The Massachusetts Department of Energy Resources (DOER), after months of public comment, released on Tuesday its proposal for a new solar-energy incentive program to replace the complex and overly expensive program now in place.
We think the state got it right. And employers and other electric customers will be the better for it.
The proposal adopts suggestions made by AIM to rely on market competition to establish the amount of incentives that developers will receive to install solar energy. The result will be a program that costs half as much as the current one and still encourages the development of solar installations throughout the commonwealth.
Total savings to employer and other electric ratepayers: $250 million per year.
The new program will eliminate Solar Renewable Energy Credits (SREC), one of two methods through which solar developers currently collect subsidies. The other, net metering credits, will remain unchanged.
While some of the details are still being worked out, the new program, called the Solar Massachusetts Renewable Target program or SMART program, will establish a solar tariff rate only after bidding is complete for an initial 200 megawatt block of solar projects. Developers will receive that bid price for 20 years.
That incentive rate will remain the same for all solar projects and will automatically decline 4 percent for every 200 MW block in the future. There will be some “adders” to the base price - for building-mounted systems, solar canopies, and cases in which solar is combined with storage technologies - that would add small amounts to the baseline price.
Projects may still receive net metering credits, but those will offset the tariff to determine the final subsidy. So if the base rate is established at 15 cents and the developer receives net metering credits of 10 cents, the utility will make up the 5-cent subsidy through the tariff.
AIM opposed the scope of the current solar program and was concerned that early proposals for the new program relied on government officials to set tariff levels for solar incentives without using the competitive market to drive down costs to the ratepayer. Such a system would fail to pass along to the ratepayer the 50 percent reduction in solar installation costs that have occurred over the last few years.
Driving down costs is important for the future of the Massachusetts economy. Massachusetts not only has one of the highest electricity costs in the country, but one of the most generous solar and renewable incentive programs, adding up to nearly $1 billion in 2016 and $2 billion by 2020. Those subsidies add up to nearly 4 cents per kilowatt hour for individual customers even before the new solar incentive program kicks in.
AIM, in a series of comments, urged DOER to adopt a model based on competition. Other states where solar installations cost half as much as Massachusetts already use the competitive model.
Competition reduces prices. Competition is also the hallmark of the recently passed Massachusetts energy bill, which requires utilities to solicit market proposals for hydropower and offshore wind, a notion AIM supports.
The solar proposal still needs to go through public comment and any tariff needs to be approved by the Massachusetts Department of Public Utilities. During the transition period between now and the point at which the new program is approved by the Department of Public Utilities (DPU) – expected January 2018 - the existing solar incentive program will remain in place at a lower incentive rate.
DOER has developed a program that is well thought-out and enjoys wide support. AIM commends DOER for this step in the right direction and we look forward to working with the Baker Administration and others to get this program approved and implemented as soon as possible.
If you are interested in following this issue and engaging with AIM on Massachusetts electricity prices, contact me at email@example.com or 617-262-1180