Solar in Massachusetts just got stronger! On April 25th, the MA Department of Energy Resources (DOER) officially announced its newest solar energy program, commonly referred to as SREC II (pronounced “S” “REC” “TWO”). In order to gain a full understanding of the program, let’s start with a brief history.
Solar Renewable Energy Certificates (SRECs) were created as part of the Solar Carve-Out Program; a market-based incentive program established to help utilities meet the Renewable Portfolio Standard (RPS) requirement of generating 15% of their electricity from renewable energy sources. The SREC program supports residential, commercial, public, and non-profit entities in developing new solar photovoltaic (PV) capacity across the Commonwealth of Massachusetts by offering solar array owners credits for the amount of solar electricity they produce. While the program was originally capped at 400MW with a goal to meet this by 2020, the cap was reached in the summer of 2013, showing the extreme popularity of the program.
The SREC II program seeks to build on the success of the original SREC program, and has been revised to support the solar market until 1,600 MW of PV capacity has been installed statewide. The much awaited program continues to incentivize businesses and organizations to install solar and reap its many environmental and financial benefits.
The SREC II program provides financial incentives to owners of solar photovoltaic (PV) systems based on the amount of electricity the system produces. For every 1,000 kWh (kilowatt hours) of solar electricity produced, the owner of the system will receive a certain number of Solar Renewable Energy Certificates (SREC). Theses SRECs can then be ultimately sold to the utility companies (and others) in the state to help them reach their state mandated goals. The SREC II program brings some changes and three areas worth noting are:
- Market Sectors – All solar projects are not considered equal in the program! The state has identified four (4) market sectors and provided different incentives accordingly. Three of the sectors are specifically defined and the fourth is a “catch all” for any system that does not fit into the first three. The state’s goal is to better manage and incent where solar is being installed.
- SREC Factors – Each market sector has a different “factor” that is used to calculate the number of SRECs a system owner will receive. The factors range from .7 to 1.0 – i.e. a system with an SREC factor of 1 will receive 1 SREC for every 1,000 kWh’s of production each quarter. Qualifying for a certain SREC factor will be a key decision for a project owner due to the financial impact.
- 10 Year Term – All systems that qualify under the program will receive a 10 year term in which they can participate in the annual SREC auction. The auction price will decrease per a set schedule over the term. The fixed term and published schedules will help project owners and lenders to model and evaluate financial performance.
These three areas are major influences on the types and number of solar energy systems that will be installed in Massachusetts over the coming years. The introduction of SREC factors is intended to create a more balanced development of solar across different Market Sectors mentioned above. In addition to the state sponsored SREC II program, the federal government still offers a 30% Investment Tax Credit (ITC) and accelerated depreciation for solar.