On April 11, 2016, Massachusetts Governor Charlie Baker signed Senate Bill S.1979 into law, reaffirming the Commonwealth’s leadership in the solar market. After more than a year of debate, the Massachusetts legislature raised net metering caps, thereby granting capacity to hundreds of solar projects—some of which have been sitting on roofs, disconnected, awaiting the decision. In contrast to recent rulings elsewhere in the United States, this bill is a compromise resulting from ongoing discussion that began with the Net Metering and Solar Task Force in 2014. The final version of the bill strikes a balance among numerous competing interests, namely utilities, ratepayers, and solar stakeholders, who held differing opinions about the future compensation of solar and the appropriate incentive mechanism.
The bill addresses recent issues of market uncertainty brought about by periodic, marginal increases to net metering caps. This uncertainty has been amplified by the impending expiration of the federal Investment Tax Credit and the full subscription of Massachusetts solar renewable energy certificate (SREC) incentives. The passage of S.1979 proves that lawmakers support the solar industry’s future role in job growth and its contribution to keeping customer rates down.
S.1979 at a glance
- Raises net metering caps by 3 percent
- All systems on the waiting list at the time of the bills passing will be granted a net metering allocation
- Maintains full net metering rates to public and municipal systems
The caps are monitored and maintained by the Massachusetts System of Assurance of Net Metering Eligibility, which has been administered by Cadmus since January 2013. Information and real-time updates on the net metering caps can be found on the program’s website, massaca.org.
Setting a new value on power
The bill also marks an adjustment in how Massachusetts will value power exported to the grid from solar generation. The biggest change is the introduction of market net metering credits, which privately owned solar systems will accumulate at 60 percent of the current rate. The bill defines private systems as all systems that have a private off-taker. Public and residential (10 kilowatts [kW] AC and below) systems excluded from the caps will continue to accrue credits equal to their excess monthly generation of kilowatt hours (kWh).
Market net metering credit is equal to 60 percent of excess monthly kWh multiplied by the following charges:
- Default service charge
- Distribution charge
- Transmission charge
- Transition charge
After the Department of Energy Resources (DOER) determines that Massachusetts has hit its total statewide installed capacity goal of 1600 MW, all new solar systems in commercial operation can claim these market net metering credits. Any systems commercially operational before that date will continue to generate credits equal to their excess generation for 25 years from the date of authorization to interconnect, after which they will receive market net metering credits. Currently, however, it is unclear what mechanism the DOER will use to track the state’s progress toward its installed capacity goal.
Criticism, and a shift in trends
The bill has its detractors in the solar industry, largely because it allows distribution companies to add a monthly minimum reliability contribution on current solar customers’ utility bills to cover the fixed costs associated with use of the electrical grid. The minimum reliability contribution can be approved only by the DOER, and only after the state hits the 1600 MW goal.
The bill also suggests a trend away from costly state incentive programs like SRECs and net metering and into more market-based solutions. It directs the DOER to develop a new incentive program for a post-1600 MW Massachusetts that aims to achieve these goals:
- Promote transition to a self-sustaining solar market
- Use market-based mechanisms or price signals when possible
- Reduce direct and indirect program costs and barriers
- Implement the incentive program with an easy-to-estimate or known budget and includes a declining adjustable block incentive, a competitive procurement model, and a tariff or other declining incentive
The expansion of Massachusetts’ net metering program comes at a cost to solar stakeholders. The market net metering credit will cause a 40 percent reduction in revenue for generating systems, and the minimum bill credit will lower energy cost savings, especially for residential customers. Nevertheless, the bill proves the solar industry’s influence. Although the fight to raise net metering caps may subside in the short term, the debate over a stable, long-term incentive program is probably just beginning.
Interested in going solar, but unsure of how to navigate the changing market? Cadmus has provided procurement assistance to dozens of municipalities, and would gladly assist you.