The state’s solar developers face a surprising new challenge now that a generous incentive for the industry has quietly evaporated.
For years, the state has issued what are known as solar renewable energy certificates, credits homeowners and businesses earn and can sell when they generate a certain amount of solar power.
To control costs, the state restricts the amount of solar power that can be financed in this way, and state officials informed the industry on Friday that the cap has been hit. There was essentially a run on these certificates in recent weeks, as solar panel builders rushed to get in line on behalf of their customers as the cap drew near.
Now the question is: What’s next?
“The industry’s on hold, basically,” said John DeVillars, managing principal at Boston solar developer BlueWave Capital. “Until there’s clarity on the next incentive program, very little activity will take place.”
The certificates’ depletion comes amid another, more public expiration in the industry: the fate of net metering. While the certificates can be bought or sold every time a certain amount of solar power is generated, net metering is the practice of selling your excess solar energy back to the grid for credit on your electric bill.
The state has caps for net metering as well, and those limits were reached last year in National Grid’s service area.
Legislative leaders failed last fall to resolve dueling versions of bills that would lift those limits, and the issue now remains mired in conference committee negotiations. The House supports a bill that’s friendlier to the utilities, while the Senate wants a more generous system championed by solar advocates.
“Massachusetts has been one of the top three markets for commercial scale solar,” said Mike Hall, chief executive of California-based Borrego Solar. “But I would say Massachusetts has more uncertainty than any of the other large solar markets in the US right now.”
Senator Benjamin Downing, co-chairman of the Legislature’s energy committee, said it’s still possible that the issue could be resolved soon. But it’s also possible that the solar debate could get wrapped up into the debate over a broader energy bill. That would mean a final decision might not happen until July, the last month of the Legislature’s formal session.
“I think [the loss of solar certificates] means we have to come up with a long-term solar policy and stop talking about it,” Downing said.
The solar certificates are far more lucrative than net metering — often twice as valuable — in terms of their value to solar power owners. Even solar supporters have been talking about replacing them with a less expensive incentive. Some anticipated these certificates would run out in the second half of the year. But few people expected they would grind to a halt so quickly, before policy makers had an opportunity to create a replacement.
The cap is hit when the amount of installed solar capacity reaches 1,600 megawatts statewide. The state encourages developers to reserve the incentives ahead of time, however. Right now, only about 1,000 megawatts of solar panels are installed. But more than enough developers filed their plans in recent weeks that the balance essentially has been spoken for already.
One potential trigger for the recent run: the state Department of Energy Resources in early January said it would set aside 120 megawatts for small, house-sized projects, to help individuals finance projects on their homes’ rooftops. Similarly sized residential projects are also exempt from the net metering caps.
After the announcement, developers of bigger solar projects quickly began lining up for the remaining capacity. On Friday, the state energy agency issued a memo informing developers that anyone filing after Feb. 1 would now be stuck on a waiting list.
“When there’s any sort of threshold like that, ... there’s a real push for folks to try to take advantage of those opportunities before they go away,” said Stephen Pike, interim chief executive of the quasi-public Massachusetts Clean Energy Center.
Energy Resources spokesman Peter Lorenz said Governor Charlie Baker’s administration is committed to smoothly managing the end of the solar certificate program and working with lawmakers to develop an alternative solar program.
Supporters say solar power improves the grid’s reliability and reduces the need to run older, polluting plants, and that the costs per solar panel are dropping as the industry matures. With dozens of projects stalled, they say thousands of construction and installation jobs could be at stake.
But the solar industry finds itself at odds with the big utilities, Eversource Energy and National Grid, and Associated Industries of Massachusetts. They argue that these incentives unfairly drive up electricity costs in the state for people and businesses who don’t use solar power. For example, National Grid on Monday said its customers in the state collectively paid $218 million for solar renewable energy credits and more than $63 million for net metering reimbursements in 2015.
Last week, AIM circulated an ad claiming that the average homeowner paid an extra $83 in 2015 to support solar power in the state, and that the typical manufacturer paid $750,000 last year. AIM is lobbying on Beacon Hill to significantly reduce the net metering credit, to make it similar to what other power plants receive for selling their electricity.