Markets Archives - Sol Systems

Mexico’s Energy Reform: Retreating from Private Energy Markets

Policy | 29 Oct 2021

By Andrew Gilligan and Ricardo Tamez

Mexican lawmakers are close to dismantling the national renewable energy market by acting to pass a constitutional reform proposal that would fundamentally change the Mexican national power sector leaving renewable energy buyers and developers with nowhere to turn. The proposal would devastate the energy market in the eleventh largest economy in the world.

Despite increasing corporate and consumer demand for new Mexican renewable energy, the current administration is pushing hard to pass the constitutional proposal. In essence, the proposal would renationalize the Mexican power industry and set Mexico on a backward slope, potentially erasing decades of progress in its journey to clean energy.

Current Mexico Market

In 2014, Mexican energy reform policies, while not perfect, opened the door for private energy firms to participate in the power sector. It created a wholesale market, independent system operator (ISO), and created one of the most competitive global solar markets – largely driven by corporate and customer demand.

Yet, after the election of President Andrés Manuel López (AMLO), the 2014 energy reform policies have been re-branded as a threat to the state-run electricity utility - Comisión Federal de Electricidad (CFE). It is becoming increasingly clear that AMLO is prioritizing state-owned enterprises and their legacy fossil fuel supply over a competitive Mexican energy economy. A position strongly supported and advocated for on behalf of Mexican fossil fuel monopoly and utility giants, Pemex and CFE.

Energy dominance is part of AMLO’s “Fourth Transformation” (4T) plan focused on returning economic power to the state, and as some experts have observed “change [or threaten] the very nature of Mexican identity.”[1] As a result, anti-renewable actions continue to mount, for example Executive Actions from May 2020 solidifies AMLO’s position. Shortly after AMLO was elected, the renewable energy auctions were cancelled, and it became increasingly clear that obtaining the national level permit for new renewable energy projects would be political in nature and increasingly difficult, often not possible.

Yet, one positive area of growth in Mexico has been the Generación Distribuida (DG) segment of the market – where installations less than 500 kW could receive accelerated net metering and interconnection approval. There is very strong customer demand for DG resources given both increased corporate sustainability targets and the growing concerns over rising national electricity rates.

Nevertheless, AMLO took executive action that limited large-scale solar development in favor of state-run fossil fuel entities. Yet, the Mexican Judicial branch has consistently denied his attempts to make unilateral change calling them unconstitutional. Some view the Mexican legal system as the key source of hope for the renewable energy industry during AMLO’s 6-year term limited presidential term. This hope was somewhat bolstered when during the Mexican mid-term elections AMLO’s political party - Movimiento Regeneración Nacional (MORENA) - lost several seats, although MORENA still performed well at the state level.

The New Energy Reform

The AMLO administration proposed the current Energy Reform at the beginning of October 2021, making an unprecedented attempt to renationalize the power industry, likely crippling the country’s clean energy transition and economic growth for years to come. This is evidenced by administration’s plans to table discussions on decommissioning fuel oil burning power plants, and the intention double-down on the use of PEMEX oil for power generation. This is coming from information in the energy ministry’s 2020-2024 development plan[2]. Similarly, Mexico’s increased focus on coal to generate electricity and AMLO’s acknowledged “fascination with fossil fuels” leave little doubt as to the goals and consequences of the proposed changes.

This proposed new energy reform would impose restrictions on private participation that are even more stringent than the state of the Mexican power sector prior to the 2014 Energy Reform. The proposal would make it illegal for private companies to directly procure power or self-supply energy.[3] The actions would make Mexico’s generation mix both dirtier and less reliable, likely leading to more rolling blackouts and brownouts already causing issues as energy supply growth stalls and electricity prices continue to increase.

Deeper Dive on What the New Energy Reform means?

