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May 8th, 2014

Massachusetts Launches SREC II Program

by Andrew Price, President & COO

 

Massachusetts officially launched the long anticipated solar renewable energy credit (SREC-II) program on April 25th. You can now exhale. SRECs, which are currently trading at 27 cents per kwh, are the primary mechanism supporting the solar boom in Massachusetts. Uncertainty in the rules associated with qualifying for SRECs has had project developers across the state holding their collective breath.

A brief history lesson for readers uninitiated in Massachusetts SRECs. Massachusetts established a goal of having 250 MW of solar PV capacity by 2017. The first SREC program was designed to stimulate the development of solar to achieve this goal. SREC-1 was very effective and Massachusetts zoomed past the 250 MW target four years early. As of May 1, 2014, installed solar capacity in Massachusetts was 496 MW and counting.

SREC-II has a much more ambitious goal of achieving 1,600 MW of solar PV by 2020. To put this in perspective, 1,600 MW is likely to represent more than $4 billion in capital investments. SREC-II seeks to moderate the torrid pace of development to avoid the type of boom–bust cycle that has plagued the wind industry.

If you use electricity in Massachusetts there are a few things you should understand about the SREC-II program. If you want to avoid wonky details, read the first two bullets and skip to the bottom.

  • Massachusetts is one of several locations in the US where solar PV can absolutely save you money. Even fiscally conservative companies–without green mandates–should consider solar PV. The combination of state and federal incentives makes solar PV attractive for purely financial considerations.
  • If you are not taking advantage of the solar PV incentives, you should be aware how much you are paying for them. The rich state incentives associated with the SREC and Net Metering programs are socialized among ratepayers across the state. These costs, combined with the other components of the Massachusetts RPS program, are adding 1 cent per kWh to your electricity rates and growing.
  • One digital SREC is created for each MWh generated by a solar PV system that qualifies under the SREC-II guidelines.
  • SRECs represent the environmental attributes associated with renewable solar generation. If you sell SRECs associated with a solar PV installation on your roof, you are also selling your ability to claim greenhouse gas reductions and other environmental benefits. Solar owners need to be very mindful of how they market this issue.
  • The value of an SREC-II credit is set, in part, by market forces of supply and demand. Credit prices are also heavily influenced by the overall number of SRECs required to satisfy the Massachusetts Renewable Portfolio Standard (RPS). The solar RPS requirement is adjusted each year by the DOER to keep SRECs generally in a target price range. The RPS adjustment notwithstanding, the price of an SREC is not guaranteed.
  • The SREC-II program seeks to incentivize development of smaller projects and projects located on buildings and parking lots over the “greenfield” (farmland or other undeveloped land) systems that dominated SREC-I. Large greenfield systems are increasingly seen as displacing valuable farm land or other green space. Large solar installations are also less dependent on the SREC incentive due to their economies of scale.
  • Factors are used to set the portion of generation eligible to receive SRECs from projects in different Market Sectors. For example, solar canopy systems installed over parking lots receive 1 SREC for every MWh generated while building mounted solar receives only 0.9 SRECs for every MWh generated. SREC factors are presented for each Market Sector in the below table.
  • Large green-field solar projects are now lumped into the Managed Growth market sector. Not only do these projects qualify for only 0.7 SRECs for every MWh generated, they also must compete for limited space under a capacity cap. Only 26 MW of Managed Growth sector projects will be allowed in 2014 and 80 MW in 2015. Each August, the Managed Growth cap will be set for the compliance year two years into the future.

Make perfect sense? If not, give us a call. CES has represented buyers (e.g. colleges, universities, building owners) on the purchase and/or ongoing management of more than 100 MW of solar projects to-date. We will walk you through the pros and cons of the transition from SREC-I to SREC-II and make sure that you are taking advantage of the unique solar incentives available to end-users in Massachusetts.

SREC-II Market Sector Table

Market Sector

Generation Unit Type

SREC Factor

A

1. Generation Units with a capacity of <=25 kW DC
2. Solar Canopy Generation Units
3. Emergency Power Generation Units
4. Community Shared Solar Generation Units
5. Low or Moderate Income Housing Generation Units

1.0

B

1. Building Mounted Generation Units
2. Ground Mounted Generation Units with a capacity > 25 kW DC with 67% or more of the electric output on an annual basis used by an on-site load

0.9

C

1. Generation Units sited on Eligible Landfills
2. Generation Units sited on Brownfields
3. Ground Mounted Generation Units with a capacity of <= 650 kW with less than 67% of the electrical output on an annual basis used by an on-site load

0.8

Managed Growth

Unit that does not meet the criteria of Market Sector A, B, or C.

0.7

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