Yesterday’s announcement from the Massachusetts Department of Energy Resources (DOER) may have taken some Massachusetts solar developers by surprise.
Immediately following the announcement of the allocations for the 2014 and 2015 Managed Growth capacity, commercial and utility scale solar developers across New England began counting down the days to when the 2016 capacity amount would be revealed. Developers had long awaiting the final figures for the DOER’s 2016 allocation, hoping they could fit their 650 kW+ solar projects into the Massachusetts solar program.
The countdown is now over, and the DOER has released their initial analysis and expectation for the Managed Growth Capacity Block for 2016. The final result is… 0 MW.
What is Managed Growth in Massachusetts and Why Does it Matter?
The Masschusetts SREC-II Program, promulgated in April, creates differentiated financial incentives for each market sector (“SREC Factor”) to level the playing field and make smaller projects more competitive with larger ones, as well as limit the development of large greenfield projects.
In sum, residential and rooftop projects receive a higher SREC Factor (0.9 or 1.0) than ground mount, landfill or brownfield projects less than 650 kW (0.8). For projects that do not qualify for any of the other market sectors (i.e. projects over 650 kW with less than 67% of the generation used on-site), the DOER created the Managed Growth Sector, which allocates a prescribed annual capacity based on how the other market sectors are expected to perform. The available capacity for the Managed Growth Sector in 2014 and 2015 was set prior to the start of the program, at 26 MW and 81 MW respectively. The 2016 capacity was the first to be calculated based on estimates once the program was underway.
The 2016 Managed Growth Sector’s available capacity was calculated as follows:
(2016 Annual Capacity Target) – (Total amount of capacity expected to be installed under Market Sectors A-C in 2014-2015 + Total Amount of Managed Growth capacity expected to be installed in 2014 and 2015) = (Available Capacity for 2016 Managed Growth Sector)
The net result of this calculation (361 MW – 388 MW) was -27 MW which translates into 0 MW as there cannot be a negative amount of available capacity.
Implications for Massachusetts Solar Development
The announcement caught a number of solar developers by surprise, as the Managed Growth projects they have been developing for a few months, or maybe even years, will no longer be eligible in 2014, 2015, and now 2016. Capacity allocation for years beyond 2016 is yet to be determined, but similarly will be influenced by a robust market for projects in Market Sectors A-C which may continue to significantly limit the capacity available for Managed Growth.
DOER’s announcement once again illustrates that there is never a dull moment in the Massachusetts solar industry. As we discussed earlier this summer, the uncertainty regarding the Massachusetts solar market is leading some solar developers and investors to flock to other promising state markets such as New York.
Still, there is hope for projects under 650 kW, and Sol Systems is especially interested in financing projects in the .8 factor, especially if they can be grouped into portfolios. For more information, contact our project finance team at firstname.lastname@example.org.
Meanwhile, the DOER is providing an opportunity for the public to comment on the 2016 Managed Growth allocation until 5:00 PM on Friday, August 29th . Comments can be submitted to DOER.SREC@state.ma.us. DOER will then review any comments received and release the final 2016 Managed Growth Block total on Tuesday, September 2nd. Sol Systems will continue to track the development of the 2016 Managed Growth Block and will provide updates on our blog.
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.