Source: Data from Consejo Coordinador Empresarial

The new energy reform targets articles 25, 27, and 28 of the Mexican constitution with the goal of reinstating state monopoly in the electricity sector by substantially changing these sections. The reforms would re-vertically integrate the national utility CFE, folding in the CRE (the energy regulatory commission) and CNH (oil regulator) into SENER (the Cabinet Department for energy), and folding CENACE (the independent system operator) into CFE. Under the new reforms, the Wholesale Electricity Market (MEM) would be effectively eliminated as CFE would oversee dispatch, determine transmission /distribution tariffs, and all pending and existing permits for large scale generation would be cancelled along with agreements made by the public sector to purchase electricity.[4] The natural concern is that the new energy reform would remove most all independent regulatory checks and any semblance of a fair marketplace.

Moving forward, CFE would be constitutionality entitled to always generate at least 54 percent of Mexico’s electricity– theoretically leaving up to 46 percent for private generation, but there is no clear way or mechanism for private generation to sell electricity, and it is hard to imagine how investors and developers will have confidence to invest in new renewable projects given this uncertainty and CFE’s discretionary power over any project.

The proposal also ends the clean energy certificates (CELs) program – the Mexican equivalent of renewable energy credits (RECs) – a further blow to any type of market structure or incentive that would support Mexico’s renewable energy targets.

Generación Distribuida (DG)

It is still unclear how distributed generation (DG) would be affected by this proposal. The text o the energy reform does not explicitly target DG, but it does propose cancelling all private generation contracts. Given the Administration’s primary focus on eliminating the larger self-supply private generation contracts (as opposed to rooftop distributed generation) combined with previous support from CFE for DG, it could be interpreted to mean that 500 kW and smaller systems will not be substantially impacted. However, the language canceling private generation contracts potentially creates uncertainty around DG too - which will put many DG investments in limbo and make it more difficult to confidently develop DG projects. Even if DG is initially unaffected, significant growth could lead to future action from the administration.

Rooftop Solar in Mexico eliminates approximately 1.3M tonnes of CO2 annually according to SENER[5] and has the capacity to increase given strong customer demand and a well-established industry. This too is threatened by this Energy Reform.

Mexican Legislative Outlook

It is hard to understate how drastic the new energy reform proposes are and how many projects, companies, and individuals the reforms would negatively impact. While on its face, the legislation lacks the two-thirds majority support it needs to pass, AMLO has increased pressure on the Partido Revolucionario Institucional (PRI) party, the party that first nationalized the oil and gas industry, in an attempt to garner enough votes.[6] According to people close to Mexican political leaders, there is an increasing sense and concern that some version of the new reform will likely pass.

What This Means

We expect a vote will happen before December. If any version of the reform passes, it seems realistic to expect that:

These actions violate the USMCA and will likely lead to reprisals not only from private firms, but from the US and Canadian governments as well.[7]
This move would put at least $45 Billion USD of projects in jeopardy and may be considered expropriation of these projects under international law.[8]
Mexico has set targets of reducing green-house gas emissions by 36% by 2030 through the Paris Climate Agreement. This energy reform likely eliminates any realistic scenario of achieving this given Administration prioritization to date.
Power will be more expensive; CFE solar is already is 3x more expensive than that from the private sector according to data CRE.[9]
For corporations, the dirtier and more expensive power comes with a third strike-it comes in clear contravention to their COP26 Goals.
This is projected to be devastating for the Mexican economy as seen in a study conducted by the Consejo Coordinador Empresarial, the renewable energy industry has the potential to increase the Mexican GDP by $748 million USD by 2024, generate nearly 288,000 direct, long-lasting jobs, mitigate 55 Mt of CO2 equivalents, and generate massive savings for Mexican businesses and consumers.[10]

Moving Forward

If passed, the new energy reform proposal will negatively impact Mexico, international climate, clean energy, trade, and corporate interests for the US and US actors as well. The reforms will likely trigger many renewable energy firms to exit the Mexican power market and would hamper the ability for corporations and investors to meet clean energy and sustainability goals in Mexico. Renewable energy is a global growth engine that can fuel economic and community recovery and growth.

