Massachusetts Debates Net Metering

A joint committee of Massachusetts senators and representatives is approaching a decision on the future of solar power. The decision will determine how to modify net metering, an incentive policy that is critical to most solar projects' financial viability. Meanwhile, utilities are unable to plan for their systems and developers have been forced to ice projects at all stages.

The debate centers on two themes familiar to many states: retail versus wholesale rate compensation and fairness to non-solar ratepayers.

Reaching the net metering caps - by utility and customer type
The data in this graph are from MassACA.

For the fifth time, renewable developments have exceeded the state's net metering tariff caps. To clear tariff waitlists and unlock projects that are on hold, the legislature must write a new law. 

A likely outcome, according to local news sources, is that the committee will raise caps by 2 percent as a temporary fix while working on more comprehensive legislation.

The legislative session ended in mid-November after the committee's first official meeting. There was no consensus. The discussion opened again on Jan. 6 with high hopes of resolving the issue.

Though lawmakers in the committee have had informal conversations since its creation in November, they have met formally only once and their second meeting is likely to be weeks away.

Speaking about the committee's progress, Senate Minority Leader Bruce Tarr told State House News on Jan. 11 that he understands the importance of lifting the cap soon but that committee members have not yet reached common ground.

The committee has struggled to reconcile the differences between the House’s, the Senate’s, and Governor Baker's versions of net metering bills. The differences between these versions reflect the broader debate.

 

Existing Incentives

Like many states, Massachusetts has a restructured utility market; utilities no longer own all of the electricity-generation assets and competitive suppliers have entered the picture. Massachusetts utilities pay their net metering customers for the electricity that their solar panels produce and feed into the grid. Customers on this tariff are compensated for these "net" kilowatt-hours.

Installed solar capacity in Massachusetts
The data in this graph are from the Executive Office of Energy and Environmental Affairs.

Another key renewable-energy policy in Massachusetts is the Renewable Portfolio Standard’s "Solar Carve-Out," which compensates solar facilities for the Solar Renewable Energy Certificates (SRECs) that they produce. An SREC, equivalent to 1 MWh of solar electricity, can be traded or used to meet compliance obligations.

The recently funded Solar Loan Program is Governor Baker's early Christmas gift to solar developers: $30 million towards fixed-rate low-interest loans for rooftop solar PV. But without movement on net-metering legislation, the fund is not enough to change the market for solar.

Solar energy has taken center stage in the debate about renewable-energy incentives. Nearly eight times the installed capacity of wind, solar continues to boom in Massachusetts. Wind growth has been basically flat since 2013 with 89 percent of the 107 MW installed before 2013.

 

Net Metering Caps

Of the 46 states with net metering, Massachusetts is one of the 20 states that employ net metering caps.

When a utility reaches the cap, which is measured in megawatts of installed renewable-energy capacity, additional projects must enter the tariff's waitlist. Meanwhile, those customers enroll in conventional tariffs and wait for new legislation.

In Massachusetts, each utility's cap for a given project depends on its historical peak load and the customer class. Customer classes are either public (in which a municipality or government entity owns, operates, or hosts the project) or private. Public projects are capped at 5 percent of a utility's peak load and private projects are capped at 4 percent of it.

For example, National Grid's peak historical load is 5,131 MW. Net metering public projects may reach 5 percent, or 257 MW, and net metering private projects may reach 4 percent, 205 MW.  After those limits are reached, the state legislature must raise the cap before additional projects can enjoy the benefits of a net-metering tariff.

As of the publication date of this article, the statewide private net metering cap was 84 percent full, with 73 MW of open capacity. National Grid, 99 percent maxed out on its private cap and 100 percent maxed out on its public cap, has amassed long waiting lists. Its private waiting list is 90 MW, nearly half its total current allowance of 205 MW.

 

The Net Metering Task Force

Old State House in Boston
This Creative Commons image from Flickr depicts
Boston's Old State House.

