Massachusetts next generation solar incentive

The Massachusetts Department of Energy Resources is developing a new solar incentive program.  DOER released its proposal for the next generation of solar incentives on September 23, 2016. 

The 2016 legislation, An Act Relative to Solar Energy, included an extension and expansion of net metering, a policy which has supported the development of most solar projects in Massachusetts to date.  But because the state's solar renewable energy certificate (SREC) program is reaching its end, the recent law also directed the Department to "develop a statewide solar incentive program to encourage the continued development of solar renewable energy generating sources by residential, commercial, governmental and industrial electricity customers."

The 2016 law specified certain required characteristics of the "next generation" solar incentive program, including that it must be one which: "promotes the orderly transition to a stable and self-sustaining solar market at a reasonable cost to ratepayers," considers underlying system costs, takes into account electricity revenues and incentives, relies on market-based mechanisms or price signals, minimizes costs and barriers, features a declining incentive framework, differentiates incentive levels, "ensures that the utility customer realizes the direct benefits of the solar incentive program," considers the value of distributed generation and encourages solar generation where it benefits the distribution system, shares program costs collectively among all ratepayers, and promotes investor confidence through long-term incentive revenue certainty and market stability.

DOER released its "Next Generation Incentive Straw Proposal" on September 23.  Highlights include:

• DOER believes that a tariff-based incentive program would be best mechanism to continue supporting solar at the lowest cost to ratepayers.
• Incentive values would be based primarily on project size, with "adders" for different types of project (based on location, off-taker, or policy considerations like promoting energy storage).
• Project eligibility criteria include being connected to the electric grid in Massachusetts, interconnected on or after January 1, 2017, and not being qualified under the previous SREC I or SREC II programs.
• Siting criteria are included - for example, ground mounted projects would be prohibited if sited in certain wetlands, prime farmlands or forest land, or permanently protected open space.
• Changes to "solar canopy" policy, to allow solar canopies to be installed on agricultural land and over canals.
• Additional support for solar facilities serving low-income properties.

DOER noted that implementing this vision would require rulemaking by DOER, as well as a proceeding before the Department of Public Utilities regarding tariffs.

DOER is accepting written comments on the proposed program design until October 28, 2016.

Massachusetts develops next solar incentive

The Massachusetts Department of Energy Resources (DOER) is designing a new solar incentive program to encourage the continued development of solar renewable energy generating sources by residential, commercial, governmental and industrial electricity customers, based on a state law enacted this spring. The so-called "next solar initiative" program could affect the pace of solar photovoltaic project development in Massachusetts, as policymakers seek a smooth transition from the current SREC II program as it reaches full capacity.

On April 11, 2016, Governor Charlie Baker signed into law An Act Relative to Solar Energy, also known as Chapter 75 of the Acts of 2016.  The law preserved and expanded net metering, preserving the value of that policy for projects developed by residential, small commercial, municipal and government customers.

As described by the Baker administration, the law also allows DOER and the Department of Public Utilities to "gradually transition the solar industry to a more self-sustaining model." In particular, section 11 of the act directed DOER to "develop a statewide solar incentive program to encourage the continued development of solar renewable energy generating sources by residential, commercial, governmental and industrial electricity customers throughout the commonwealth."

The law prescribed twelve requisite characteristics of the solar incentive program, but left the creation of rules and regulations to DOER.  Some criteria are process-oriented, such as that the program "promotes the orderly transition to a stable and self-sustaining solar market at a reasonable cost to ratepayers," or considers underlying system costs, environmental benefits, energy demand reduction and other avoided costs provided by solar renewable energy generating facilities.

Other criteria define structural requirements for the program, such as that it "relies on market-based mechanisms or price signals as much as possible to set incentive levels," "differentiates incentive levels to support diverse installation types and sizes that provide unique benefits," and "features a known or easily estimated budget to achieve program goals through use of a declining adjustable block incentive, a competitive procurement model, tariff or other declining incentive framework."  The law also requires the program to promote investor confidence through long-term incentive revenue certainty and market stability.

After the solar bill's enactment, DOER held two public listening sessions, and solicited comments on the development of the "next solar incentive" through June 30, 2016.  Many commenters expressed support for a continuation of the SREC framework, such as "SREC III."  Other comments focused on locational issues, such as proposing policies to deter the development of projects located on farmland or other undeveloped "greenfield" sites.

DOER is expected to release a first draft of its next solar incentive program this summer.

Massachusetts net metering expansion bills

As Massachusetts solar energy legislation seems stalled over debate on the value of solar renewable energy credits, 100 state legislators have written to the Massachusetts House of Representatives leadership calling for "a bill to raise net metering caps as expeditiously as possible."  Governor Baker, the state House and Senate have each agreed to expand net metering programs, but legislation has yet to be fully enacted due to a lack of agreement over the separate SREC issue.

Solar panels on a rooftop in Massachusetts.

Massachusetts solar energy policy is at an inflection point, as the state's two most significant solar photovoltaic offerings -- net metering and the Department of Energy Resources SREC II program -- reach prescribed limits.

Current law caps public sector net metering at 5% of a distribution company's historical peak load, and private sector net metering at 4%.  Last year, Governor Charlie Baker and legislators agreed to increase each of these caps by another 2% of load. The Baker administration described An Act relative to a long-term, sustainable solar industry as maintaining:

strong support for solar generation in the Commonwealth by raising the private and public net metering caps two percent each, to six and seven percent, respectively. The enhancement of cap space represents a 50% increase for public entities, and a 40% increase for private entities, in the allowable amount of solar energy available for net metering credits. This increase will provide immediate support for projects being developed in service territories where the caps have already been reached, and provides the Department of Public Utilities with the authority to raise the caps further, as needed in the future.

