MA Solar Production Tariff Proposal

With the expiration of SREC II, Massachusetts' solar incentive program that uses solar renewable energy credits, a new program has been proposed, which replaces SRECs with tariffs.

In the proposed program, there are a number of benefits to the new solar tariff structure, which have been outlined in the Next Generation Incentive Straw Proposal, among them include:

-Long-term revenue certainty to generators

-Greater cost-certainty to rate payers

-Opportunity for greater synergies between incentive and net metering programs

Qualification Under the Proposed Program

Projects that are already qualified under SREC I or SREC II, would not qualify for this new solar incentive program.

In order to qualify for this new program, which utilizes Capacity Based Tariff Rates (kW AC), a project would have to be connected to the Massachusetts electric grid and interconnected after January 1, 2017. The tariff, which is primarily based on project size, provides a 10-15 year fixed price tariff depending on size, with a maximum project size of 5 MW per parcel of land. (Note that the project cannot be located on designated wetlands, forest lands, open space, or other protected natural habitats.) The incentive's generation begins upon interconnection.

Additional adders would be available for location, off-takers, and other policy incentives, and may be combined to encourage the project being sited in the most optimal location to maximize on the tariffs available.

For example, a 2,000 kW project (under Capacity Based Tariff Rates) that was building mounted (which is considered a location based adder) on low-income property (off-taker based adder) and was not being net metered (policy based adder) would get a tariff incentive of .15+.02+.04+.05 = .26/kwh for 15 years.

However, the tariff is paid out “Net of energy value”, meaning the project would receive the difference between the tariff value and it’s power purchase agreement (PPA) value as the tariff incentive.

To continue the above example, the project has a PPA for 20 years for .15/kwh. For years 1-15 the project receives .15/kwh produced under the PPA, plus .11/kwh of tariff incentive so that each kwh of solar energy produced earns the project .26.  In years 16-20 the tariff expires and the project earns the base .15/kwh under the PPA.

In this way, the incentive is received at a stated value at the time the power is generated.  The project does not have to wait for the SREC auction or sell off the SRECs to a third party in order to monetize them.  This makes modeling and cash flow more predictable.  Also, since the project is guaranteed to get the tariff value for the first 10-15 years, there is incentive to take on projects with lower PPAs, which in turn saves energy costs for the consumers of the energy produced.

It is important to note that since the new solar tariff structure is still in the proposal stage and is not currently a program, the facts in this example could change significantly.

As it stands, we are optimistic about this program, which if it passes all phases of implementation, would go into effect Summer 2017.

We hope you enjoy this issue. As always, we welcome your comments. Email info@rodmancpa.com with your feedback.


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