November 13, 2019

Resident Calls Solar Array Financial Rout for Taxpayers

To the Editor:

After several false starts, the 3 Megawatt (MW) Princeton Solar Array was inaugurated on October 11, 2017. For the Array owner, NJR Energy Ventures (NJR), this project is a both a technical success and a stunning financial bonanza. For Princeton taxpayers, it is a fiscal debacle. Incentive payments and electricity sales worth nearly one million dollars per year, or more than 14 million dollars over the 15-year life of the NJR contract, will be collected by the array owner, NJR, instead of going to Princeton taxpayers.

The attempt to install a solar array on Princeton’s former municipal landfill off River Road began in 2011. Shortly after discussions started, Princeton officials hesitated and stopped the effort. The project restarted in 2015, but once again was paused due uncertainty, it was said, in the SREC market (a Solar Renewable Energy Certificate certifies generation of one million watt hours (MWh) of solar electricity).  Finally, when Princeton officials felt that the price of SRECs had stabilized, the project went ahead.

It is clear from this history that the Princeton staff involved in the project planning must have understood the central role of SRECs in project financing. Princeton also hired an independent consulting firm for project support.  Given these factors it is curious that Princeton agreed to a 15-year contract with such grossly unfavorable terms.

The contrast with how Princeton University financed its much more complex and expensive array is striking. In 2011 the University signed an eight-year contract with an installer who kept array ownership and collected revenue from SREC and power sales. After eight years the array was expected to be fully paid for with a reasonable profit for the installer. At the end of the contract the University took full ownership of the array without having risked any of its own funds at any time.

Evidently neither Princeton municipal employees nor its consultant spoke with the University about these arrangements. Nor did they look at the University website where the array financial engineering is explained.

Any and all means should be used to reclaim some of the huge tax-free profits being made from the Princeton array to benefit Princeton taxpayers. The consultant’s report and the contract signed by NJR and Princeton should be made publicly available and thoroughly examined. For example, some residential contracts allow the homeowner to purchase their array before the end of the contract. If this is the case for this contract then the possibility of an early buyout should be explored.

There is a strong element of environmental justice in this issue. The SRECs are funded by a surcharge on all electricity sold. Princeton owes it to ratepayers in Newark, Camden, and other cities that cannot benefit financially from this incentive program to be sure to extract maximum environmental benefit from these funds.

Array revenues should be dedicated exclusively to projects to fight climate change, such as: converting municipal heating and cooling systems to geothermal systems, installing EV chargers for municipal employees and the public, buying EV vehicles for the municipality, and converting school buses from diesel to electric power.

Finally, the reasons for this extraordinary blunder should be determined and made public so that a repetition in future projects might be avoided.

Al Cavallo
Western Way

Mayor Lempert’s response follows:

The Princeton Solar Array project was structured as a no-risk win-win for Princeton. The array — which was privately financed — is environmentally responsible and has been economically beneficial to the municipality and to the Stony Brook Regional Sewerage Authority. The project has also made use of a formerly unusable Brownfield property, the closed portion of the landfill at River Road, and converted it into a revenue-generating asset for Princeton.

The solar energy generated by the array is sold under a long-term Power Purchasing Agreement to the sewer authority at a reduced rate, providing substantial savings to Stony Brook and its customers. In addition, the municipality receives the benefits of land lease payments in exchange for hosting the facility. Public solar projects are often privately financed since governments are not able to benefit from any of the tax incentives associated with solar projects.

The contractor we engaged for this project, Gabel Associates, managed a competitive process and performed a comprehensive evaluation of proposals to select the solar developer that provided the greatest value. The financing of the project was not an “extraordinary blunder” as claimed by Mr. Cavallo. In fact, the use of a private sector developer and private financing was a deliberate strategy.

All of the risks inherent in this project were borne by the private sector investors, and they have also financially benefited, which is appropriate. Princeton has benefited as well and is expected to realize over $455,000 from lease payments. Meanwhile the sewage authority is expected to realize more than $2.4 million in energy savings, which also benefits Princeton residents. While the Princeton solar array project has been profitable, there were no guarantees when we started the project, since it was dependent on market forces out of our control.  It is why municipalities are, and should be, risk averse.