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Massachusetts Tweaks SREC Program

Massachusetts has released a revised set of policy recommendations aimed to stabilize and grow the solar renewable energy certificate (SREC) program.

On Jan. 3, the Massachusetts Department of Energy Resources (DOER) filed revisions to the solar carve-out portion of its renewable portfolio standard (RPS). The DOER’s proposal would establish the second phase of a SREC program and lay out a roadmap to attain 1,600 MW of installed solar capacity by 2020.

In SREC states, such as Massachusetts, the RPS requires electricity suppliers to secure a portion of their electricity from solar generators. A program provides a means for SRECs to be created for every megawatt-hour of solar electricity generated. The SREC is sold separately from the electricity and represents the “solar” aspect of the electricity that was produced. The value of a SREC is determined by the market, subject to supply-and-demand constraints.

According to the DOER, the recommendations are intended to do the following:

• Provide economic support and market conditions to maintain and expand PV installations in Massachusetts;
• Control ratepayer costs;
• Maintain growth across installation sectors and manage growth to reach 1,600 MW by 2020;
• Maintain a competitive market of diverse PV developers, without undue burdens of entry;
• Address financing barriers limiting residential and nonprofit direct ownership, without compromising a third-party ownership model; and
• Minimize regulatory complexity and maintain flexibilities to respond to changing conditions.

Mark Sylvia, DOER commissioner, says the recommendations were designed to build upon the popularity of the first SREC program while being careful to manage the growth.

“We wanted to ensure that there are a diversity of [solar] projects being installed,” Sylvia says. “We want to continue to see ground-mounted projects on landfills and brownfields being installed, but we also want to see more residential development and rooftop solar.”

So as not to repeat past missteps, Sylvia says the agency’s proposal more carefully manages the growth of solar development in the state. For example, in 2007, Gov. Deval Patrick, D-Mass., set a goal of 250 MW of solar installed capacity by 2017. However, by May 2013, the state had already met that 2017 threshold.

This time around, the DOER anticipates the annual installation of 140 MW to 200 MW of solar if the state is to meet the 1,600 MW goal.

“We wanted a strong mechanism for the further development of solar PV in Massachusetts,” Sylvia says. “We think we’ve come up with a good model moving forward.”

Among the more meaningful changes from the first SREC program is the elimination of “forward minting” of residential projects - a process where SRECs would be produced before they were generated.

To support the residential direct ownership market, the DOER will allocate $30 million of alternative compliance payments to develop - with stakeholder input - a financing support program for residential solar that would require $20 million to $50 million in loans annually at the start of the program, and $300 million to $500 million cumulatively by 2020 - a significant opportunity for the banking/financing industry.

According to the DOER, the program will be reviewed in 2016 to protect developers and ratepayers.

Rob Dewees, a partner at law firm Nixon Peabody’s energy and environment practice, explains the agency’s recommendations are designed to protect Massachusetts from the kind of market volatility experienced in New Jersey and Pennsylvania.

“The basic assumptions behind the revamped program are that with declining solar construction costs, projected increases over the next few years in wholesale power costs and the continuation of net metering, the importance of SREC revenue for developers should decline from what it has been,” Dewees says, adding that he expects the program tweaks to be a tonic for the long-term viability of solar in the commonwealth.

“Unlike some other states, Massachusetts has addressed its rapid growth,” Dewees says. “The proposed changes should keep a strong and healthy market. It’s a process that is easily understood once the rules of the road are understood.”

The DOER’s final regulations are expected to be filed by the end of March. - Mark Del Franco

 

NY Pumps $210 Million Into Renewables

New York Gov. Andrew M. Cuomo says the $210 million in initial funding for the NY Green Bank represents a new market-oriented approach to accelerate clean energy deployment and create jobs. The money combines $165 million redirected from other programs and approved by the New York Public Service Commission (PSC) and $45 million from the Regional Greenhouse Gas Initiative.

The announcement comes on the heels of the PSC’s approval of an additional $108 million in funding over the next two years for residential and commercial solar energy projects under Cuomo’s NY-Sun initiative.

With the PSC approval, the NY Green Bank is expected to open for business and offer its first financial products early this year. Cuomo proposed the creation of a $1 billion Green Bank in his 2013 State of the State address as the financial engine to help mobilize private investment in clean energy projects.

“New York’s Green Bank will target existing market barriers which currently prevent the widespread deployment of clean energy,” says Richard Kauffman, chairman of energy and finance for New York State. “Given these obstacles in financing, merely setting up a competitive market that offers the promise of choice offers only that: a promise unrealized if projects cannot obtain financing. The Green Bank is just one component of the state’s new chapter on energy policy that focuses on enabling self-sustaining private markets and reducing dependence on subsidies.”

According to the governor, the NY Green Bank will partner with private-sector institutions by providing financial products such as credit enhancement, loan loss reserves and loan bundling to support securitization and build secondary markets.

As part of its oversight function, the PSC will work with the NY Green Bank to ensure financial offerings meet the investment criteria and will review and monitor quarterly progress reports. - Mark Del Franco

 

CALSEIA Wants 30-Year Net Metering Contracts

The California Solar Energy Industries Association (CALSEIA) has joined a number of solar and renewable energy advocates in urging the California Public Utilities Commission (CPUC) to require that net-energy metering (NEM) agreements with existing customers be honored for 30 years or longer. The petition effort took the form of a letter written to CPUC President Michael Peevey.