In the last legislative session, the Massachusetts House and Senate each passed a similar bill expanding net metering.  But because these bills differed on the reimbursement rate for solar renewable energy credits (SRECs), a conference committee must now try to find agreement between the versions if the concept is to advance. 

In an apparent attempt to prompt action from the conference committee, 100 state legislators signed a March 14, 2016, letter calling for a floor vote on a bill at the earliest opportunity.  The legislators described net metering credits as "compensation for the value provided by solar generation exported to the grid."  They articulated a pro-consumer net metering policy:

In our view, a strong net metering policy, at a minimum, calls for maintaining retail net metering credit value for preferred classes of projects, such as (1) community shared solar, (2) projects that serve low income housing and low-income ratepayers and (3) municipalities until an official, publicly scrutinized analysis of costs and benefits has been completed. In addition, we ask the Conference Committee to ensure grandfathering of existing systems. We also are in favor of the inclusion of new or expanded programs to achieve solar equity for low-income residents.

The legislators noted increased urgency given the filling up of the SREC II program.

The bills -- H.3854 and S.2058 -- are now before the Conference Committee.

MA solar policy faces change

Massachusetts solar energy faces uncertainty, as the two state policies most supportive of solar photovoltaic project development -- a solar project's right to produce solar renewable energy certificates and a customer's right to net meter -- reach their end.  With the Massachusetts SREC II and net metering programs ending, new solar energy projects face diminished and uncertain financial incentives.

Massachusetts has made a strong commitment to solar energy.  The Commonwealth met its original goal of 250 megawatts of solar power installations four years early, then set a new goal was set of 1,600 MW by 2020. As of May 2015, over 841 megawatts of solar capacity had been installed in Massachusetts.

As the Solar Energy Industries Association has noted, "The Massachusetts market is driven by net metering, a renewable portfolio standard with a solar goal along with an accompanying SREC market."  The Massachusetts Clean Energy Center seemingly agrees, listing net metering and SRECs as two key "production-based incentives and benefits" for solar system owners.
The Massachusetts Department of Energy Resources ran its Solar Carve-Out II, or SREC II, program from April 25, 2014 to February 5, 2016.  The DOER described the program as designed to support the market until 1,600 megawatts of photovoltaic capacity has been installed statewide.

But that limit has been reached, counting the 653.8 megawatts of PV capacity installed under the Department's SREC I program (which ran from 2010-2014), additional capacity installed under SREC II, and over 600 megawatts of additional projects having reservations filed for the remaining SREC II program capacity.  The practical effect is that new projects will not likely be able to participate in the SREC II program.  This removes a key incentive for Massachusetts solar development.

The other Massachusetts solar promotional program reaching its limit is the Commonwealth's net metering program.  Under net metering, customers of certain electric distribution companies who generate their own electricity may offset their electricity usage.  Effectively, the retail meter spins forward when the customer uses electricity from the utility grid, and it spins backward when the customer generates excess electricity.

Massachusetts law requires each distribution company to maintain net metering caps equal to 4% of the company’s highest historical peak load for private net metering customers, and another 5% for municipal or public entities.  Once an electric distribution company fills its net metering caps, it can no longer allow customers to take service under its net metering tariff.  National Grid has reached its cap in its service territory, with other service territories close to full.  If net metering is not available to Massachusetts customers, it will remove another incentive that has supported significant growth in the state's solar sector in recent years.

In 2015, several pieces of legislation were proposed to lift the net metering caps, but no bill respecting net metering passed both the House and Senate.  The House measure contained provisions including a shift from retail rate compensation for net metering to a wholesale rate for most systems after the 1,600 megawatt target is met, authority for utilities to impose a minimum bill charge on net metering customers after the target is reached, and increased opportunity for utility ownership of solar.  A 2014 effort to lift net metering caps and reform solar policy similarly died.

But with significant interest in solar, from citizens and communities to the Commonwealth, U.S., and even the United Nations following the 2015 Paris Climate Agreement, how will Massachusetts react to the end of its SREC II and net metering programs?  Will a third effort to increase net metering work?  What will the Department of Energy Resources offer as a successor to the Solar Carve-out II SREC program?

Massachusetts solar power goal reached, expanded

Massachusetts has surpassed its goal of being home to 250 megawatts of installed solar energy capacity four years early.  Governor Deval Patrick's administration and the state legislature have adopted a series of policies favoring the development of solar energy, including a target of reaching 250 MW by 2017.  Last week the administration announced that this goal had already been reached, and established a new goal of 1,600 MW by 2020. 

Solar power in Massachusetts has grown significantly in recent years.  In 2007, the Commonwealth hosted just 3 MW of solar capacity.  Since then, Massachusetts has adopted a variety of incentives for renewable power production.  Chief among these is the Renewable Portfolio Standard (RPS) Solar Carve-Out program.  State law currently requires utilities to source up to 400 MW from in-state solar photovoltaic projects.  Utilities purchase solar renewable energy certificates, or SRECs, representing the environmental attributes of electricity produced by qualified projects.  These SRECs come in addition to the actual power produced by projects, and carry a premium value over other renewable attribute products.  State laws such as the 2008 Green Communities Act have provided additional incentives, including technical assistance and financial support for solar development.

Given current policies and market dynamics, solar power in Massachusetts will likely continue to grow.  While the bulk of newly installed capacity is likely to be in the form of distributed generation (as opposed to very large-scale utility installations as are under development in the desert Southwest), Massachusetts will continue to see projects ranging from residential rooftop-scale to close to 10 MW.  Reaching 1,600 MW within the next seven years will be a challenge, and may depend on continued policy support and market trends, but the recent rate of growth and relative enthusiasm suggest this may be possible.