DOER Releases Next Generation Solar Incentive Program Proposal

On Friday, the Massachusetts DOER met to announce the proposal of a new solar incentive program that would be effective January 1, 2017. It is a tariff-based incentive, as the DOER feels that is the most cost-effective approach. The program calls for the development of 1,600 MW of solar energy and a declining block model for pricing purposes. Here is a deeper look into the criteria and design details, which at this point are subject to change:

On Friday, September 23rd, the Massachusetts Department of Energy Resources (DOER) met to announce the proposal of a highly anticipated new solar incentive program that would be effective January 1, 2017. The proposed program steps away from the familiar Solar Renewable Energy Certificate (SREC) model, to introduce the idea of a Feed in Tariff-based incentive.

While this is certainly a change from what the industry and its customers are accustom to, the program has the potential to simplify solar incentives and establish long-term stability for the industry. On the flip side, if the details regarding the value of solar energy and compensation rates are not carefully considered, the program could reduce the pace of growth in solar.

Here is a first look at the program highlights, with specific criteria and design details subject to change.

Program Objectives

At the highest level, the DOER developed a program with the following objectives:

  • Maintain robust growth across installation sectors – residential, small commercial, utility-scale, roof mounted, ground mounted, etc.
  • Ensure widespread access to incentives for all ratepayers (e.g. community shared solar, low income, etc.)
  • Address land use concerns related to siting of solar projects
  • Provide economic support and market conditions to maintain and expand PV market in MA
  • Expand direct ownership of solar from residents and businesses
  • Encourage solar growth without net metering
  • Encourage the development and growth of solar plus storage projects
  • Provide clear policy mechanisms that control ratepayers costs and exposures

Feed In Tariff Model

While significant details of the program still need to be developed, at the highest level, the DOER has designed a Feed In Tariff (FIT) program.  A FIT is a policy mechanism designed to encourage investment in renewable energy technologies, under which eligible renewable electricity generators, including homeowners and business owners, are paid a fixed price per kilowatt-hour (kWh) from the utility for the renewable electricity they supply to the grid.

The tariff program is proposed to be a 10-15 year fixed rate that applies to all electric distribution companies (EDCs), across Massachusetts. These tariff payments are for Class I RECs, and the anticipated incentive payments would be net of the value of energy.

Declining Block Incentives

The program calls for the development of an additional 1,600 MW of solar energy and a declining block model for pricing purposes. This means that as more residents and commercial property and business owners adopt solar energy, the FIT compensation value will decline.

The DOER’s declining block model proposes 8 blocks of 200 MW each. Based on the load share, there is the option for individual EDC blocks; for example, there could be 100 MW for Eversource and 100 MW for National Grid. In each successive block, tariff values are proposed to decrease by approximately five percent.

Finally, the EDCs will receive full cost recovery for the cost of all tariff payments. The recovery of net costs would be made through a fixed monthly charge to all distribution customers.

Tariff Project Categories

The tariff-based program will contain incentive values based on the size of the project, which are categorized as follows:

  • Less than 25 kW AC (Low Income)
  • Less than 25 kW AC
  • 25 – 250 kW AC
  • 250 – 1,000 kW AC
  • 1,000 – 5,000 kW AC
Tariff Rates
System Capacity Incentive ($/kWh) Term Length
Less than or equal to 25 kW AC (Low Income) $0.35 10-year
Less than or equal to 25 kW AC $0.30 10-year
> 25 – 250 kW AC $0.23 15-year
> 250 – 1,000 kW AC $0.18 15-year
> 1,000 – 5,000 kW AC $0.15 15-year

*These rates are subject to change.

Furthermore, the DOER has included incentive adders for different project types, divided into three categories: location based, off-taker based and policy-based. Depending on the specific project location, bonuses can be given as well for projects located on landfills, brownfields, etc. In contrast to the SREC-II program, these adders can be combined together to promote the ideal siting of projects.  Specific incentive adder values have yet to be finalized, but their main purpose is to encourage the development of specific types of solar projects, many of which are discussed below.

Land Siting Criteria for Ground-Mount Systems

One of the more restricting segments of the program applies to ground mounted solar energy systems, which outlines numerous prohibited areas for development, including designated prime forest, farm land, wetlands, archaeological sites, and other protected open lands and wildlife habitat areas. These restrictions are beneficial for ensuring the Commonwealth’s biodiversity is protected, while encouraging more land-based solar energy development on landfills and brownfields.

Standalone Solar + Energy Storage

A major change in the new program compared to the current SREC- based models is the inclusion of both behind-the-meter and standalone energy storage incentives. Energy storage solutions have been gaining ground over the last decade, and we’re finally seeing technologies emerge that could make storage a possible common reality. However, many technologies are still not economically feasible without incentives. In an effort to depart from net metering, the DOER has included incentive adders to help encourage co-location of energy storage assets located behind-the-meter, and for standalone (off-grid) storage systems.

Since storage allows an electricity producer to capture and store energy on-site to use at a later time, it supports the notion of moving away from net metering, where energy is distributed back into the grid, and the solar owner is compensated from the utility for that power at the retail rate.   The benefits of storage over net metering are many, and are outlined in detail in the DOER’s proposal slides (which are accessible through the provided link at the end of this post).

Non-Net Metered Facilities

Net metering policies have been both a major contributor to the growth of solar in the Commonwealth, and a major headache for the industry, its customers, utilities and legislators alike.  In designing the new program, the DOER sought to “prevent the success of a new incentive program from being driven by the availability of net metering” by providing a higher level incentive to non-net metered facilities

Program Eligibility Criteria

  • Must be connected to electric grid on or after January 1, 2017
  • Maximum project size is 5MW AC per parcel of land
  • Generation of the incentive begins either upon interconnection or becomes effective date of program (whichever is later)
  • Cannot also be qualified under SREC I or SREC II

Bottom-line

The proposal, though still very preliminary in scope, has both potential advantages and disadvantages. One positive aspect of the proposal is its potential to deliver predictability; the fixed-rate of the tariff guarantees that incentive prices will always be laid out and stable, unlike the current incentives that change with the market. However, among the concerns our industry is likely to have with the proposal is the incentive value cut, which could be significant.

Still, there are many details that need to be worked out in order to bring the program to life. The DOER will be accepting written comments on the proposal through October 21, and it will continue to be modified throughout the fall, with an effective goal date of January 1, 2017.

While we’d like to believe that this date will be met, there are many important details regarding program implementation that need to be addressed, and could cause the program’s start to be pushed out until a later date. Should this be the case, the DOER will have to have to address the possibility of extending the current SREC-II extension deadline. But we’ll leave that discussion for a different day.

You may access a detailed summary of the proposed incentive program on the DOER’s website here:

http://www.mass.gov/eea/energy-utilities-clean-tech/renewable-energy/rps-aps/development-of-the-next-solar-incentive.html

 

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