Massachusetts Solar Bill Raises Net Metering Caps, Looks to Replace SREC Program

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This past Friday, Governor Charlie Baker filed a solar bill in Massachusetts. That fact alone — the act of filing a bill, without regard to its content — was welcome news for the solar industry and solar customers in the state. With non-residential net-metering solar development capped in the 171 cities and towns in National Grid service territory, and the ITC cliff fast approaching, legislative action this fall to lift the net-metering caps is the critical priority for Massachusetts solar advocates, and the clock is ticking. Now, after the Senate passed a net-metering cap increase two weeks ago, and after the governor acted on Friday, a bill appears within reach. That is great news.

But what about the content of the Baker administration’s proposal?  What’s in there, and what would it mean for solar in Massachusetts?

This is mostly a good bill; it’s mostly good public policy that would provide a pathway forward for solar in Massachusetts, but which would also lay the statutory groundwork for a next generation of solar rules that would more efficiently use ratepayer investments in renewable energy. Most importantly, the bill does two smart and positive things.

One, it raises the net-metering caps. That’s fundamental; any responsible and productive solar bill in Massachusetts right now must provide some headroom for ongoing solar development during the period of time that it will take for regulators to implement the market rules which would constitute a transition to an amended framework. This bill does that, raising the net metering caps by about 445 megawatts, 205 megawatts of which is in currently-capped National Grid service territory. Without a bridging net-metering extension like that, the intervening time before an amended policy can be enacted would see projects delayed (and ultimately killed, as their placed-in-service dates would slip past the ITC deadline), shuttered solar businesses, and job losses. The alternative — an interim cap increase — saves jobs and projects, and continues the Massachusetts solar success story.

Two, it instructs Massachusetts’ Department of Energy Resources to develop and implement a new solar incentive program to replace the SREC program, which would take effect once the 1,600-megawatt goal of the current program is reached. All stakeholders agree that this is the right next move. Eventual replacement of the SREC program was the most significant consensus recommendation of the recently concluded, legislatively created Net Metering Task Force, a 17-member stakeholder body where consensus was scarce. The SREC program has been tremendously successful at starting and growing a productive, competitive, and efficient local solar industry in the state; now there is near-universal agreement that a next-generation solar incentive policy can have a lower public price tag and can be easier to use. The Solar Energy Industries Association (SEIA), among others, has publicly advocated for this responsible change.

In the near term, then, if you want to see solar continue to thrive in the state of Massachusetts, and you also believe that the industry can be pressed to start to do more with less, then you should be happy with this bill. Looking at the longer term, however, beyond 1,600 megawatts, the proposed policy has one glaring flaw that, if enacted, would cost Massachusetts its national solar leadership position.

Under current law, eligible net-metering generators get credited at (most of) the retail rate for monthly net-excess generation — if your solar generator produces more electricity than you use in a given month, you get credited at the retail rate for the excess, and you carry that forward to the next month. That crediting-for-excess structure is what has made virtual net metering so popular and successful in Massachusetts. Under this bill, for many types of systems, that credit would change to the lowest possible amount: it’s the energy-only wholesale rate for monthly net excess, stripped of any value for capacity or distribution-system benefit.

As Foley Hoag’s Adam Wade was quick to point out on Friday, this “appears to be at odds with the emerging conclusions of other states’ investigations, and the report of Massachusetts’ own net metering task force, which have begun to develop clear economic analyses indicating that distributed solar provides value to the grid in excess of the value of the power generated and in many cases in excess of the ‘full retail’ rate for power, including wires charges.”

Adam is right, and the point is important.  Government-conducted or -mandated studies in Arizona (both APS’ study and the solar industry’s response), California, Colorado, Hawaii, Maine, Mississippi, North Carolina, Nevada, New Jersey and Pennsylvania, New York, Texas, Utah, and Vermont — as well as Massachusetts — have all concluded that the value of distributed renewable generation is higher than just the wholesale rate; none has shown wholesale or lower. As SEIA points out in its Friday statement on the bill, two states that are arguably Massachusetts’ only peers in forward-thinking distributed solar policy right now — California and New York — are engaged in robust regulatory processes to answer the very question that the Baker administration proposes to answer at a stroke: what is distributed solar worth? That’s a better approach, and it is more consistent with both the Net Metering Task Force report and the Senate’s net metering bill.

Importantly, the governor’s proposal leaves some types of projects capturing the full retail rate for all production, and that’s positive. Residential-scale systems would continue to capture the full retail value for monthly net-excess production. Larger systems that are sized such that their production in all months does not exceed load behind the meter in that month would likewise capture the full value for all production, though that is a more restrictive size-to-load ratio than any other net metering state that is serious about solar. The critical point is that, in not allowing most net-metering generators to bank production in the summer to be used in the winter, the Baker administration’s proposed policy would undermine the fundamental structure of net metering that has led to its adoption in 44 states, and move Massachusetts from the front of the pack to the back in terms of net-metering policy.

Overall, the solar community’s reaction since Friday has been mixed. There is a lot to like in this bill — it’s a serious proposal that, if enacted exactly as written, would provide a sound strategy in the short term, though at the expense of a sustainable long-term strategy. The monthly net-excess proposal represents a serious threat for solar viability in the state of Massachusetts, and would dramatically slow the solar momentum here. If that component of the bill can be adjusted in the upcoming legislative process so that the legitimate concerns of all stakeholders are addressed — and I believe it can be — then Governor Baker’s proposal is a significant step toward putting his administration’s and this legislature’s stamp on the successful — and evolving — Green Communities Act.

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Dan Berwick is VP of strategy and business development at Borrego Solar Systems.

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