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Massachusetts Takes Next Step to Implement New Solar Energy Incentive Program
Category: Solar News
Massachusetts Takes Next Step to Implement New Solar Energy Incentive Program image

On September 26, 2018, the Massachusetts Department of Public Utilities (DPU) finally issued its Order approving the Solar Massachusetts Renewable Target (SMART) program, the new state solar incentive program that will replace SREC II Program and promote the next 1,600 MW of solar development. Although the Massachusetts solar industry is still waiting for the official launch of the SMART program on November 26, this Order provides critical clarifying points about the program’s implementation.

The purpose of the 219-page Order is to direct the participating Distribution Companies, including Eversource, National Grid and Unitil, to modify their proposed tariff to fully comply with the Commonwealth’s public policy, initiatives, laws and mission. Specifically, the SMART program must embody the words of An Act Relative to Solar Energy that was signed by Governor Baker in 2016. The DPU must also ensure that utilities’ rates remain “just and reasonable” for all ratepayers across the state (DPU 17-140-A, 7).

The SMART Program was designed to reduce the overall cost of solar incentive programs that are passed on to ratepayers (e.g. the Renewable Energy and Energy Conservation Charges on your electric bill). The program is expected to “cost over 57 percent less than the [current] SREC II Program…on a dollar-per-MWh basis” (11). These significant cost savings are due to a couple of different factors, such as its declining block structure as well as the competitive solicitation and procurement processes utilized by the Massachusetts Department of Energy Resources (DOER).

It is important to pay attention to all of the details outlined in this Order. While some of the DPU’s directives are considered to be a ‘win’ for the solar industry, others could have a major impact on a customer’s return on investment.

No cap on Alternative On-bill Credits

The DPU has ordered the Distribution Companies to remove any mention of a cap to Alternative On-Bill Credits (AOBCs). In SMART, the AOBC mechanism is considered to be an alternative to the state’s Net Metering Program, accounting for the Value of Energy portion of a solar energy system’s total compensation. Initially, the Distribution Companies had proposed to limit the number of AOBCs to the customer’s annual average energy usage. The idea of a cap on AOBCs was met with ample resistance from solar industry advocates, municipalities, Legislators and the Attorney General’s Office. Intervenors argued that these caps would be especially harmful to the development of Community Shared Solar (CSS) projects and that recipients would receive fewer bill savings. In the Order, the DPU acknowledges this argument and states that it will not implement an AOBC cap at this time (26). The DPU seemed to heavily lean on the prior actions of the Legislature for this decision, claiming that “the Legislature’s silence [in the 2016 Act] regarding an AOBC cap is significant” (25).

The Order concludes that the value of AOBCs shall be the recipient’s Basic Service Rate multiplied by the total kWh in a billing cycle. Intervenors had argued that this proposed value of the AOBC is too low (17) and does not consider the true value of solar on the electric grid— something that the DPU indicates it may be interested in exploring further (20).

Eversource's merger catches up to SMART

In the last section of the Order, labeled as “Miscellaneous,” the DPU subtly includes an important modification regarding how the merge of Eversource’s two service territories (NSTAR and WMECo) will impact the SMART Program moving forward. Specifically, the DPU directed Eversource to “work quickly and collaboratively with the DOER” to figure out the utility’s new capacity blocks and base compensation rates (BCR) and to “resolve other issues” related to the merger (207).

Since the DOER has already gone through an official competitive procurement process to determine the BCRs for each service territory, the DOER does not expect to change the capacity blocks or BCRs for Eversource's two service territories. The DOER intends to "remove any reference to WMECo from program documents." Eversource's two service territories will now be referred to as "Eversource East and Eversource West instead of NSTAR and WMECo, respectively" (SMART Program Launch). 

Customers are still unable to transfer AOBCs across service territories. According to the Order, customers are only allowed to transfer AOBCs across ISO-NE load zones (28). The DPU says, “AOBCs may be allocated across load zones, but the Department will not direct the Distribution Companies to transfer AOBCs between utilities” (74). According to the DPU, the “costs and burdens” of instructing the distribution companies to transfer AOBCs between territories outweighs the benefits. Solar advocates, on the other hand, argue that the ability to transfer these credits across service territories would “increase equitable SMART Program access” and would be significant to solar development for low-income customers (55). The DPU is hesitant to move away from its precedent, which “prohibits customers of one…Company from paying for the costs of a program that benefits customers of another company” (74).

Equitable access to the SMART Program

Blue Hub Capital—formerly known as Boston Community Capital—is featured throughout the SMART Order, advocating for increased access to and participation in solar incentive programs by low-income households. Low-income households are defined as “residences with a household income of at or below 60 percent of the state median income” (46). According to Blue Hub Capital, these households “pay a disproportionately high percentage of their income for energy costs as compared to higher income households resulting in arrearages and utility shut-offs.” In Massachusetts, Blue Hub Capital says, the energy burden for low-income households is higher than the national median.

The SMART Program includes different types of added incentives for low-income solar development. Several commenters have expressed that these adders will not be enough to remove the barriers preventing these customers from signing up for the program— as seen during prior solar incentive programs. According to the Order, “although 33 percent of the Commonwealth’s total affordable housing stock is located in Eversource’s NEMA load zone, only 7.5 percent of solar under SREC I and SREC II Programs serving affordable housing is located there because it is challenging to find sites to develop solar and allocate credits to offtakers in this load zone” (58).

Many of these barriers are acknowledged by the DPU, but it is clear that the DPU “does not have sufficient information” on this subject matter, a phrase repeated several times throughout this section (70). From the DPU’s diction, it seems that Massachusetts needs to conduct more studies focused on increasing solar access to low-income customers. For example, the DPU claims that there is “no information” (60); they are “without evidence” (63); the “record is unclear” (70); or that they “do not have comprehensive data” (62) that would help the Department in its decision-making.

At this point, it is unacceptable for the Commonwealth of Massachusetts to say that the “record is unclear” on how to increase access to solar energy for low-income customers, affordable housing residents and environmental justice (EJ) populations. The barriers to solar for low-income customers are not new. While creating the next solar incentive program, the DOER made great effort to engage the public by facilitating numerous working groups and stakeholder meetings. It is possible, however, that the DOER did not sufficiently reach out to people within EJ populations (73). The voices of these communities must be heard.

If there are still gaps in the existing pool of research and literature on low-income solar projects, then why are we hesitating to fill them? For Massachusetts, a successful transition towards a clean energy grid should not leave these customers behind. Vote Solar, an industry advocacy organization, says that being intentionally inclusive of these communities is at the core of finding the solution to expanding access to solar energy. We will need to wait and see SMART’s impact on low-income customers as the DPU “monitor[s] the progress of target population participation” in the program (73).

The wait isn't over just yet...

Before the SMART Program officially opens its door to applicants on November 26, the Distribution Companies needed to submit a revised SMART Provision to comply with DPU’s directives in the Order by October 16, 2018. After DPU review, each utility must then submit a company-specific SMART Provision for review. The Distribution Companies will file their first respective SMART Factors for approval by November 1, 2018. The DOER estimates that the compliance tariffs will likely be approved within 30 to 45 days from the date of the Order (September 26, 2018). Once the compliance tariffs are approved by the DPU, we jump into the SMART Program.

In the meantime, the DOER is hosting a number of "SMART Launch Presentations" at various locations in Massachusetts. During these presentations, the DOER will present the final details of the SMART program. 

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