DOER’s Solar Incentive Straw Proposal: Optimism, Anxiety, Uncertainty.

On September 23, DOER presented a straw proposal for the next phase of Massachusetts solar incentives. DOER’s ambitious proposal for a tariff-based program reflects a thoughtful development process and a laudable goal of crafting a program that is more efficient at promoting sustained solar deployment. There is plenty to like. But, DOER has bitten off quite a mouthful by proposing a structure that departs so dramatically from the SREC approach. Massachusetts stakeholders have seven years of experience with SRECs; a tariff-based program will be something new.

Given the novelty and complexity of DOER’s proposal, the biggest concern among solar developers may not be that DOER is unable to design a workable new program, but that DOER is unable to complete the design and implementation of its new program in time to avoid a period of policy uncertainty that stalls the development of new projects. Even aside from worry about an actual gap in incentive eligibility between the current, expiring SREC II program and the next program, an extended period of uncertainty about the details of the next program could cause the pipeline of new projects – many of which have long development cycles – to freeze up.

Some details on the proposal:

  • Projects 5 MW AC or less that are not qualified under SREC I or SREC II, that are not sited in prohibited areas, and that interconnect after January 1, 2017 would be eligible;
  • Projects would receive payments for Class I RECs through a 10-15 year fixed-price tariff that would be available from all electric distribution companies (EDCs);
  • Tariff payments would be net of the value of energy produced by the project (i.e. the tariff payments would adjust to maintain a net compensation level that takes into account the value of energy that is sold, net metered, or perhaps even used on-site) – a feature designed, in part, to avoid market disruption if net metering caps are reached;
  • Tariff payments would decline over time through a series of declining blocks (proportionally attributed to each EDC): as each block of 200 MW is filled, the tariff value for the next block would decrease by approximately 5%;
  • Tariff payments would be based on project size with the following values provided by DOER for “illustrative” purposes (capacity in kW AC, incentive in $/kWh):
  • ≤ 25 kW (low income) $0.35 10-year term
  • ≤ 25 kW $0.30 10-year term
  • > 25 kW – 250 kW $0.23 15-year term
  • > 250 kW – 1,000 kW $0.18 15-year term
  • > 1,000 kW – 5,000 kW $0.15 15-year term
  • Taking a page from SREC II’s increased incentives for projects with particular off-taker and site characteristics, projects with preferred characteristics would be eligible for “adders,” which in this proposal would be cumulative – again, DOER provided “illustrative” values ($/kWh):
  • Building mounted $0.02
  • Brownfield/Landfill $0.03
  • Solar Canopy $0.04
  • Community Shared Solar $0.04
  • Low Income Property Owner $0.04
  • Low Income Community Shared Solar $0.06
  • Behind-the-Meter Energy Storage $0.03
  • Standalone Solar with Energy Storage $0.05
  • Non-Net Metered $0.05