Two weeks ago, I returned to the town in New Jersey where I had grown up in order to film a news segment. On a whim, I drove past my parents' old house and saw, amidst a collection of other changes, one that I'd half expected: perched on the utility pole across the street was a solar panel. Even though none of the houses on the block appeared to have any hardware installed, the neighborhood had joined the distributed renewable power revolution.

At least in the northern part of the state, it's hard to go anywhere without seeing these individual panels scattered about on various poles that carry current. Individually, each appears to be less than a meter square, but they represent an impressive feat: the installation went from an announcement to wealthy neighborhood eyesore in two years. More impressive, however, are the sorts of numbers these efforts have driven. New Jersey is second in the nation in terms of installed solar capacity. In 2009, it had more installed capacity than the third and fourth states (Colorado and Nevada) combined.

In this perspective, we'll take a look at some of the factors that have pushed New Jersey to become a leader in renewable energy, how the state government responded to them, and why that highlights the problems that result from our failure to develop a national energy policy.

Why renewables (especially solar) are a good fit for New Jersey

There isn't really a single factor that has driven the surge in solar in the Garden State; instead, there is a large confluence of them. Some of them are historical and cultural. It's the most densely populated state, a position it achieved through decades of unconstrained development. That has resulted in a real effort to preserve the state's remaining open spaces, which limits the prospect of things like utility-scale solar installations. The state also experienced a period of heavy industrialization in the absence of environmental regulations, and has responded by tightening said regulations significantly. Its position as a leader in environmental regulation is highlighted by the fact that the former head of its Department of Environmental Protection, Lisa Jackson, has been bumped up to head the EPA.

In general, the past experience with unconstrained growth has left the state's residents unlikely to join the charge to strip the government of regulatory power. Its voters also have a slight tendency to vote for Democrats, and even its Republicans tend to be the sorts of moderates that are difficult to find on the national stage. As a whole, these trends tend to mean that New Jersey will accept what the scientific community is telling it about climate change, and will act accordingly.

The state's energy economy also makes renewable power an easier sell economically. New Jersey is an anomaly in many ways, getting about half of its power from nuclear plants and importing a substantial fraction (about 30 percent) from out of state. The bulk of its expanding electricity needs have been met by coal and natural gas, even though those bump up against the state's strict environmental laws and have to fight for the limited land in play. All of those factors keep New Jersey's electricity prices in line with those of surrounding states, which remain the highest in the nation outside of Hawaii. Renewables don't have to come down as far in price to become competitive.

With the political and economic pieces in place, New Jersey has acted; the state has a renewable energy standard that dictates that, by 2020, it will receive 20 percent of its energy from renewable sources. So far, progress on the intermediate goals has generally been good.

Greening the Garden State

Deciding to go renewable doesn't help you pick a technology. In the case of New Jersey, however, there aren't a lot of choices. The state's general flat topography means that hydropower isn't much of an option; the last attempt to build a major dam within the state died in the 1970s, as public opposition helped turn the land that would have been flooded into a National Recreation Area. Many of the estuaries and rivers that do flow into the ocean in New Jersey have excellent potential as sources of tidal power, but that technology hasn't yet advanced far enough to allow deployment. A similar thing applies to wind. The state has some excellent potential wind resources, but they're all offshore, and the US has only gotten to the point of approving large offshore wind projects since President Obama took office.

Given the state of current technology, New Jersey was going to go solar if it was going to do anything at all. And, in a state where open land is precious and often preserved, it wasn't going to build much in the way of utility-scale projects. Its aggressive renewable targets would have to be met largely through distributed solar.

This isn't necessarily a bad thing. As a densely populated state, there are lots of roofs available to host photovoltaic panels. A healthy assortment of shopping malls, shipping warehouses, and other facilities would also help. But the usual mixture of rebates, tax credits, and price incentives that have been applied in many states generally haven't driven adoption at the rates New Jersey needed.

So, the state devised a system based on what are called Solar Renewable Energy Certificates, or SRECs and focused its efforts on these. Those operating solar panels can do whatever they want with the power, either using it at home or selling it back to a utility. No matter what's done, as long as the equipment produces 1,000 kWh, it also generates SRECs, which can be bundled and sold on a market. The primary purchasers on the market are utilities, which use them to meet their annual quota of renewable power; falling short will net them a fee. This happened in 2009, when an insufficient number of SRECs were generated; the money went directly into programs that promote additional installations. To prevent excessive speculation, the maximum price for an SREC is capped; they have generally traded for well below this cap.

All of this has created a vibrant solar market in the garden state. Intermediaries can bundle the SRECs generated by groups of homes and sell them on to utilities. Companies with large facilities can put solar installations on the roof and become an SREC vendor. In the case of the sort of solar hardware that has appeared outside my childhood home, a utility has cut out the middle-men and put panels on its own hardware (which, conveniently, has easy grid access). Things might get tougher as the requirements ramp up over the decade, but there are still a lot of empty roofs in the state.

Local success, national failure

It's difficult not to admire New Jersey as an unexpected success story, a tiny upstart passing giant states with far better solar resources at their disposal. But, from a national perspective, its success doesn't make much sense. Right now, in addition to cost, the biggest barrier to solar installations is our manufacturing capacity. At our current rates, we simply can't build and install panels fast enough to meet all of the goals we've set for decades down the line; most plans assume a significant increase in manufacturing capacity. While the supply is constrained, it would seem to make sense to put what we can make where we'll get the most bang for our buck. And that's states like Arizona, New Mexico, and Nevada—precisely those states that New Jersey has shot past.

There are plenty of reasons this is the case. These states currently pay far less for energy than New Jersey does, which makes renewables a tougher sell. A large part of that, however, could probably be offset by an installation's increased productivity there. The biggest problem is that these states lack the sort of political and cultural perspective that makes renewable an easy sell in New Jersey.

This brings us to the larger issue: our transition to an increased reliance is a national problem, but we only solve one aspect of it (technology research) on the national level. Beyond that, issues like grid reliability, long distance transmission, storage for intermittent sources, etc. are left to a patchwork of the federal government, states, utilities, and grids. And, as a result, we simply don't make good use of our limited resources.