State Proposes New Solar Incentive Program

By Tanya Stasio

Last week the Massachusetts Department of Energy Resources (DOER) presented the final proposal for a new solar incentive plan to replace the completed Solar Renewable Energy Credit (SREC II) program. Massachusetts’ previous solar incentive programs, developed during the Patrick Administration, helped spur the development of 1,600 megawatts (MW) of solar capacity in the state. Massachusetts currently ranks fourth in the nation in terms of solar installations and the solar industry employs more than 18,000 people in the commonwealth.

What is SMART?

The new program, called the Solar Massachusetts Renewable Target (SMART), aims to procure 1,600 MW of additional solar energy. To reach this target, it uses a “declining block incentive” which offers stable, predictable prices that decrease over time. For example, the incentive rate will be reduced by 4% after the first 200 MW, 4% after the next 200 MW and so on until 1600 MW has been installed. Under this structure, the costs of the incentive program are driven down over time as solar energy installation increases.

The program contains “adders,” or additional compensation, for projects that are in preferred locations, serve low income or government entities, engage in Community Shared Solar (CSS) and/or combine solar and storage. Preferred locations include brownfields, landfills, solar canopies, and mounted on buildings. The program also includes an adder for projects being held up by the net metering cap. Though this may prove to be helpful for some projects, it won’t act as a successful replacement to net metering itself. Adder values will also decrease by 4% per capacity block and can be combined in a single project.

How it Differs From SREC II

Under the SREC II program, solar developers would receive credits (SRECs) for solar electricity generation. SRECs are tradable, meaning their value is determined by market based mechanisms. Under this structure, long-term revenue is uncertain, making it harder to predict the return for projects and developments (see Figure 1).

In contrast, the declining block incentive under the SMART has a fixed incentive level where projects are on a fixed price term (see Figure 2). This characteristic allows for more certain predictions of program costs and revenue. However, the incentive level is half that of SREC II, which greatly reduces compensation to solar developers.

Smooth Transition (sort-of)

DOER announced it will grant SREC II extensions for facilities that have not already secured extensions, at a slightly lower incentive level. This extends the construction deadline for all facilities to the start date of the SMART program. After public comment and approval, the extension will likely go into effect by mid-March. These extensions will be granted at a reduced SREC factor (by about 30%). This extension comes after months of uncertainty and no set incentive program options for the solar market.

What Does This Mean for Net Metering Policy?

Despite the net metering “adder” and the Administration’s claim that this program “kills two birds with one stone”, the SMART program should not be thought of as a replacement for net metering. Although the SREC program has been extended, there remain projects across the state held up by the net metering caps. The caps have already been hit in National Grid territory and there is only about 100 MW left in Eversource territory. This means, despite the SREC II extension, there are still many projects in the state that will be held up by the net metering caps.

It will also take a long time for the new program to go through the state approval process, possibly longer than the anticipated 12 months. This makes it increasingly important to address the net metering cap issue now while projects are being held up. This legislative session we will be continuing the fight to remove the net metering caps. Download our Solar Policy Guide to learn more about the legislation that has been filed this session.

DOER will issue a formal regulatory proposal in March 2017 followed by a public comment period. The Department of Public Utilities will also initiate a proceeding to finalize certain elements of the SMART program. It is anticipated that SMART will go into effect in early 2018, though it could be pushed even later.

Do you have thoughts on the new SMART program? Let us know in the comments or contact our Programs Manager Kate Galbo at Kate.Galbo@cabaus.org.

Tanya Stasio is CABA’s Policy Fellow. She is a student currently studying environmental science and economics at Simmons College. In her studies, she has conducted empirical research on the topics of water quality management and renewable energy. In the past, she has interned Socializing for Justice, A Better City Transportation Management Association and the Massachusetts Department of Environmental Protection.