2,000 Megawatts of Solar on the Horizon in Massachusetts?

2,000 Megawatts of Solar on the Horizon in Massachusetts?

The Massachusetts program to encourage development of solar electrical generation capacity has been much more successful than expected. That’s both good and bad, because the current program was meant to suffice until 2017. The market has grown so rapidly that more than half of the incentives have been claimed. Of the 400 megawatts (MW) carved out in the program, only 150 MWs remain, and those are expected to be used up in the near future. So what’s next for solar in Massachusetts?

We recently attended the Massachusetts Department of Energy Resources’ (DOER) meeting on the future of policy to encourage the growth of the solar PV market in Massachusetts after the 400 MW cap of the current Renewable Energy Portfolio Standard (RPS) Solar Carve-Out program is reached. DOER announced to the packed meeting that they believe the market could grow to 2,000 MW.

DOER’s objective is to provide economic support and foster the right market conditions to maintain and expand PV installations in MA. They also want to reach the point where solar PV does not need a separate program and can be absorbed into the RPS Class I program. They are currently evaluating two options to achieve their goals:

Option 1 – Maintain and expand the RPS Solar Carve-Out framework with revisions

This option is attractive because the industry is familiar with and generally supports the current program design. Within this option there are many revisions under consideration including creating a new Solar Renewable Energy Certification (SREC) market (referred to as SREC II). While a new SREC II market would require additional compliance burdens, it was acknowledged that simply maintaining one SREC market may breach expectations of existing generators under the 400 MW program who entered the program under specific rules that would likely change if additions are made to the original SREC market.

To reduce incentive value as the market expands and installation costs decline, DOER introduced the idea of Carve-Out Generation – SREC Factor. A qualified project would be given an SREC Factor between zero and one. The electricity from the project would then be split into one portion that generates SRECs and one portion that generates RPS Class 1 credits. The SREC factor would decline gradually to near zero as the program reaches the cap, thus transferring the program solely into RPS Class I.

To complement the SREC Factor and enable incentive differentiation, DOER also presented the SREC Factor Adjustment. To date, additional incentives through the Massachusetts Clear Energy Center (MassCEC) have been necessary to maintain a robust residential/small system market, but it’s understood that this funding may come to an end. The Adjusted SREC Factor would offer added economic incentive to help drive projects in particular sectors (e.g., small systems) where the Adjusted SREC Factor would equal the SREC Factor multiplied by a “Small System Adjustment rate.”

Option 2 – Establish a new Central Procurement framework

The second option focuses on creating a new policy framework that fosters a simpler and more predictable solar market. This could take a couple different forms. The first idea uses long term contracts (LTK) for SRECs through frequent, standardized, and competitive solicitations. LTKS might be purchased by DOER, MassCEC, or an independent third party, who would recover the cost through utility rates or a System Benefit Charge. LTKs provide a level of certainty to developers since they set an SREC price for the contracted amount of time. Similarly a Feed-In Tariff (FIT) approach would require distribution utilities to purchase solar energy at regulated prices. Solar generators would be automatically eligible and pricing would be set by DOER, with utilities spreading the cost across ratepayers.

A hybrid approach was also presented in which LTKs would be used for large systems and FITs would be used for small systems.

DOER’s full presentation (PDF) is available, and provides further detail on their observations of the current program, the two primary policy options, and other overarching policy issues.

DOER noted they intend to move the process along promptly, hoping to have a framework sometime this summer. Whatever course is chosen, the future of the solar energy market in Massachusetts should be much clearer in the next few months and potentially much larger.

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