[1] https://mexicoelections.weebly.com/op-eds/a-pivotal-election-for-amlo-and-his-fourth-transformation

[2] https://www.argusmedia.com/en/news/2114825-mexico-aims-to-boost-fuel-oil-in-power-generation

[3] https://www.animalpolitico.com/elsabueso/cfe-energia-barata-limpia-reforma-electrica/

[4] https://www.bloomberg.com/opinion/articles/2021-10-12/under-lopez-obrador-mexico-s-energy-grid-risks-fading-to-black

[5] https://www.nrel.gov/docs/fy18osti/71531.pdf

[6] https://elpais.com/mexico/2021-10-06/la-reforma-electrica-de-lopez-obrador-abre-una-grieta-en-el-pri.html

[7] https://www.jdsupra.com/legalnews/2021-mexican-constitutional-reform-bill-6763325/

[8] https://www.wsj.com/articles/mexico-american-assets-obrador-amlo-energy-11634496785

[9] https://datos.gob.mx/busca/dataset/memorias-de-calculo-de-tarifas-de-suministro-basico

[10] Estudio De Energías Limpias En México 2018-2032. Consejo Coordinador Empresarial. https://amdee.org/Publicaciones/EstudiodeEnergiasRenovablesenMexico2018a2032_v16.pdf

Sol SOURCE: State Markets and Solar Chatter – Q2 2020

Policy | 28 May 2020

By The Sol Systems Editorial Team

Click here to access the web edition of The Sol SOURCE Q2 2020.

The Sol SOURCE is a quarterly journal that our team distributes to our network of clients and solar stakeholders. Our newsletter contains trends and observations gained through quarterly interviews with our team, and it incorporates news from a variety of industry resources.

Below, we have included excerpts from the Q2 2020 edition. To receive future Journals, please subscribe or email SOURCE@solsystems.com.

STATE MARKETS

New Jersey - On April 30, 2020 the New Jersey Solar Renewable Energy Credit (“SREC”) program closed and the New Jersey Board of Public Utilities (“BPU”) shifted solar projects to a temporary, transition incentive program (“TREC”). In the coming months, we expect the BPU to continue taking comments from the solar industry and other interested parties to ensure a smooth transition from the legacy SREC program to the new TREC program. Solar projects that did not receive PTO by April 30, 2020 will automatically rollover into the new TREC program, and new projects will be able to enter the transition program until a successor program is finalized.

While the transition program will provide short-term stability, the solar industry is still awaiting the BPU’s proposal of a long-term successor program. Sol, along with many others in the industry, continues to engage with other industry partners and with the BPU on the implementation of the TREC program and the proposal of a long-term successor program and will provide update and clarity as possible.

Massachusetts - On April 15, 2020, in response to the results of the 400 MW Review of the Solar Massachusetts Renewable Target (”SMART”) program, the Department of Energy Resources (“DOER”) issued an order both expanding the program to 3,200 MW and altering some important program features. While the expansion of SMART is great news, certain alterations have caused concern in the industry.

One of the most concerning revisions proposed by DOER is the 250% increase of the greenfield subtractor. This proposed change has many in the solar industry questioning if this too high of an increase, one that could impact project economics. An additional source of concern is the requirement that, unless otherwise exempted, all projects over 500 kW should include a storage component.

Overall, DOER’s proposed changes will alter how solar developers approach Massachusetts. The state held a virtual hearing on the proposed changes on May 22 and particular concerns should be shared with DOER through formal comment due June 1. Sol Systems will continue to engage and provide updates as the program revisions progress.

Illinois - For those active in the Illinois market, there is much to track. On the legislative side, the industry is working on a solution that would expand and provide additional funding for the Adjustable Block Program (“ABP”). Without an extension of the APB, new in-state solar projects could come to a halt.

On the regulatory side, Ameren filed a petition with the Illinois Commerce commission asserting that distributed solar capacity has reached three percent. However, many in the solar industry argue that Ameren’s calculation is flawed and have appealed the commission.

Specifically, if Ameren indeed reached the 3% threshold, it will trigger a review of their net metering compensation rate. Once net metered volume hits 5% the compensation rate will change. Sol will continue to track the Ameren proceeding and any legislative developments.

