today."

Yet the long-term economic benefit of wind power is palpable since no fuel is needed. The Atlantic County Utilities Authority has saved $500,000 a year in electric costs from five wind turbines - the largest wind farm in the state - that help power its wastewater treatment facility.

Nationally, billionaire oilman T. Boone Pickens delayed a plan to develop a wind farm on thousands of acres in west Texas, citing the drop in natural gas prices Last month, BP Solar scrapped plans for a $97 million expansion of its Frederick, Md., plant citing intense global competition. And the nation's second-largest ethanol company is under bankruptcy protection.

On the consumer and small business end, converting to renewable energy is costly even with government incentives. Solar panels and geothermal heat pumps can cost tens of thousands of dollars to buy and install in homes and small buildings.

But New Jersey consumers may no longer enjoy generous state rebates that paid up to 70 percent of installation costs. Because they will still be able to write 30 percent of the purchase price off their taxes thanks to a provision in the $700 billion federal bank bailout bill, the state Board of Public Utilities is considering severely reducing rebates, according to a BPU notice for public comment issued Oct. 30.

Since 2001, it has offered rebates of up to 70 percent of construction costs to homeowners and businesses. A typical residential solar installation costs $48,000 to $60,000, although some small systems cost less than $20,000.

Without the state taxpayer-funded incentive, there may be a slowdown in what has been a burgeoning business in New Jersey.

More than 3,300 homes, businesses, school and government buildings have installed solar panels in New Jersey, the second most in the nation behind California. Much of it was propelled by the $233 million given by the BPU to businesses and residents since 2001.

"The rebate is very important to the solar industry," said Thomas Matulewicz, a partner in GeoGenix, a solar installation company in Monmouth County. "The market really took off when it was introduced."

The BPU has begun shifting to market driven incentives by requiring the state's electric utilities to buy renewable energy certificates from consumers who generate enough electricity from solar panels.

"The jury is still out on whether this will have the same impact" as rebates, said David Pringle of the New Jersey Environmental Federation, an advocacy group. "The rebates were known and proven."

State officials have long pushed the cost-saving benefits of projects like solar power, but admit that may not be enough to entice consumers right now.

"In the short term, people aren't spending money anywhere," said Jeanne Fox, president of the state Board of Public Utilities. "Everyone hopes this passes quickly. People will still use electricity regardless and renewable energy will eventually save money."

But with small businesses clamoring for loans just to make ends meet, long-term energy savings will not be a priority, Rutgers' Felder said.

"Small businesses are usually short for credit," he said "If they can't meet payroll, they're not going to put $30,000 or $40,000 out for a capital investment like solar panels."

Despite the gloomy short-term outlook, green technology is still seen by many as a skyrocketing business sector. A recent Clean Energy Conference in Jersey City drew 900 attendees, many of whom were bullish on renewable energy. While projects may stall in the short term, many said the long-term outlook is good.

Renewable energy's biggest champion at the conference was Governor Corzine.

"We are going to have to stay the course with these issues and that will take public investment and public policy to make sure that we are committed to renewable energy and efficiency," he said at the conference. "We're going to sustain our sustainability efforts in New Jersey."

Corzine has pushed to create "green-collar" jobs in a state that lost 6,000 jobs in October bringing total losses to 27,200 this year.

A University of Massachusetts study released in September said that a $100 billion federal stimulus package could create 2 million jobs nationwide including, more than 57,000 in New Jersey.

Corzine's energy master plan draft includes a proposal to retrain workers in the building trades with energy efficiency skills.

If things get worse, Felder said, green jobs could be a panacea to the economy, much like public works jobs were during the Great Depression.

"Before you had the Tennessee Valley Authority and the building of bridges and roads and dams," he said. "Creating green-collar jobs can transform a workforce and provide steady employment for years."