Future of Massachusetts Solar – After the 400 MW Program Cap

22 Mar 2013

Sol Systems met with solar developers, investors, and policymakers to discuss potential changes to the Massachusetts SREC market.

Sol Systems met with solar developers, investors, and policymakers to discuss potential changes to the Massachusetts SREC market.

Investors, developers, SREC aggregators, and other stakeholders in the Massachusetts solar market gathered at the State House today for meetings relating to the state’s RPS Solar Carve-Out Program. The Department of Energy Resources (DOER) sought public comment for two pivotal changes to the solar policy regime currently underway—the establishment of a post-400 MW solar program, and the ongoing rulemaking to address changes to regulation 225 CMR 14.00.

Policymakers noted the success of the Solar Carve-Out program in “aggressively growing solar installation and businesses in Massachusetts”, pointing to the rapid pace at which the state has neared Governor Deval Patrick’s goal of 250 megawatts of solar capacity by 2017. The latest DOER data from this month shows nearly 215 megawatts of solar capacity qualifying for the Solar Carve-Out Program, 195 megawatts of which is already operational. With this pace of growth, everyone is asking, “What will happen to incentives for solar development once current capacity meets the 400 megawatt cap of the Solar Carve-Out Program?”

In today’s meeting, the DOER detailed several objectives and potential policy directions, giving hints of what the Massachusetts solar industry can expect. Two primary policy options were discussed: the extension or revision of the current RPS Solar Carve-Out, or a central procurement program in which either distribution companies or a government entity would competitively solicit long-term contracts for SRECs. A feed-in tariff in conjunction with a central procurement program was also briefly mentioned. Numerous stakeholders in support of an extension of the RPS model expressed their preference for a second solar carve-out program, or “SREC-II market”. They urged the DOER not to increase the megawatt cap of the current program, citing the negative impact that retroactive changes would have on assumptions made in the financial models of projects already in the ground.

A theme of the day was the establishment of a “firm” floor price for SRECs deposited into the annual Solar Credit Clearinghouse Auction. While the DOER does not perceive itself to have the regulatory authority to implement such a floor, Massachusetts Bill H. 2915 has language pertaining to this issue; the Bill is currently under review by the Joint Committee on Telecommunications, Utilities, and Energy. Many stakeholders expressed that a firm auction floor price would bring more certainty to the market for project development. Others worried that this could shift annual compliance buying even further towards compliance year-end, and suggested quarterly compliance obligations on suppliers to ensure level SREC purchases throughout the year.

While from one perspective the policies and formulas that make up the Massachusetts solar market are elegantly designed and have led to rapid increases in total solar capacity, to many market participants the program can seem overly complicated and opaque, leading to uncertainty that undermines investment. To this end, stakeholders urged the DOER to aim for transparency, consistency, and simplicity in developing its post-400 megawatt solar policy.

The presentation from today’s meetings is available on the DOER’s website. The DOER is targeting summer 2013 for an official announcement of the ongoing policy framework. Stakeholders can submit written comments on the post-400 MW policy presentation until April 8th, as well as on the proposed regulatory changes to 225 CMR 14.00 by 5:00pm this Monday, March 25th. Please contact info@solsystemscompany.com or (888) 235-1538 (extension 1) with questions about the Massachusetts SREC market.

About Sol Systems

Sol Systems is a boutique financial services firm that offers investor clients direct access to the renewable energy 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 arranged financing for thousands of projects and facilitated hundreds of millions in investment on behalf of Fortune 100 companies, private equity, family offices and individuals.

For more information, please visit www.solsystemscompany.com.

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Amber Rivera

Amber Rivera