A Bright Future for Solar in the Bay State

Long a national leader on clean energy policy, Massachusetts is close to raising the bar when it comes to solar, with a legislative package that would dramatically expand access to solar energy in the state. A comprehensive solar energy bill (H.4185) was introduced last week into the Massachusetts House of Representatives.  If passed, the bill will encourage more Bay Staters to go solar by removing the state’s caps on net metering, and by redesigning an incentive program to bring online 1,600 megawatts (“MW”) of solar energy by 2020.

The legislation was negotiated by state agencies, renewable energy interests groups, and the electric utilities. As expected, the bill is a compromise for all parties. On balance, we believe it’s a compromise worth supporting. Here’s our breakdown of what this important legislation contains:

• Uncapped net metering for schools, government entities and businesses: Massachusetts’ net metering program is one of the most important reasons for our solar success. Net metering is a simple straightforward policy that provides Bay Staters with full credit on their energy bills for any valuable clean electricity they deliver to the grid for use nearby. The problem is, customer participation in net metering is currently limited by an arbitrary cap. H. 4185 would uncap net metering, and this is fantastic news for our state’s energy customers. The program is fair, it’s working and it needs to be expanded so more Bay Staters can go solar. Net metering caps for schools and government entities have already been reached, and the cap for businesses and residents is also close to being hit. This legislation permanently alleviates this problem, and without such action, the Commonwealth’s solar market would have ground to a screeching halt in the near future. This provision paves the way for a long-term, sustainable solar market without administrative caps. This is a huge win for solar in Massachusetts.

• Redesigned incentive program to bring the most solar bang for your buck: Governor Patrick has set an ambitious goal for bringing online 1,600 megawatts of solar by 2020. This bill would create a cost-effective and predictable incentive program to ensure that small and large-scale solar projects are developed in the state.

  The new incentive program will replace the current solar renewable energy certificate (“SREC”) incentive program. The SREC program will continue to exist for solar systems that are already installed, but starting in 2016, new solar customers would have access to the new incentive program. The new program will provide solar customers with a payment for 15 years for each kilowatt-hour of production from their system (the payment is for the environmental attributes associated with the electricity, not the electricity itself). While the payments for each individual customer would be fixed for 15 years, the compensation for future systems would step-down as more and more systems are installed, eventually reaching zero as the state transitions to an incentive-free market. The exact level of compensation for each “block” of systems will be determined by the Massachusetts Department of Energy Resources (“DOER”), and Vote Solar plans to participate in that public proceeding. This “declining-block” incentive has been successful in California, and has recently been adopted in New York. Below is graphical representation of a declining block program. This program should reduce financing costs for solar systems in MA, and thereby lower the overall costs associated with going solar.

• Minimum bills: A significant compromise for the solar community as part of this legislation is the establishment of minimum bills. To be clear, minimum bills are not a new charge on a customer’s bill. Instead, minimum bills prevent a customer from having a $0 electricity bill. No matter what, a customer’s bill will not drop below a certain threshold. The threshold will be determined as part of a proceeding at the Massachusetts Department of Public Utilities. For example, if a customer has a $100 electricity bill, and a net metering credit on their account of $100, the minimum bill would prevent an electricity bill of $0. Let’s say that the minimum bill is $15. In this scenario the customer would still pay the electric utility $15, and the remainder of the customer’s credit would carry-over to the next month. The minimum bill would apply to all customers – not just solar customers – which means that there is no discrimination against solar customers.

  The minimum bill ensures that customers of a utility will always pay something while they are connected to the grid. This approach addresses a concern by utilities that customers could avoid paying any electricity bill. Vote Solar does not share this concern because the evidence suggests that the long-term benefits that solar provides make up for any revenue loss utilities experience when customers go solar. Nevertheless, we view minimum bills as a more reasonable approach than some rate design changes proposed in other states – from additional charges on solar customers in Arizona (flat out discriminatory) to a very high fixed charge for all customers in Wisconsin (which reduces the motivation of customers to conserve energy). In the context of these other very bad proposals, minimum bills can be viewed as an acceptable proposal for MA.

• Restructuring of virtual net metering: In Massachusetts currently, virtual net metering allows a solar system in one location to offset a customer’s utility bill in a different location. As such, the benefits of solar energy are available to all customers, even if the customers can’t install a system where they live or work. While this concept is in some ways preserved in H.4185, the bill credit offered under the new structure, which is simply called “virtual metering,” will no longer be the same as the net metering credit available to systems that generate and use electricity at the same location. Under the proposed legislation, the compensation per kWh for virtual metering projects would be fixed for the first 15 years, at a level to be determined by DOER in a public proceeding. It would include compensation for the electricity produced (at the sum of the generation, transmission, and transition rates) and compensation for environmental attributes (via an additional payment to bring the total compensation to the fixed level set by DOER). After the initial 15 year term, the payment for environmental attributes will end and virtual metering projects will receive only the generation + transmission + transition rate compensation. Let us note here that we disagree that this represents an appropriate long term valuation of the energy produced by these solar systems. We will actively participate in the DOER proceeding to fight for an appropriate bill credit level for these offsite systems, and will continue to work to ensure that Massachusetts’ market rules appropriately consider solar’s benefits in the longer term. Our goal is to ensure that customers without the ability to put solar on their homes and businesses still have equal and fair opportunities to access the bill-saving benefits of clean and reliable solar energy.

• Multiple solar energy systems on one parcel of land: The compromise on virtual metering credit is slightly mitigated by another provision in the bill which would allow for multiple net metering solar systems on the same parcel of land, so long as the aggregate size of the solar systems on the parcel don’t exceed predetermined limits. This is very different from the current rules, which mostly forbid more than one solar system on a parcel of land. This change would allow, for instance (a) condominium owners to separately install systems, (b) low-income housing to have dedicated systems for each unit, (c) strip malls to have multiple systems to serve multiple customers, (d) farms to have multiple installations for multiple buildings. While we would prefer to see more of an aggregate net metering approach, which would allow all the meters on a parcel to be offset by the production of a single solar system, this provision in H.4185 is a small step in the right direction.

Overall, this bill is a win for solar in Massachusetts, and an important demonstration of how one leading solar state has chosen to move past the heated solar vs. utilities debates happening across the country, and strike a compromise that will keep Massachusetts customers going solar in a big way. Go Bay State, go.