The Massachusetts legislature created a Net Metering Task Force in 2014. The task force was made up of 17 members who represented utilities, solar installers, regulators, the state bureaucracy, customers, and the International Brotherhood of Electrical Workers (IBEW). They were charged to develop a final report with a comprehensive scope.

After eight months of spirited discussion, the group came a consensus on some of the issues but still disagreed on others. The group was forced to publish two versions of its recommendations about net metering caps, net metering compensation, the expiration dates of net metering policies, and how utilities should procure renewable energy.

Reflecting on the deliberations, David Colton, an Easton town adminstrator who is on the task force, said that both solar advocates and utilities came to the table "dug in" to their positions.

For a town like Easton, who recently saved its community $200,000 per year by installing two megawatts of solar, solar is a no-brainer. "[The benefits are] all going back to the schools," Colton said. "If you send a dollar to National Grid, it ends up in the pocket of an investor."

Cities and towns in the state generally enjoy significant autonomy. The state has a policy known as ‘home rule’ that establishes this. Town meetings are powerful, but electric utilities present a challenge to home rule because they operate regionally and are governed by state entities - the legislature and the Department of Public Utilities (DPU).

 

Load Defection and Equity

A key issue at the heart of many disagreements between solar companies and utilities concerns the balance of costs among solar and non-solar ratepayers. There are income differences between those who can easily afford to install solar and those who cannot. Utilities sometimes take the side of low-to-moderate-income ratepayers whose costs might increase.

Some researchers say that when people install solar to lower their bills with the savings made possible by net metering, it drives up other customers’ bills, which in turn makes them seek out solar power.

This positive feedback loop is driven not by solar development, but by tariff design. In California and Massachusetts, customer rates are assessed per kilowatt-hour. Their bills are determined by usage to encourage energy efficiency.

But utilities’ costs are almost entirely fixed and are therefore not as flexible. Utilities' own bills are not priced per kilowatt-hour but are instead based on yearly fixed payments to generators, ad-hoc maintenance for transmission and distribution infrastructure, and other incremental expenses. These costs rarely scale with electricity consumption.

However, for customers, the fewer kilowatt-hours they use due to solar, the less they contribute towards these fixed costs. That leaves non-solar customers to shoulder an increasing burden, which further incentivizes them to install solar.

 

Competing Priorities

Unlike California’s Public Utilities Commission, which plays a decisive role in electricity policy and disagrees with utility recommendations at times, Massachusetts' DPU is a minor player and has a relatively peaceful relationship with utilities.

Instead, the legislature holds the reins.

The House and Senate both consist of around 85 percent Democrats, but that does not mean their viewpoints are similar on net metering. In fact, the House and Senate often disagree.

The House version of the solar bill included a minimum bill, but the Senate version did not. Because this feature provides guaranteed payment for utilities, the solar industry tends to fight this option, but the task force was required to analyze it. Because it was so contentious, the task force spoke in general terms and left further modeling to the DPU.

In line with the minimum bill, the House bill also sets net metering compensation at the wholesale rate (5¢/kWh). The Senate version sets it at the retail rate (17¢/kWh), and Governor Baker's bill strikes a balance between the two. The joint committee will ultimately set the rate in its final "Solar Bill," which the governor must sign before it becomes law.

 

Future Prospects

Since net metering began in 2007, Massachusetts has raised its cap four times. Again the utilities have nearly reached their limits. But this time, the task force's extensive work and the intense debate has offered utilities, solar companies, and regulators a glimpse of comprehensive renewable-energy reform.

Senate President Stanley Rosenberg seemed to understand the urgency. He said he is concerned not only about people's projects and investments, but also about people's jobs.

Whether legislators set up a quick fix by raising the cap or create a new incentive regime entirely, they will impact Massachusetts' fuel mix today and far into the future.

 

Correction: The Massachusetts SREC program is open for business.

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