Less than two months after Massachusetts unveiled the SREC-II solar incentive program, big utilities and developers are back at the table to push for a new deal. Stakeholders congregated at the Federal Reserve Bank of Boston on Wednesday, June 11th, to broker a stable and sustainable agreement addressing the state’s two biggest policy incentives: net metering and the Massachusetts solar renewable energy credit (SREC) market.
The Massachusetts Department of Energy Resources (DOER) led the negotiations among the Solar Energy Industries Association (SEIA) and the state’s dominant utilities, National Grid and Northeast Utilities. The meeting resulted in a compromised agreement that will hopefully be translated into proposed legislation to be presented to the TUE Committee.
The agreement rests on five pillars:
5 Pillars of the Proposal
- Solidify PV Goal: Memorialize Governor Deval Patrick’s 2020 1,600 MW PV goal and modify the framework to provide a less volatile program.
- Incentive: A new incentive structure would replace the current SREC-II program with a program similar to California’s tiered rebate program and New York’s proposed Megawatt Block Program. This will include Performance Based Incentives (PBI), a fixed $/kWh payment based on production, that will step down over time to reflect the drop in solar costs over the period. The PBI program is expected to last for 15 years.
- Net Metering: This agreement proposes removing the current 3% cap on net metering (NEM) thus getting rid of the uncertainty developers currently face and providing greater stability surrounding net metering policy through 2016.
- Minimum Bill Floor: The utilities may be vindicated as well since the proposal will impose a minimum bill to compensate for the previously unaccounted transmission and distribution infrastructure charges which, as claimed by the utilities, put financial pressure on the rest of the consumers. Imposing this cost on all ratepayers will be a sign of equality in sharing these costs. The minimum bill floor is not an additional cost or charge, but rather a floor that a ratepayer’s bill will not go below.
- Virtual Net Metering: Lastly, this proposal will further bolster the virtual net metering (VNM) cause by allowing for virtually net metered projects to receive rates similar to private Class III (equal to transmission, transition and supply charges). Projects are further classified and capped at 2 MW for priority projects (classified by an approved list of off-takers), 1 MW for private projects and 5 MW for projects on landfills.
What Does this Mean for the Massachusetts Solar Market?
The compromised agreement addresses many of the outstanding questions and development hurdles many solar developers and stakeholders are experiencing through the current market’s structure, most notably regarding the net metering cap; however, concerns with this potential structure still exist. One of the concerns surrounding this legislation is the establishment of a minimum bill floor, which compensates utilities for distribution charges that are, according to the utilities, not being currently accounted for. Establishing a minimum bill floor might direct the responsibility for this cost solely on solar facilities in the future, as the minimum bill floor will likely only come into play if a customer offsets enough of their electricity bill and it falls below the minimum charge.
A second concern is the establishment of a completely new incentive program structure. The SREC-II program was finalized less than two months ago, and as it currently stands, the new SREC-II program is likely to stabilize in the near future. The creation of a completely new incentive structure may cause an unnecessary disruption to an already stable market.
Under the proposal, the new program would open on July 1st, 2015 and will be fully implemented by January 1st, 2016. Developers can choose between the existing SREC program and the newly proposed PBI structure between those dates. Previously awarded SREC I & SREC II programs will be grandfathered.
Sol Systems will continue to track the progress of this proposal. The Sol Systems project finance team can help provide developers with feedback on their current projects, and our SREC team can work with owners, installers, and developers to monetize SRECs. Please contact our project finance team at email@example.com or (888) 235-1538 ext. 2 to see how Sol Systems can provide financing and SREC contracts for Massachusetts solar projects.
About Sol Systems
Sol Systems is a renewable energy finance firm that provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. Founded in 2008, Sol Systems focuses on meeting the industry’s most critical solar financing needs, including tax structured investments, capital placement, debt financing, and SREC portfolio management. To date, the company has facilitated financing for thousands of distributed generation solar projects and hundreds of millions in investment on behalf of Fortune 100 corporations, utilities, banks, family offices, and individuals. For more information, please visit www.solsystemscompany.com.