Massachusetts Department of Energy Resources (DOER) Commissioner Mark Sylvia recently shared the DOER’s most recent developments regarding its SREC II program with a packed house at the recent Electricity Restructuring Roundtable on Solar in New England and California. The official draft has not been published for the public, but is expected to be filed any day now. Here’s what you need to know.
- SREC-II Policy Objectives: Unchanged
The overall policy objectives remained unchanged under this most recent draft. The DOER’s main goals are still to provide sufficient economic support, control ratepayer costs, and create competitive, robust, and progressive market conditions that will maintain and expand PV installations in Massachusetts to reach Governor Deval Patrick’s 1600 MW goal by 2020. The most significant updates and changes to the original SREC-II draft regulations came instead in the announcement of the key design features, which will drive the structure of the SREC-II Program.
2. SREC-II Key Design Features: Unchanged
With the new draft, the Program Cap remains s at 1600 MW minus the capacity reached in SREC-I by June 30, 2014. In addition, projects will still be eligible to generate SRECs for 10 years (40 quarters), and incentives will decline over time through a set 10-year forward schedule of Auction Prices and ACP rates. Projects will then have 10 years of eligibility to generate Class I RECs (eligible resources for Class I RECs include not only solar PV, but also solar thermal, wind, new hydroelectric facilities, landfill gas, ocean thermal, wave or tidal energy, etc.) following their 10 years of eligibility under SREC-II. In addition, the Compliance Obligation and Minimum Standard will be set in regulation for 2014 and 2015, and calculated annually thereafter based on actual and projected supply, and constrained by Cumulative Installed Capacity Targets. These updates remain unchanged from previous stakeholder meetings, but are still key elements to the design.
Figure 1. Auction Price and ACP Rate Schedules
3. SREC-II Key Design Features: Changed
SREC Factors remain a vital design feature in the SREC-II program to provide differentiated financial incentives based on market sectors; however, the market sectors have been condensed and simplified in the newest draft regulation. The SREC Factor for the residential sector has been increased to 1.0. The Managed Growth Sector will no longer be structured and set by a competitive solicitation and will instead have a fixed SREC Factor of 0.7. Qualifications for the Managed Growth Sector will still be limited to a certain amount of capacity in the form of Annual Blocks, which will be made available on a two year forward schedule set by the DOER and informed by the Cumulative Installed Capacity Targets. In addition, the DOER will conduct an evaluation in 2016/2017 to accommodate market and policy changes. The market sectors are set out below in Figure 2.
Figure 2. Market Sectors and SREC Factors
In addition, Forward Minting has been eliminated and, instead, the residential direct-ownership market will be addressed with a financing program, initially funded using ACP funds. The DOER plans to announce the expected features of this financing support program in parallel with the SREC-II rulemaking. They expect this program will need to be supported by $20-50 million in loans annually at the start of the program, and $300-600 million cumulatively through 2020, which will provide a significant opportunity for the financing/banking industry to get involved as the ACP funds diminish.
The RPS Class I regulation for the SREC-II program is expected to be filed any day now. Following the filing, a rulemaking period will commence which includes a Public Hearing and comment period in January, followed by review by the Joint Committee. The DOER projects the SREC-II program rules to be promulgated before the end of Q1 2014.
Sol Systems will continue to track the progress of the SREC-II regulation and will post any updates to our blog. Developers interested in financing options for commercial Massachusetts solar projects can contact our project finance team at email@example.com or (888) 235-1538 ext. 1. Our team is happy to discuss your project with you and assess financing opportunities. Solar installers with customers in need of SREC options in Massachusetts can contact our SREC services team at firstname.lastname@example.org or (888) 235-1538 ext. 1.
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Sol Systems is a boutique financial services firm that offers investor clients direct access to the solar asset class and provides developers with sophisticated project financing solutions. Founded in 2008, Sol Systems focuses on meeting the most critical needs of the industry, including SREC monetization, capital placement, tax equity, and New Market Tax Credits. To date, the company has facilitated financing for thousands of projects and facilitated hundreds of millions in investment on behalf of Fortune 100 companies, private equity, family offices and individuals.
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