SOLAR CHATTER

The Solar Energy Industries Association (SEIA) has been hard at work finding federal solutions to COVID-19's impact on the industry, as well as working on the state level to ensure permitting, construction, and other essential activities continue to keep solar infrastructure projects moving forward. The organization has launched a COVID-19 resources webpage for solar companies.
In spite of efforts to retain renewables jobs during the COVID-19 crisis, an estimated 106,000 U.S. clean energy employees went out of work in March, with current predictions warning that the number could rise to as high as 500,000 by the end of June. These job losses come as the entire country and much of the world adapts to the drastic changes made in society to combat this virus.
There has been a measurable drop in carbon emissions from data recorded during mass stay-at-home orders, as many cars have been kept off the roads and planes out of the sky. Scientists have predicted a 6% global drop in energy demand for 2020, the equivalent of the energy demand of India.
As scientists have warned for years, the measures taken to combat climate change may need to be equally drastic in scope to those taken for COVID-19, and if the crisis has proven anything, it’s that the world is willing to make changes when convinced of a distinct and present danger. As we think ahead of what a post-COVID world may look like, the potential to institute massive change to turn the tides on climate change could emerge, if the climate change movement strikes while the iron is hot.
Although solar construction has been deemed essential in states like Illinois, much of the work needed to make progress on projects is halted by the absence of roles that have not been deemed essential, such as land surveyors. Our team has dug deep into the issue in a recent blog post.
For a record 40 straight days, renewable energy sources have generated more electricity than coal in the United States according to the Institute for Energy Economics and Financial Analysis (IEEFA). The IEEFA noted the possibility that renewable energy could exceed coal for the first time ever this year on an annual basis.

ABOUT SOL SYSTEMS

Sol Systems, a national solar finance and development firm, delivers sophisticated, customized services for institutional, corporate, and municipal customers. Sol is employee-owned, and has been profitable since inception in 2008. Sol is backed by Sempra Energy, a $25+ billion energy company.

Over the last ten years, Sol Systems has delivered 800 MW of solar projects for Fortune 100 companies, municipalities, universities, churches, and small businesses. Sol now manages over $650 million in solar energy assets for utilities, banks, and Fortune 500 companies.

Inc. 5000 recognized Sol Systems in its annual list of the nation’s fastest-growing private companies for four consecutive years. For more information, please visit www.solsystems.com

Solving Price Volatility in Renewable Energy Wholesale Markets

Renewable Energy Procurement | 05 Nov 2019

By Utsav Adhikari

Clean energy resources like solar and wind energy are fast becoming the cheapest sources of electricity generation in the United States. Since 2009, the levelized cost of electricity dropped by 69% for onshore wind power and by 88% for solar power. The numbers and trends are more or less accepted as fact—itself a triumph in these Orwellian times. The accompanying benefits speak for themselves and have won over many former skeptics. Solar and wind are thriving in states that lean conservative, including the next five biggest state markets after California for installed solar capacity and four of the top five for installed wind capacity. The clean energy transition is well underway, riding on the twin tailwinds of necessity and value.

In jurisdictions with competitive wholesale electricity markets, the growing penetration of renewables poses challenges, not only to grid operators but to all market participants. The variable levels of output of wind and solar resources increase price volatility in the energy markets. This has already become a reality in ERCOT and may soon be the case elsewhere too. Solar and wind projects are also increasingly exposed to this merchant power price volatility due to shortening PPA terms and offtake structures that put some price risk on the projects.

For someone unfamiliar with the mechanics of wholesale electricity markets, it may not be immediately apparent why adding greater volumes of cheaper resources, especially zero marginal cost resources like wind and solar, does not always depress power prices. The answer to the bi-directional volatility in prices lies in the operational attributes of other non-variable generators in the system.

A system with high renewables penetration is susceptible to fluctuating levels of output from wind and solar plants. Here, seasonal or day-to-day variability is perhaps less important than intra-day variability. If it is sunny and windy one day but cloudy and calm the next, it is still more predictable than a scenario where wind speeds suddenly drop off or cloud cover develops rapidly over some large solar plants. A week-long heat wave consistently pushed weekday peak prices above $1,000/MWh in ERCOT during the week of August 12, but prices truly spiked and reached the mythical $9,000/MWh cap when wind generation levels suddenly plummeted.

