MA’s New Solar Incentive Program Still Faces Key Issues
By Kate Galbo, Programs Manager
On June 5, 2017, the Massachusetts Department of Energy Resources (DOER) issued emergency regulations establishing a new solar incentive program called Solar Massachusetts Renewable Target (SMART). These regulations were promulgated as a result of legislation passed in April 2016, which requires DOER to establish a new solar incentive program. DOER is now accepting comments on the program until July 11th and will submit the final regulations in August. As we quickly approach the submission deadline, there are some key issues within the regulation that need to be addressed to increase fair access to solar.
As it currently stands, the SMART program threatens the continued viability of key market segments like community solar. Issues with the program include significantly lower compensation levels that will make many projects uneconomical and continued lack of program transparency and market certainty.
SMART Program Overview
The SMART program is designed to support development of an additional 1,600 MW of solar in Massachusetts. It transitions from the Solar Renewable Energy Credit (also known as SREC) framework to a declining block compensation mechanism. The 1,600 MW will be divided into 8 blocks with set compensation levels that decline with each block (i.e. 200 MW per each block). The compensation rate will be set through a competitive bid process and then administered through a tariff approved by the Department of Public Utilities (DPU). As a result, it’s impossible to know now exactly how much compensation solar projects will receive until the competitive solicitation takes place.
Program compensation levels are too low to support development of diverse projects.
The base rate determined during the auction process will be enhanced through a base compensation rate factor for certain types of projects. Small-scale solar projects (25 kW or less) will receive a base compensation rate that is 200% of the clearing price for projects between 1 and 2 MW in the competitive solicitation. However, small-scale projects will only receive the tariff for 10 years while larger projects (up to 5 MW) will receive the tariff for 20 years.
Given that the cost to deploy in the small-scale sector is generally twice that of the 1-2 MW sector, the compensation level should be much higher, especially given the fact that the small-scale solar industry employs the majority of solar workers in the Commonwealth.
Compensation adders are good but should not be capped.
In addition to the baseline incentive amount, the program offers “adders” up to 1 MW for particular types of installations. Adders are available for projects that make use of priority land (such as rooftops, parking canopies, or brownfields), community solar, and those that include energy storage. All adders are capped at 320 MW per adder type, meaning adders are likely to be unavailable for the full duration of the SMART program. Both the compensation levels and adders automatically decline by 4% per capacity block, so the compensation available to new solar projects will decrease as more solar is deployed through the program. Decreasing the value over time fails to recognize the increased costs and complexity for community solar projects as well as external factors that could cause market uncertainty – such as rising interest rates, potential import tariffs, or changes to the federal Investment Tax Credit.
As it stands, the SMART program has good intentions to increase deployment of solar in Massachusetts but fails to demonstrate commitment to equitable access to solar and small business job growth. CABA will be attending the July 11th hearing in Boston to deliver public testimony on the regulations. There will also be public hearings on July 10th from 10:00 AM to 12:00 PM at Westfield State University and 3:00 to 5:00 PM at Worcester State University.
About the author: Kate Galbo joined CABA in September of 2015 after receiving a degree in Environmental Policy and Analysis from Boston University. Previously, she conducted research for Policy Studies Institute to help bridge the gap between sustainable development research and society. Kate has previously interned for other Massachusetts non-profit organizations. As Programs Manager, Kate focuses on engaging with our member businesses to take targeted policy action, achieve meaningful emissions reductions, and foster a sense of community.