California also is on a solar tear. It wants "a million solar roofs" a decade from now, and is spending $3.3 billion on subsidies, hoping to get 3,000 megawatts installed. More than 158 megawatts of grid-tied solar power were installed in California last year, double the amount installed in 2007. Since the 1980s, California has installed nearly 500 megawatts of grid-tied solar power, equivalent to one large power plant, but still a tiny fraction of the 40,000 megawatts the state needs on a summer day.
New Jersey's $514 million program will double its solar capacity to 160 megawatts by 2013, and will be funded by utility customers. Costs will be defrayed slightly by a 30% federal tax credit, roughly $1 million a year in proceeds from the sale of solar renewable energy credits. In addition, solar energy fetches higher prices in the state's deregulated market, because it's produced at peak times.
PSEG will get more than electricity from the pole-mounted systems, which cost about $1,000 apiece. The solar units will have a radio capability, so they can alert the utility to outages and relay other grid data. "As they deploy these systems, they get a smart grid network," said Shihab Kuran, chief executive of Petra Solar in Plainfield, N.J., which is manufacturing the systems locally.
Jesse Pichel, an alternative-energy analyst with Piper Jaffray & Co., said a change in government incentives should stimulate more solar development. Beginning Aug. 1, renewable-energy companies can get cash grants from the federal government, instead of a credit against taxable income, for 30% of the cost of projects. The change will make it easier to finance projects.
Even though panel prices have fallen amid abundant supplies of polysilicon, the primary material used to make panels, the electricity still costs more than power generated from conventional fossil-fuel sources. "We've got to stop pretending solar power will lower the cost of energy. It's going to increase the cost, and people have got to understand why it's worth more," said PSEG's Mr. Izzo. He listed the names of pollutants produced by coal or gas incineration that don't occur with solar technology.
Jeanne Fox, president of the New Jersey Board of Public Utilities, said her state has 4,000 solar installations, or "more per square mile than California." There are limits, though, she added, "because the ratepayers can't afford to have solar everywhere, even though the cost is dropping."
New Jersey's goal is to garner 3% of its electricity from the sun and 12% from offshore wind by 2020, part of a larger effort to meet 30% of the state's electricity needs through clean sources.
Write to Rebecca Smith at rebecca.smith@wsj.com and Russell Gold at russell.gold@wsj.com
Printed in The Wall Street Journal, page A5