Massachusetts already has the seventh-greatest #solar energy capacity in the United States and employs over 14,000 in solar jobs across the state. Its solar power capacity can power more than 250,000 homes, which is an astounding accomplishment. However, this January, Massachusetts made it public that it wants to double its solar capacity through a new incentive program. This means that the solar capacity of the state will go over 3 GW.
Massachusetts’s initiative is called “Solar Massachusetts Renewable Target (SMART) Program” and shifts from the common policy seen in the Northeast. The new initiative resembles the Solar Initiative in California and the German feed-in tariff.
Fixed Prices and Long-Term Contracts
At the core of the new SMART program is a fixed contract price, as well as a fixed term for solar energy projects that are under 5 MW. The contract price includes both the value of the energy and the incentive. This means the projects will have an almost certain revenue stream because the new program does not use solar renewable energy credit – which is known to fluctuate wildly – as an incentive.
In addition, the prices will depend on capacity. All projects that are larger than 1 MW will be included in a bid for the first block of capacity. The cap on this first block of capacity is $0.15 per KWh for projects up to 2 MW and $0.14 for projects from 2 to 5 MW.
The 1-2 MW clearing price obtained during the competitive bid will be used to calculate the prices for the smaller projects. Keep in mind that the contract prices just set a floor and do not show the real per-kilowatt reimbursement to the producer of #solar power. A net metered project, the incentive will be calculated by subtracting the “volumetric distribution + transmission + transition + three-year average basic service rate for this particular rate class” from the contract price. The value will remain fixed over time, so there will be no fluctuations. As an example, a solar project of 25 kW with a 28-cent contract price and an 18-cent base rate will receive a 10-year incentive of $0.10 for every KWh.
Even though the contract prices start with the bidding results, they rise dramatically for small solar energy projects. For a 25 KW project, they can rise to 150 percent of the index price. Projects smaller than 25 KW will get larger prices, but they will also get a shorter contract. This means that smaller solar projects can have their initial finance costs – which are usually incurred in the first 10 years – covered effectively.
Solar Energy Contract Adders
Projects can receive more than just the solar project compensation. There are additional incentives – or adders – that are awarded to solar projects that meet specific standards. Projects cited in specific locations (landfills and buildings are just two examples) will get a bonus to their per-KW contract. If projects include solar energy storage, they are also eligible to receive an adder. Specific off-takers such as public entities also qualify solar energy projects for adders.
The adders are stackable, so a project can obtain several bonuses if they meet multiple criteria. These bonuses were designed to encourage projects that serve public interests that are not yet captured by the Massachusetts solar market. The incentives are expected to push the market towards an energy democracy model of solar energy.
There is also at least one penalty that project can incur to their per-KW contact. This “subtractor” will be applied to the contract if the project is built on a green field, and reflects the opportunity cost of the land use.
Small Solar Projects Are Welcome
Small solar energy projects – under 25 KW – have a reserved capacity of 20% of each block of program capacity. The total reserved for smaller projects is 320 MW from the 1,600 MW program.
Solar Cost Sharing
Program costs will be divided proportionally among the distribution utilities to make sure all projects are treated equally and fairly. The distribution will be based on each utility’s share of the electricity sales in the state of Massachusetts. This means that small utilities will not support a disproportionate number of solar energy projects and struggle to cover the costs involved.
Declining Blocks of Program Capacity
The SMART tariff takes into consideration declining solar prices, just like California’s Solar Initiative program does. The contract prices and the bonuses will decrease by 4 percent per block (with each block including around 200 MW of capacity). Keep in mind that 20% of each block of 200 MW is reserved for small (under 25 KW) projects.
Advantages of the SMART Program
For regulators and solar program projects, the SMART tariff means predictability and certainty. The program will be sustainable and durable over the long term in the ever-evolving Massachusetts solar energy marketplace. According to decision makers, the new tariff will be able to reduce financing risks while lowering the soft costs of the new solar projects.
As per pv magazine, SEIA’s director of state affairs for the Northeast, Dave Gahl, stated, “The Solar Energy Industries Association (SEIA) applauded the plan but highlighted what it sees as a related issue that could still scuttle solar growth in Massachusetts. This week’s RFP announcement is another step in the transition from SREC II incentive program to the new SMART. Getting this right will be critical to maintaining Massachusetts strong foundation as a solar leader in the United States. However, it’s also essential that the governor and legislature act to raise net metering caps to continue solar growth and protect the more than 15,000 solar jobs in the Commonwealth.”
Over the next few years, the SMART tariff will gradually increase the installed capacity of solar power to 3,200 MW (from 1,600 MW at the time of writing). The initial prices are set competitively and are capable of adjusting over time according to capacity. Each project will get adders based on several criteria including beneficiaries and location. Even though it is not perfect, the new SMART solar program certainly deserves attention. It will be fascinating to follow the latest solar news coming out of Massachusetts to see how everything pans out.