When faced with sudden shortfalls in generation, grid operators signal other non-variable resources to ramp up their production and make up for the lost generation from the renewable resources. Before the advent of solar and wind plants, supply-demand imbalances usually occurred when load increased or decreased rapidly. Generators that adjusted their production accordingly were called load-following generators, compared to baseload plants which churned out a steady amount of power regardless of the load profile.

However, ramping production up or down is not optimal for all conventional generators and adds more costs to their offers, thereby raising clearing prices. Furthermore, such generators face more wear and tear when they are forced to cycle more frequently than they were designed to, adding more maintenance costs over time. Further compounding this issue is that as more conventional generators retire, they are replaced by either variable renewable resources or combined cycle gas plants (which are not designed to ramp frequently), the very resources pushing them into retirement.

Owners/operators of coal plants and other older thermal generators complain about subsidized renewables driving their plants to retirement, but in truth the blame remains within the fossil fuel industry.

The efficiency of modern combined cycle gas plants, together with the shale revolution in the United States, which has drastically lowered natural gas prices, are primarily responsible for pushing market prices down and making coal, nuclear, and older thermal plants uneconomic. As those resources retire over time, and given the current trends of new generator build-out, combined cycle gas plants will form more and more of the supply curve. As the supply curve flattens as a consequence, the negative price impact from a rightward shift along the curve resulting from increased demand should get smaller. However, dynamic markets are also likely to see numerous other trends collide over the time horizon during which this effect plays out. Utilities exposed to price volatility may place greater emphasis on demand response and electrical vehicle charging programs. Generators are also continually adapting to market trends in their operations and asset management practices that help them capture incremental gains. Such market responses have the potential to mitigate volatility, but perhaps not to the extent that most market participants desire.

An obvious solution to managing the volatility caused by variable wind and solar is batteries. Indeed, large hydro plants have been tamping volatility for grid operators for some time, especially in the Pacific Northwest. These plants effectively simulate the functionality of batteries by adjusting their dams and the subsequent flow of water, which in turn generates electricity more responsively. Battery storage systems can rely on both charging and discharging modes to help ramp up or ramp down as long as there is sufficient storage capacity scattered strategically across the grid. As grid operators become more familiar and comfortable with the software controls, operational range, and capability of batteries, they can rely on batteries to smooth variable generation, regardless of whether or not they are co-located with the solar or wind project.

For flexible grid-scale storage to be operational reality, market prices must provide the incentives to invest in these resources. Although FERC’s Order No. 841 addresses opportunities for storage resources to participate in wholesale markets, grid operators must also continue to reform how market pricing is determined. The value of the flexibility provided by batteries should be reflected in market prices to ensure that price signals incentivize investments in storage, whether as a standalone or a co-located resource. Again, FERC has recognized this and directed PJM and NYISO to revise their price formation procedures to accommodate fast-start resources. Continued evolution of these procedures as the penetration of renewables increases would accelerate the deployment of wind and solar deployment in the least disruptive manner possible.

This is an excerpt from the Q3 2019 edition of The SOL SOURCE, a quarterly electronic newsletter analyzing the latest trends in renewable energy development and investment based on our unique position in the solar industry. To receive future editions of the journal, please subscribe.

ABOUT SOL SYSTEMS

Inc. 5000 recognized Sol Systems in its annual list of the nation’s fastest-growing private companies for four consecutive years. For more information, please visit www.solsystems.com

Is Residential Solar Down for the Count?

2017 | 20 Jul 2017

By Lauren Miller

Reflecting on 2017 so Far

2017 has been an interesting year so far for the solar industry, but then again, when is it not? According to the latest Solar Market Insight report, residential solar build slowed ever-so-slightly in 2017 compared to Q1 2016 numbers; 2,044MW were installed in Q1 of this year, a 2 percent decline year-over-year from 2016 levels. While 2 percent is small overall for an industry that has had an average annual growth rate of 68 percent over the last 10 years (and you can’t sustain those growth numbers forever), what is notable is that the residential market fell 17 percent over Q1 2016 numbers, and 2016 was already a slower year for residential growth than 2015, growing by 19 percent compared to 2015’s records setting 66 percent.