The letter, a copy of which also went to Gov. Jerry Brown, asks Peevey to preserve the current NEM contract for all of California’s NEM consumers who sign up before the 5% cap is reached for at least 30 years from the interconnection date. The AB 327 legislation that Brown signed in October of last year requires the CPUC to establish rules under which utilities will be allowed to set new NEM rates. At issue is how long the utilities will be required to honor the rates of NEM contracts signed under the existing rules.

“Some of the language in the legislation is not exactly friendly to the solar sector,” says Brad Heavner, CALSEIA’s policy director. “The utilities are saying existing contracts should be honored for six to 10 years, and we’re saying 30 years at least.”

CALSEIA and its allies argue that uncertainty generated by AB 327 is having an adverse effect on the renewable energy market. In particular, the letter expresses concern that customers who thought they were signing up for long-term rates when they had solar power systems installed will see diminished value under a new rate scheme.

“We want the discussion to be about customer expectations,” Heavner says.

The letter was also signed by the Los Angeles Business Council; the California Cattleman’s Association; the California Association of School Business Officials; and other businesses, organizations and school districts.

The pressure campaign comes as the CPUC is preparing to issue its ruling on NEM policy in March. Renewable energy advocates are pressing for a favorable NEM decision in advance of the official ruling, hoping to take the issue off the table.

Heavner says the NEM issue in California is part and parcel with similar utility challenges to the policy across the country. - Michael Puttré

 

Senate Reform Plan
Reduces Solar Tax Credit

In December, Senate Finance Committee Chairman Max Baucus, D-Mont., proposed a sweeping set of reforms on energy-related tax incentives that would overhaul energy tax breaks offered by the government and consolidate or extend many of the provisions promoting renewable energy that are currently only temporary.

Notably, the plan ensures that all energy tax incentives would be technology-neutral and provide an equal credit to all U.S.-produced resources or technologies based on carbon emission levels.

The most significant ramification for the solar sector is the proposed reduction of the investment tax credit from its current 30% to 20%.

This aspect drew immediate fire from the Solar Energy Industries Association.

When reached for comment, industry watchers gave the finance committee high marks for its ingenuity.

“The proposal is innovative in that it’s technology-neutral,” explains David Burton, a partner at law firm Akin Gump Strauss Hauer & Feld. “It is the most thoughtful that Congress has been with energy,” he says, adding that the plan’s streamlined approach could be used as a future model when - or if - tax reform talks progress.

“Although the proposals set forth in the plan are a good way to approach energy,” Burton says, “I don’t see tax reform happening.”

John Marciano, a partner at law firm Chadbourne & Parke, agrees. “[The proposal] probably has legs,” he says. “It represents a good starting point for discussions.” Nonetheless, he cautions that he doesn’t expect further action on tax reform to heat up before the 2014 elections.

Akin Gump’s Burton calls Baucus’ rumored departure from chairing the Senate Finance Committee (to become U.S. Ambassador to China) “a setback” that would ensure the status quo remains in place.

 

Obama Orders Federal
Energy Review

President Barack Obama has directed the U.S. federal government to undertake a Quadrennial Energy Review (QER), with the first multi-agency report scheduled for Jan. 31, 2015.

Unlike the long-standing Quadrennial Defense Review, a legislatively mandated report of U.S. Department of Defense priorities and strategy, the QER is an executive order that creates a task force that essentially includes all executive departments and agencies with any effect on energy policy, production or consumption.

According to the White House, the initial focus for the QER will be the U.S. energy grid. The executive order says the nation’s infrastructure for transporting, transmitting and delivering energy is increasingly challenged by transformations in energy supply, markets and patterns of end use.

Moreover, issues such as aging, capacity, the impacts of climate change, and cyber and physical threats are to be addressed in the first QER report.

The presidential memorandum establishing the QER casts a wide net. In addition to mandated federal input, the QER task force is instructed to seek the views of state and local governments; nongovernmental, environmental, faith-based, labor and other social organizations; and academic and nonprofit sectors.

Obama says the interagency QER task force will develop an integrated review of energy policy that builds on his energy security blueprint of March 2011 and last June’s Climate Action Plan.

 

SolarWorld Files New Dumping Suit

SolarWorld has submitted anti-dumping and anti-subsidy cases with the U.S. International Trade Commission and the U.S. Department of Commerce against China and Taiwan to close what it says is a loophole in trade remedies issued in January 2013.

According to SolarWorld, the measure enables Chinese producers to evade duties averaging about 31% by assembling modules from cells manufactured in third countries. As a result, the company says, China has continued to improperly subsidize its export-intensive campaign and sell below production costs in the U.S. market to seize market share.

SolarWorld has been aggressive in its use of the courts to pursue alleged anticompetitive trade practices by China-based PV manufacturing firms, to the point of balking at mediation efforts. The company cites research, including a recent National Renewable Energy Laboratory report, that concludes China has no solar production cost advantage and so pricing is the result of anticompetitive policies. Chinese companies deny they are dumping their PV products on the market.

The Solar Energy Industries Association (SEIA) took a dim view of SolarWorld’s latest bid for legal action over perceived unfair trade practices, calling the action an “escalation.” S