Efforts to Raise the Net Metering Cap
Solar energy has been an important success story in Massachusetts over the last eight years. Three major programs have contributed to this success: retail rate net metering*, solar renewable energy certificates (SREC), and federal tax credits currently scheduled to expire at the end of 2016. Based on these policies, the Commonwealth became a national leader in solar energy, reaching Governor Patrick’s initial goal of installing 250 MW several years early. This prompted the Patrick Administration to embrace a new goal of 1,600 MW of solar capacity, which the Baker Administration endorsed in early 2015.
Unfortunately, Massachusetts solar success is in jeopardy because of legislative caps on the amount of solar capacity that can qualify for net metering, although very small projects are exempted. In past years, whenever there was a danger of hitting these caps, the Massachusetts Legislature agreed to raise them. However, policymakers, including the Baker Administration, have come to demand that increasing the caps should come along with a long-term framework for solar policy. So when the caps were reached in National Grid service territory this March –preventing municipal, community-shared, and low-income solar projects from moving forward in 171 cities and towns across the Commonwealth – no action was forthcoming. At a hearing before the Joint Committee on Telecommunications, Utilities and Energy (TUE Committee) on June 2 , Acadia Center and many other stakeholders proposed a long-term framework – the Next Generation Solar Policy Framework for Massachusetts – that has now been endorsed by 66 organizations and encouraged legislators to act swiftly.
The Senate Acts
As the August recess loomed, it looked as if the Legislature would not address this pressing issue. But in late July, as the Senate prepared to debate a climate adaptation bill, an amendment was unexpectedly introduced to address the net metering caps.
The amendment received bipartisan praise on the floor of the Senate, was attached to the underlying climate adaptation bill, and ultimately the full bill passed unanimously. The solar provisions of this bill would:
- Immediately increase the caps to 1600 MW to accommodate the Commonwealth’s current solar goal and eventually eliminate the caps;
- Allow the Department of Energy Resources to reform the SREC programs or replace them with a new incentive program;
- Grandfather existing solar projects under the current programs; and
- Starting in 2017, allow the Department of Public Utilities (DPU) to adjust the distribution portion of retail rate net metering for solar projects that consume less than 67% of generation onsite.
Overall, this Senate solar amendment is great in the short run and would set the stage for strong continued solar growth after 1,600 MW, including community shared solar, but leaves at least two major questions unanswered. What levels of solar capacity should Massachusetts aim for after the 1,600 MW goal is achieved? And how, if at all, should the DPU use their authority to adjust net metering credits?
The Baker Administration Weighs In
Subsequently, the Baker Administration released its own solar bill, which contains some strong provisions, but also raises at least two major concerns.
On the plus side, the Administration bill would:
- Provide an immediate increase in the net metering caps and the ability for DPU to increase the caps further without legislative action;
- Extend the current programs through 1,600 MW;
- Allow reasonably good grandfathering provisions for projects that start operation before 1600 MW is reached;
- Continue full retail rate net metering for small projects after 1,600 MW is reached;
- Create a new incentive program for post-1,600 MW.
Unfortunately, because the increase in the caps is modest, the bill creates a new problem — needing the DPU to raise the caps again as early as next year. Relatedly, the net metering caps are never eliminated – even for new projects that would be covered by a new net metering structure – so the net metering caps would still be an issue far into the future.
Perhaps even more troubling, the Baker administration’s bill would substantially cut net metering credit value for larger projects after 1,600 MW of solar capacity has been installed. For community shared solar, low-income solar, and municipal projects, the transmission and distribution credits would be entirely removed and other types of projects would receive even bigger cuts. This would significantly affect all types of projects, but it could be a particular challenge for community shared solar and low-income solar. These types of projects are not able to offset the credit value decrease with an increase in incentive programs because of restrictions on how revenue from incentives can be distributed. This change risks setting solar policy back significantly and certainly won’t propel solar forward in Massachusetts.
Formally, the Senate bill containing the solar amendment (S.1979) has been sent to the House Ways and Means Committee and the Baker administration’s bill (H.3724) is now at the TUE Committee. This allows for a wide array of possible next steps. The Legislature should hit the ground running on these issues when the legislative recess ends in September.
Massachusetts would benefit if the many good aspects of both bills moved forward, such as strong grandfathering for existing projects and a continuation of current programs until 1,600 MW is reached. Both bills would benefit from a solar goal beyond 1,600 MW and a final bill should provide for a bigger cap increase than the Baker administration’s bill. But the major gap between the two bills is the alteration of the net metering credit framework in the long run. The Next Generation Solar Policy Framework for Massachusetts has a detailed proposal on this issue that is fair to solar generators and other ratepayers – adjusting net metering credits based on the long-run value of solar generation. Stay tuned for a coming blog post on how this would work in Massachusetts and similar proposals across the region.
* Net metering allows customers to generate their own electricity in order to offset their electricity usage (through, for example, a rooftop solar PV system). Net metering can lower a customer’s electricity bill by reducing the amount of electricity that the customer buys from the distribution company (the utility). Net metering allows customers to receive credits for any electricity that they generate but do not use. Each distribution company in MA has a cap, and after it is hit, no more customers can use net metering. Small systems, primarily those under 10 kW of capacity, are exempt from the caps. For more info see: http://www.mass.gov/eea/grants-and-tech-assistance/guidance-technical-assistance/agencies-and-divisions/dpu/net-metering-faqs.html#6
Mark LeBel is a staff attorney at Acadia Center working from the Boston office. He primarily works on transportation issues, including electric vehicles and clean fuels, and grid modernization issues. Mark holds a JD with honors from NYU School of Law and an AB with honors in Applied Mathematics with a focus in Economics from Harvard College.