What gives? Is the residential market down for the count? Industry press would have you thinking so, but we think it will come back around. Here’s why.

Residential Growth

The solar industry, like many other industries, goes through cycles of growth. Back in 2014, all eyes, including ours, were on the residential market.8 SolarCity’s stock was through the roof, trading above $80, and even SunEdison was interested in residential. In 2015, it tried to acquire Vivint (though that didn’t turn out so well. We even saw residential outpacing the C&I sector in 2014, when 1,231MW were installed compared to 1,036MW in the C&I space according to GTM’s Solar Market Insight report’s annual state data.

In 2015, residential experienced the largest annual growth rate yet and outpaced C&I again with 2,099MW of residential compared to non-residential’s 1,011MW. This marked the fourth consecutive year of greater than 50 percent annual growth, marking a threefold increase in the residential solar market from four years prior. Even in 2016, which saw a lull in year-over-year growth, residential outpaced non-residential with 2,583MW compared to 1,586MW. This growth is particularly remarkable considering the average size of a residential system in the U.S. is 5kW, so 200 systems need to be sold for every C&I developer’s one 1MW project.

Policy Changes Drive Uncertainty

The notion that the residential sector would maintain a greater than 50 percent annual growth rate forever is impossible, if not unsustainable. It would be foolish to think otherwise. Look at the example of the cellphone, which is the most quickly adopted consumer technology in history. From 2004 to 2013, ownership grew from 65 percent to 91 percent in the United States. Solar has a long way to go before it hits market penetration like the cell phone.

Additionally, past a growth rate like that being unsustainable, the threat of the investment tax credit (ITC) expiration at the end of 2015, caused residential companies to rush and sell systems that would qualify for the 30 percent credit. This inflated build rates. In 2016, after the ITC extension, we began to see a lull as the threat of losing out on the tax credit became less imminent.

However, it’s not only the post-ITC extension lull, that has slowed the residential market. Regulatory and policy changes in key state markets contributed by creating uncertainty. For example, California restructured its net metering under NEM 2.0, Nevada had its own highly publicized debacle, SREC prices started to fall in Maryland, and Massachusetts began transitioning away from its SREC II program to the new SMART program. These factors have driven uncertainty in key markets, and contributed to slower residential growth year over year.

Aside from policy changes, like any new technology, solar will be subject to what sociologist Everett Rogers refers to as the diffusion of innovations curve. Under Rogers’ theory, adoption is led by innovators, then followed by the early adopters, and then the early and late majorities which tend to be the drivers of massive growth followed by a leveled-off growth pattern of laggards. We have seen this pattern in California – which fell 30 percent year-over-year according to GTM. The state’s residential market has gone through these stages and has begun to start leveling off…for now.

Outlook

Nonetheless, we’re optimistic about the future of solar in emerging markets such as Illinois, which is required to install at least 338MW of residential solar (<10kW) by 2030 under the recently enacted Future Energy Jobs Act (not to mention the potential 1.08GW of utixlity-scale, 1.01GW of C&I, and 270 of discretionary and brownfield MW, totaling around 2.7GW overall that will be needed by 2030 to meet the requirements). Mature residential markets such as New Jersey have remained strong, while new state markets began to emerge in Utah, Texas, and South Carolina.

As these new markets emerge, we feel optimistic about the national outlook of the residential market despite current net metering battles in higher penetration states (and even not-so-high penetration states). In fact, even if the Suniva trade petition is taken up, residential market may be the market sector hit the least, while utility-scale, which has been the “hot” market sector fueled by post-ITC-extension project spillover, may be affected the most. Indeed, the tables may turn again.

