The Massachusetts legislature passed a compromise energy bill Tuesday evening with several wins for the clean energy industry.
The bill raises the renewable portfolio standard, such that the state’s renewable energy supply will need to increase by 2 percent annually from 2020 through 2029, before reverting back to 1 percent. The language also authorizes the study of an additional 1,600 megawatts of offshore wind.
In a rare move, lawmakers stepped in to overturn a demand charge for residential solar customers that utility Eversource had gotten approved by regulators. The bill also imposed a minimum share of clean energy required to serve peak hours and set an energy storage deployment target of 1,000 megawatt-hours by 2025.
The bill did not deliver on the solar industry’s desire to lift the net-metering cap on larger systems.
It awaits Governor Charlie Baker’s signature.
If you’re interested in understanding more about how ongoing policy developments in Massachusetts are impacting the solar and storage landscape in greater New England, be sure to attend GTM’s New England Solar and Storage Forum in Boston on October 23.
Demand charge remanded
Eversource earlier this year won approval for the first rooftop solar demand charge approved by regulators for a major utility. It would be non-coincident with the system peak, and it would apply to customers who lacked advanced metering, meaning they would have little means of knowing when they will actually get charged.
The new legislation clarifies the legal framework that Eversource used to impose the charge.
“It’s one of these rare instances of the legislature inserting themselves into this discussion on behalf of customers,” said David Gahl, director of state affairs, Northeast, at the Solar Energy Industries Association. “The final language doesn’t prohibit the utility from proposing demand charges, but it provides more direction about how those demand charges would be calculated.”
Going forward, any demand charges would have to be pegged to system peak demand.
Additionally, the language requires that “the distribution company regularly informs affected customers of the manner in which demand charges are assessed and of ways in which said customers might manage and reduce demand.” That’s a watered-down version of the Senate bill’s language, which would have required advanced metering so that the customers could find out for themselves what their real-time usage looks like.
This outcome sets a precedent for other utilities that might be considering charges to impose on their own solar customers.
Should other utilities go for a charge that doesn’t steer individual behavior toward peak demand reduction and imposes costs without giving customers tools to respond to them, it’s possible that such action will draw political backlash. It’s reminiscent of the legislative reversal of Nevada regulators’ infamous net metering decision.
Multiple wins for storage
The bill establishes a clean peak, whereby regulators will set a minimum percentage of kilowatt-hour sales during seasonal peak hours that must be met from clean energy. This ensures that the growth of renewables generation overall does not rely exclusively on an expansion of gas peaker plants to meet the fast ramps required to balance the grid.
The clean peak will start at the current baseline in 2019 and gradually increase each year by at least 0.25 percent. This will likely incentivize the deployment of energy storage, to make clean energy dispatchable for peak hours.
Baker, who has emerged as one of the most vocal supporters of energy storage policy currently residing in a U.S. governor’s mansion, had introduced this idea himself back in March.
The 1,000-megawatt-hour target also puts additional urgency behind the administration’s ramp-up in storage deployment. The Department of Energy Resources had previously set a goal of 200 megawatt-hours by 2020.
That sets up a parallel with New York Governor Andrew Cuomo’s target of 1,500 megawatts of storage deployed by 2025. Both states are racing to jump-start an energy storage industry hub in the Northeast.
Pour one out for net metering
Meanwhile, the legislation did not address raising the net-metering cap for commercial and community solar projects. Three utility territories have hit their caps already, which means projects need to pencil out economically without the benefit of full retail-rate compensation for solar exports to the grid (the cap doesn’t apply to residential systems).
As far as policy outcomes go, the removal of net metering is easily the solar industry’s least favorite. The withdrawal symptoms elicited bitterness in the solar industry’s otherwise positive comments on the passage.
“The bill failed to raise the net metering caps, a move that means some Bay State businesses and communities that want to go solar are unable to do so,” said Sean Gallagher, SEIA’s vice president of state affairs. “Across the state, solar projects, jobs and millions of dollars of investment remain stalled.”
“While it helpfully clarifies the structure for new charges for solar customers, there remains uncertainty in the Commonwealth’s solar market due to caps on net metering that have been hit,” said Janet Gail Besser, EVP of the Northeast Clean Energy Council, in a statement.
It would be hard to blame market uncertainty on the caps themselves, as they were transparently communicated years ago. Projects that received a NEM allocation prior to the cap will continue coming online, likely into next year. New projects in areas that have hit the cap must contemplate receiving a wholesale market rate, just a fraction of the compensation that would have come from net metering.
The state has not embarked on any grand proceedings to chart a future beyond net metering. The Solar Massachusetts Renewable Target incentive program is in the final stages of regulatory approval; it’s not a replacement for NEM, but will provide a new and different stream of ratepayer funds to encourage solar development.
“The DOER understands the stop-and-start nature of the Massachusetts solar industry isn’t good for business and purposefully included a mechanism within the SMART regulation that would circumvent any NEM cap-related constraints,” said Austin Perea, a solar market analyst at GTM Research.
At the end of the day, solar developers in Massachusetts face high costs for permitting, labor, land acquisition and racking, but also enjoy an unusually generous policy environment.
“You do have higher costs, but you have by far the most lucrative incentive market in the U.S., and you have high retail rates,” he said.