Mass Solar Carve-Out........It's Full

For most in the solar industry, it became apparent sometime in early March 2013 that the Massachusetts Solar Carve-out (SCO) was going to get filled up sometime before 2013 is over. Whereas in late 2012 many smart people (self included) thought that the SCO would run through mid-2014 based on the rate of solar build-out experienced during 2012. Unfortunately, we are currently facing a solar development train wreck in MA as the SCO now appears to be fully subscribed. MA DOER confirmed this in an e-mail sent out to stakeholders earlier today. The relevant excerpt is shown in the graphic below. 

DOER Excerpt.jpg

The DOER has been flooded with Statement of Qualification (SQA) applications since everyone has been racing to get their projects qualified before the music stops. There was supposed to be a queuing system for the SCO program, but the SCO filled up before it could be implemented.

At ETE, we've attended the hearings for the development of the post-SCO policy and Gov. Patrick's administration is very dedicated to advancing the solar industry in the state. The successor program to the SCO is expected to accommodate approximately 1,600 MW of new solar build and will likely be a REC based program that fits within the current Class I Renewable Portfolio Standard or some slight modification thereof.  

We should all learn a lot more about the future of solar in MA at the stakeholder meeting scheduled for June 7th. Although DOER is working with urgency on this, and they've moved quickly in the past (remember, the SCO was promulgated under "emergency regulations"), it won't be quick enough to prevent a major slowdown in solar development. Developers who require net metering under the private sector caps will likely continue with their interconnection processes, but nothing large is going to get financed until there is clarity regarding the successor solar program.

DOER will need to be sensitive to the needs of REC purchasers and therefore an entirely new REC program or carve-out is unlikely. REC purchasers are deregulated energy suppliers, investor-owned utilities, and other load serving entities. A new REC program would constitute retroactive rate making and would probably lead to a lawsuit (per the TransCanada suit of 2010). As a result, the REC "factor" approach within the Class I REC program mentioned by DOER during the March stakeholder meeting seems like the path of least resistance as REC compliance buyers would likely not view that as a change in law or retroactive rate making. 

If you are building a commercial scale solar array that you will own yourself and are comfortable with an IRR around 10%, it still makes sense to go forward as you are likely to get REC prices north of $100/MWh in the new regime and the provisions for 50% bonus depreciation on solar assets sunset at the end of 2013 (unless Congress decides to renew it again on Jan 2nd of the new year like they did in 2013).

Anyhow, the SCO filled up really quick and caught us a little off-guard. Hopefully the regulations for the new solar program come out really soon.