Conclusion

As always, don’t believe the hype. We’ve seen a slowdown in key markets such as California, and debate over rate design does create uncertainty and affect growth, but that does not mean the sky is falling. The solar industry and the various market sectors – residential, commercial, and utility-scale - are subject to cycles of growth. However, the solar industry as a whole has continued to grow each year at an unprecedented rate, and even with this year’s slowdown, total U.S. installed PV capacity is expected to triple over the next five years. It’s also worth noting that solar ranked second in installed electric generating capacity in the U.S. during Q1 at 30 percent, behind only natural gas which at 41%. The pending trade case would certainly slow this growth, but if unsuccessful, the solar industry will continue its trajectory.

This is an excerpt from the July 2017 edition of The SOL SOURCE, a monthly electronic newsletter analyzing the latest trends in renewable energy based on our unique position in the solar financing space. To view the full Journal, please subscribe or e-mail pr@solsystems.com.

ABOUT SOL SYSTEMS

Over the last eight years, Sol Systems has delivered more than 600MW of solar projects for Fortune 100 companies, municipalities, universities, churches, and small businesses. Sol now manages over $650 million in solar energy assets for utilities, banks, and Fortune 500 companies.

Inc. 5000 recognized Sol Systems in its annual list of the nation’s fastest-growing private companies for four consecutive years. For more information, please visit www.solsystems.com.

SREC II Strikes Back: Massachusetts DOER Announces Extension Details

2017 | 27 Mar 2017

By Kate Brandus

After months of regulatory uncertainty, the Massachusetts Department of Energy Resources (DOER) finalized the MA SREC II extension details on Wednesday, March 22. This decision provides much-needed certainty to the #7 solar market in the country as it transitions from its incumbent SREC program to a new, tariff-based program, SMART.

Massachusetts Solar: A History

The MA SREC II program went into effect in April 2014. The program was designed to piggyback off the success of its predecessor, cleverly named SREC I. SREC II was originally designed to align with former Governor Deval Patrick’s 1600MW by 2020 goal. This goal was blown out of the water when the cap was hit in early 2016.

Over the past year, the DOER has worked tirelessly to design a new incentive program. But, unlike previous incentive regimes in Massachusetts, the new program, Solar Massachusetts Renewable Target (SMART), will not have an SREC component. A complete program redesign, unsurprisingly, takes time, and has created a disruption in the market. Developers had not been able to successfully “sell” or finance solar projects without color into project economics. This is why the announcement last week was so critical to getting the Massachusetts solar market back on track.

SREC II Extension Details

The decision on Wednesday finalized the details of the extension. Most importantly, it creates a definitive deadline for SREC II, and shares final SREC factors for the duration of the program. Read on to determine which SREC factors apply to your project.

As a refresher, the original SREC Factors for MA SREC II are listed in the table below.

Market Sector	Generation Unit Type	SREC Factor
A	1. Generation Units with a capacity of <=25 kW DC 2. Solar Canopy Generation Units 3. Emergency Power Generation Units 4. Community Shared Solar Generation Units 5. Low or Moderate Income Housing Generation Units	1.0
B	1. Building Mounted Generation Units 2. Ground mounted Generation Units with a capacity > 25 kW DC with 67% or more of the electric output on an annual basis used by an on-site load	0.9
C	1. Generation Units sited on Eligible Landfills 2. Generation Units sited on Brownfields 3. Ground mounted Generation Units with a capacity of <= 650 kW with less than 67% of the electrical output on an annual basis used by an on-site load.	0.8
Managed Growth	Unit that does not meet the criteria of Market Sector A, B, or C.	0.7

1) Projects that meet the below qualifications are eligble for the following SREC factor:

Received authorization to interconnect by January 8, 2017 or
The nameplate capacity of the system is over 25 kW and you demonstrate that the system’s interconnection is contingent upon receipt of notice of authorization to interconnect from the EDC by January 8, 2017

Market Sector	SREC Factor
A	1.0
B	0.90
C	0.80
Managed Growth	0.70

2) Projects that meet the below qualifications are eligble for the following SREC factors:

A nameplate capacity less than or equal to 25kW DC and received authorization to interconnect after January 8, 2017 or
A nameplate capacity greater than 25kW DC that receives an extension pursuant to MA 225 CMR 14.05(9)(s)4.a

