Sol Systems is currently offering 3 and 5-year SREC contracts for Massachusetts solar projects.

August has been a big month for Massachusetts solar, with the SREC auction clearing in the third round, and new legislation lifting the net metering caps.

Change has come to the Massachusetts solar market, but not in the way many were expecting.

Amid the controversy of this summer’s proposed changes to the Massachusetts solar market, a significantly scaled-back bill was presented and eventually enacted as an amendment to Senate Bill 2214. On the last day of the year’s legislative session, lawmakers raised the net metering caps for public and private solar projects and created a task force to study the state’s net metering policy.

Senate Bill 2214 raises the net metering cap for private solar projects from 3% to 4% of an electric distribution company’s peak load. For public projects the cap increases from 3% to 5%. The legislation will take 90 days from the date Governor Patrick signs the bill to go into effect. The enacted bill also created a task force charged with more closely examining the state’s net-metering policies, with the goal of recommending incentives or programs that drive the state towards the deployment of 1600 MW of solar generation. The 17 member task force will consist of representatives from the public sector, consumer advocates, solar industry associations, solar businesses, large energy consumers, and investor-owned utilities. The task force will first meet on October 1, 2014 and will report its analysis of the current net-metering policy and any recommendations for reform by March 31, 2015.

Implications for the Massachusetts Solar Market

The net metering cap increases significantly impact the development of commercial and industrial (C&I) solar capacity in Massachusetts. Residential will be largely unaffected, as customers with systems smaller than 25 kilowatts are not subject to the net metering caps. The temporary fix in the net metering caps will alleviate some of the pressure building up in the Massachusetts market due to regulatory uncertainty and various incentive bottlenecks.

Systems that generate electricity at one utility meter and sell those credits to another customer in the same utility territory (“virtual net metering”) must have a net metering allocation in order to operate and as a result have also been held back by the net metering cap. Virtual net metering allows solar developers to combine an ideal site for solar with a creditworthy host, even if those two entities are not located at the same utility meter. Virtual net metering overcomes challenges in developing a solar project and is key to helping MA reach its 1600 MW goal. However, qualifying for virtual net metering is only half the battle for a MA solar project.

Under SREC II, ground mount projects above 650kW using less than 67% of electricity on site with no other special qualifications fall under the Managed Growth sector, which is capped and has reached capacity for the foreseeable future. As a result the cap increases for virtual net metering will not help large ground mounts seeking to qualify for incentives in order to pencil (read more about Massachusetts SREC II and SREC Factors).

As of August 4th, the Cadmus Group, tasked with administering the system of net metering assurance, reported 107.9 MW of available capacity remaining out of 332.9MW of total capacity in the program. Providing historical peak load has not changed, we can use this figure to estimate the program’s new total capacity under the increased caps. We expect to see a new total capacity of 443.9MW and 554.8MW for private and public systems, respectively. Taking into account capacity already in service, allocated, or pending, the final total capacities available once the bill goes into effect will be 206.3MW for private offtakers and 234.5MW for public offtakers.

The difference of 1% in the cap raise between public and private offtakers goes a long way to correct the imbalance between those systems. Before the cap increase, nearly 90% of the available capacity went to projects with private offtakers. WMECO, NGrid-Nantucket, and NStar had several megawatts each available in the public sector; Unitil and NGrid had no capacity remaining. In fact, NGrid boasted a waiting list 25+MW deep. After the increase goes into effect, we expect to see significant capacity open up for public projects, though it will likely fill up much faster than the private cap, if current trends hold true. While public entities have attractive credit profiles that often form the basis for financeable deals, many investors, including Sol Systems, are interested in private commercial or nonprofit offtakers with solid financials as well (contact our team at 888-235-1538 x2 or finance@solsystemscompany.com). Developers that can access and serve this offtaker demographic will do well under the expanded cap.

An application for net metering allocation requires significant project milestones to be in place, including an executed interconnection services agreement (ISA), site control, and major permitting.  Developers interested in locking up the remaining allocations have the best chance of doing so if their project is fairly far along in development. Projects currently on the waitlist will have priority for new available capacity.

While significant structural issues remain in the Massachusetts market, this temporary fix will remove a few of the hurdles facing developers in the Nation’s #6 solar state. But solar stakeholders would be wise to view these changes as a short term solution, as the caps have only been raised slightly and will be reached again. Next year’s legislative session may see renewed debate and a return of the proposals considered this summer.

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.

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