Uh-oh! Massachusetts Solar Carve-Out II Program (SREC II) is full!

ANDOVER, Mass. - Feb. 19, 2016 - PRLog -- In a shocking and potentially disastrous announcement on Friday, February 5, 2016, Michael Judge, Director, Renewable and Alternative Energy at the Massachusetts Department of Energy Resources (DOER), explained that the full capacity of the Massachusetts Solar Carve-Out II Program (better known as SREC II) may have been reached for projects larger than 25 kW DC. Specifically, “DOER has qualified or received applications for over 854 MW DC of capacity,” exceeding the program limit of 660.595 MW for such projects.

If DOER’s reviews confirm that the program is full, new commercial solar projects in Massachusetts, already suffering under the severe limitations imposed by the net metering cap in National Grid service territories, may come to a screeching halt. DOER provided a progress update on February 18, 2016, indicating that incomplete applications have until February 25, 2016 to be finalized. After that date, DOER will complete its review and announce the status of the program.

A bit of background: SREC II is a program devised by the state to incentivize solar renewable energy projects in Massachusetts. The original program (SREC I) had a goal of developing 400 MW of solar capacity statewide. SRECs, or solar renewable energy certificates, were created through the generation of solar power and awarded to owners of solar facilities; the SRECs are then sold to investor-owned utilities (IOUs) as a means to compensate energy producers in addition to the value of the actual electricity produced, thereby helping to make solar energy more affordable. The value of the SRECs in the original program typically exceeds the value of the power itself. This structure has dramatically reduced payback periods and has helped spur huge growth in the solar marketplace in Massachusetts over the past several years.

In fact, the initial program was so successful that the 400 MW capacity mark was reached well ahead of the original program goals. Therefore, a new program was created in 2014 (dubbed SREC II) with a revised goal of 1600 MW of new capacity (inclusive of the original 400 MW target). The SREC II program was quickly filling up, so that in January 2016 DOER created the Small Generation Unit set aside, reserving 120 MW of the capacity remaining under the Program Capacity Cap at that time, for PV projects with a capacity equal to or less than 25 kW DC. This meant that larger projects, those over 25 kw in size, had only a total capacity of 660.595 MW in the program.

Friday’s announcement indicated that qualified projects (those already approved for SRECs) and applications for new projects now total 854 MW, well above the target [UPDATE: as of 2/18/16, applications received now appear to total 986MW]. If the program capacity has been reached, additional projects will not enjoy the additional revenue afforded by the SRECs and such projects would likely be severely limited going forward.

Is there any hope? Well, maybe. According to Mr. Judge, DOER must review each of the applications to verify that they qualify according to the program rules. The sheer number of applications received just before the deadline implies that some applicants may have been “stuffing the ballot box” – i.e., submitting applications prematurely in order to secure a place in line. Should the DOER’s review conclude that a project application is incomplete, the applicant would have two weeks [February 25, 2016] to submit a complete application or have the application rejected. One possible shortfall that could lead to the rejection of an application would be the failure to secure an Interconnection Service Agreement (ISA) from the local utility.

Time will tell if the program capacity has actually been reached or if applicants were prematurely jumping the gun and trying to preserve capacity. Even if so, the DOER announcement indicates that another renewal (SREC III?) may be needed to maintain the momentum that is quite evident in the state’s solar build out.

If the program is full, there will no doubt be tremendous pressure placed on the state’s politicians to up the cap once again.