Market Sector	SREC Factor
A	0.80
B	0.70
C	0.65
Managed Growth	0.55

3) Projects that meet the below qualifications are eligble for the following SREC factors:

If the project is greater than 25kW DC; has not received an extension prior to the release of this March 2017 guideline; is mechanically complete or authorized to interconnect by March 31, 2018, and receives an extension for good cause:

Market Sector	SREC Factor
A	0.70
B	0.60
C	0.55
Managed Growth	0.50

4) Projects that meet the below qualifications are eligble for the following SREC factors:

If the project is greater than 25kW DC; has not received an extension prior to the release of the March 2017 guidelines; is not mechanically complete or operational as of March 31, 2018, and receives an extension for good cause, the system is eligible for the following SREC factors:

Market Sector	SREC Factor
A	0.65
B	0.55
C	0.50
Managed Growth	0.45

What Happens Next?

Now that the MA solar industry has more certainty regarding its regulatory framework for the immediate future, the next step is the updated draft of the SMART program, which is expected to be released sometime in April. A public comment period will follow the release of SMART.

Note that if the effective date of the SMART program has not occurred by July 1,2018 the DOER reserves the right to further reduce the SREC factors for projects over 25kW DC.

Sol Systems applauds DOER for its efforts, and all the work its done to spur economic growth in Massachusetts. Today, Massachusetts has 14,582 solar jobs and has established itself as a national leader in solar energy deployment.

Stay tuned to our blog for more details to come on the SMART program.

ABOUT SOL SYSTEMS

Over the last eight years, Sol Systems has delivered more than 500MW of solar projects for Fortune 100 companies, municipalities, universities, churches, and small businesses. Sol now manages over $650 million in solar energy assets for utilities, banks, and Fortune 500 companies.

Inc. 5000 recognized Sol Systems in its annual list of the nation’s fastest-growing private companies for four consecutive years. For more information, please visit www.solsystems.com.

Tag: Markets

Mexico’s Energy Reform: Retreating from Private Energy Markets

Mexico’s Energy Reform: Retreating from Private Energy Markets

Current Mexico Market

The New Energy Reform

Deeper Dive on What the New Energy Reform means?

Generación Distribuida (DG)

Mexican Legislative Outlook

What This Means

Moving Forward

Recent Articles...

DC Greens: Building Impact Through a Sustainable and Resilient Food System

Infrastructure + Impact Spotlight: Q&A with Lynn Heller of Climate Access Fund

Overcoming the Interconnection Bottleneck

Sol SOURCE: State Markets and Solar Chatter – Q2 2020

Sol SOURCE: State Markets and Solar Chatter – Q2 2020

Recent Articles...

DC Greens: Building Impact Through a Sustainable and Resilient Food System

Infrastructure + Impact Spotlight: Q&A with Lynn Heller of Climate Access Fund

Overcoming the Interconnection Bottleneck

Solving Price Volatility in Renewable Energy Wholesale Markets

Solving Price Volatility in Renewable Energy Wholesale Markets

Recent Articles...

DC Greens: Building Impact Through a Sustainable and Resilient Food System

Infrastructure + Impact Spotlight: Q&A with Lynn Heller of Climate Access Fund

Overcoming the Interconnection Bottleneck

Is Residential Solar Down for the Count?

Is Residential Solar Down for the Count?

Recent Articles...

DC Greens: Building Impact Through a Sustainable and Resilient Food System

Infrastructure + Impact Spotlight: Q&A with Lynn Heller of Climate Access Fund

Overcoming the Interconnection Bottleneck

SREC II Strikes Back: Massachusetts DOER Announces Extension Details

SREC II Strikes Back: Massachusetts DOER Announces Extension Details

Recent Articles...

DC Greens: Building Impact Through a Sustainable and Resilient Food System

Infrastructure + Impact Spotlight: Q&A with Lynn Heller of Climate Access Fund

Overcoming the Interconnection Bottleneck

Explore sustainable energy solutions with Sol Systems

Explore sustainable energy solutions with Sol Systems