DOER Releases Emergency Regulations for Solar Massachusetts Renewable Target (“SMART”)

On June 5, 2017, the Massachusetts Department of Energy Resources (“DOER”) filed much anticipated emergency regulations (225 CMR 20.00) to govern, at least the DOER’s part of its proposed Solar Massachusetts Renewable Target (“SMART”) program. The regulations build on a proposal released January 31, 2017 (discussed previously, here) and represent the Baker administration’s first formal step in following through on the legislature’s 2016 mandate to DOER in An Act Relative to Solar Energy commanding that it develop a new statewide solar incentive program.

SMART is to follow and perhaps ultimately to replace the successful combination of the state’s net metering and SREC carve-outs to the state RPS that propelled Massachusetts to a 7th in the nation ranking for solar installation and employment of more than 14,500 jobs in the solar industry.

As emergency regulations, they take immediate effect in the form initially filed (although there is little that actually goes into effect), subject to final adoption within 90 days of their being filed after a public comment period. (More below on the public comment process.)

So how do they look? In short, they are spare on key details and require some changes for drafting precision but, most importantly, they omit to state key specifics as to the remaining process, especially on the DPU side of things.  The regulations include some additional surprising and potentially undesirable features, such as sector caps and limitations on adders.  Above all, what was once conceived of as a pre-packaged DOER-designed program that would be shepherded through a coordinated noncontroversial DPU approval process may now become a significant task for the DPU requiring active stakeholder involvement.

Timing for completion of the remaining steps and commencement of the program remains uncertain but conceivably may go well into – and maybe even past – 2018.

Program Design

The basic design of the program is unchanged from the initial ‘straw’ proposals. As promised, SMART will be centered around a “buy-all-sell-all” (capacity, power and attributes) tariff-based block program to support an additional 1,600 MW of new solar generation to span eight blocks (200 MW in each block), with base compensation rates and adders declining 4% between each successive block. (Smaller utility territories may choose to have fewer blocks with a higher rate of decline.) Within each block, utilities will purchase an amount of program capacity that is proportional to the amount of overall load that they serve.

The tariff based payments will run for terms of 20 years for larger projects (greater than 25 kW) and 10 years for smaller projects (25 kW or below). Compensation will be centered on a base rate and supplemented with several “adders” and a “subtractor” in an attempt to incent certain types of projects and locations.

Base rates for projects between 1 MW and 5 MW are set in a one-time competitive procurement for 100 MW of projects. Each utility will develop a request for proposals by October 3, 2017 for their share of the initial 100 MW. Additionally, they must hold a bidder conference to address questions at least 15 business days prior to the deadline to submit proposals and make decisions on selection within 30 business days of the close.

Ceiling prices ($0.15 for projects 1 MW to 2 MW and $0.14 for projects 2 MW and above) for the initial procurement remain unchanged and there is no floor price for the auction; however, projects in the initial procurement will now be ineligible to receive compensation adders and may not be net metered.

The utility auctions will establish a clearing price for the proposals in each size category. The statewide base compensation rate is the weighted average of the clearing prices in the 1 MW to 2 MW band, and the indices for calculating rates on projects below 1 MW are unchanged.

Finally, compensation will still be net of energy value—the payment will depend on the difference between the program’s rate and the cost of the underlying electricity—and will vary depending on whether the project is “standalone” or “behind-the-meter.”

Eligibility Requirements

While the regulations do not make major changes to project eligibility requirements, they do add significant and relevant details.

As before, projects are limited to 5 MW AC, and the new regulations contain anti-segmentation provisions—one project per a parcel or building may qualify for the program and properties subdivided after January 1, 2010 must demonstrate an unrelated reason for the subdivision in order to qualify multiple projects. Additionally, projects must have a commercial operation date on or after January 1, 2018 and cannot be previously qualified and operational under SREC I or II. There are special exceptions for replacement and relocated projects.

In addition to the strict land-use performance requirements contemplated by the proposal, the regulations detail new design and performance requirements for projects located on agricultural farmland. Such projects must not interfere with the continued use of the land for agricultural purposes and may be no greater than 1 MW. They must also meet several design standards such as minimum height requirements.

Compensation Changes

Perhaps most surprising, the regulations announced three new limits on incentive payments. While the proposal said simply that adders could be combined, the regulations limit such combinations to one adder per category on units above 25 kW. In practice, that means such projects may only claim one location-based and one off-taker-based adder in addition to the energy storage and new solar tracking adders. Units 25 kW or less may only claim the energy storage adder. A new $0.01/kWh adder is included for projects that include trackers.  Additionally, for units above 25 kW, compensation cannot exceed 230% of the base rate. Finally, each individual adder may only be applied to 320 MW of projects across all utility service territories and blocks.

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