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Northeast - Shedding Light on Potential Problems with Enhanced Incentives for Solar Power in Massachusetts
By Joe Dalton, Director, Government &
Regulatory Affairs, GDF SUEZ Natural Gas & LNG NA
GDF SUEZ Energy North America, Inc. is
an enthusiastic advocate of renewable energy development done
correctly. But as the chill of winter gives way to the warm glow
of the spring sun, we are troubled by the implementation of a
new program in Massachusetts to provide incentives for solar
energy development.
The Massachusetts Department of
Energy Resources (DOER) is in the process of promulgating final
regulations to implement a section of recently passed
legislation, the Green Communities Act of 2008, that creates a
“Solar Carve Out” purchase requirement within the existing Class
I Renewable Portfolio Standard (RPS) program in the
Commonwealth.
However, even though the rules are not
final, they are in effect. GDF SUEZ, our customers and all
Massachusetts suppliers and customers must already comply with
the new requirements; this is part of the revised Regulation for
RPS Class I, 225 CMR 14.00, which
incorporates the solar carve-out requirements and was issued as
an Emergency Regulation on January 8, 2010.
DOER held a
public hearing March 2, 2010, on the proposed final regulation,
and took public comment, but has yet to issue a final
regulation. The requirement is in effect, however, because of
the Emergency Regulation issued in January.
According to
DOER:
“The RPS Solar Carve-Out is a market-based
incentive program to support residential, commercial, public,
and non-profit entities in developing 400 MW of solar
photovoltaic (PV) across the Commonwealth.
“All
regulated and competitive Retail Electricity Suppliers that
serve the Massachusetts load (also known as Load-Serving
Entities) need SRECs to meet the RPS Solar Carve-Out compliance
obligation (Municipal Light Districts are exempted) . . .
“Retail Electricity Suppliers submit Annual Compliance
Filings to DOER, in order to demonstrate that they have
ownership of sufficient SRECs to meet their compliance
obligation or have submitted Alternative Compliance Payments to
meet any shortfall.”
The market-based incentive piece of
the proposed regulations is innovative in some respects. But
without amendments, the proposed regulations also have the
potential to impose substantial new costs to retail electricity
suppliers and their customers. The program’s Alternative
Compliance Payment level of $600 is nearly 10 times the amount
of current Class I RPS levels of $60.93 for other renewable
energy. Perhaps more problematic, the complex formula used to
determine the required purchase amount may have the unintended
consequence of making investments in solar more rather than less
difficult.
Through our trade association and in direct
conversations with legislators and regulators in Massachusetts,
we have advocated that DOER address two critical concerns in
order to improve the solar carve-out proposal. First, we
recommend that DOER modify its proposed regulations by following
the customary practice of the Massachusetts legislature to
exempt existing retail contracts from the new obligation.
Second, we recommend that the agency simplify the purchase
requirement as a fixed percentage going forward to provide the
proper signal to retailers so they can price these resources
accordingly and with certainty.
Left without
modifications, this new solar incentive could become a costly
disincentive for Massachusetts consumers and businesses.
Furthermore, poor program design will make it harder for
customers to manage their energy costs – and may even force them
from attractively priced, longer- term deals and into
shorter-term arrangements. In turn, the very program designed to
create a solar surge in Massachusetts may instead result in
potential new solar investments fading away.
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