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Massachusetts DOER Finalizes Rules for Solar Carve-Out Program

by William Friedman

The Massachusetts Department of Energy Resources (DOER) announced that it re-filed its Solar Carve-Out Emergency Regulation without any changes, thereby finalizing the temporary regulations that had been in effect for the past three months and bringing stability to the existing Solar Carve-Out program.  The Solar Carve-Out program enables participating solar units to produce valuable Solar Renewable Energy Credits (SRECs), which can be sold on the open market or at auction.  Earlier this year, DOER announced that applications exceeded the Solar Carve-Out program’s 400 MW cap.  In late June, DOER released the Emergency Regulation to deal with the program’s oversubscription and to offer a path forward for projects that were uncertain as to whether they would still qualify for incentives under the Solar Carve-Out. 

Under Massachusetts law, however, the Emergency Regulation could only remain in effect for three months if not finalized into law.  Finalizing the regulations gives all projects relying on the terms of the Emergency Regulation certainty that the previously announced requirements and construction timeline will remain in force.

Along with its announcement of the re-filed regulations, DOER released a draft guideline for qualified Solar Carve-Out units seeking an extension of the December 31, 2013 construction deadline.  Under the regulations, in order to qualify for the Solar Carve-Out, a solar project must be completely installed and receive authorization to interconnect from the local distribution company by December 31, 2013.  If a project does not meet the December 31 deadline, it may receive an extension until June 30, 2014, if it can demonstrate that it expended at least 50 percent of its total construction costs by December 31, 2013. 

The draft guideline explains that DOER will only consider costs associated with building the generating units as construction costs, and will not take into account legal fees, permitting, or financing costs.  The guideline provides two alternative methods for calculating the total construction costs of a generation unit.  First, the owner or operator can multiply the solar unit’s direct current capacity by the corresponding dollar per watt cost, as set out in the table below.  Second, the owner or operator of the generation unit can provide DOER with actual demonstrated costs.  All eligible costs must be incurred no later than December 31, 2013.

No later than January 6, 2014, all generation units seeking an extension must submit their applications for extension to DOER. DOER will notify applicants of its decision within 30 days.

Finally, if a project can demonstrate that it is ready to begin operations and is only waiting for a distribution company to issue its authority to interconnect, the interconnection deadline is extended indefinitely.




Massachusetts DOER Extends the Availability of Valuable Solar Carve-Out Program

by William Friedman

As previewed at a recent solar stakeholder meeting, the Massachusetts Department of Energy Resources (DOER) released its emergency regulation on June 28, 2013 to address the excess of applications for Massachusetts’ Solar Carve-Out program and to guide the program’s future.  Qualification for the program enables a solar project to sell valuable Solar Renewable Energy Certificates (SRECs) to distribution companies, which are required to fill a minimum percentage of their electricity sales with generation qualified under the Solar Carve-Out.  Last month DOER reported that an unexpectedly high volume of applications for the Solar Carve-Out blew through the program’s 400 megawatt (MW) cap, creating uncertainty as to which projects would qualify under the program. 

The emergency regulation sets the 400 MW cap aside and permits all projects that meet certain conditions and construction deadlines to qualify for the Solar Carve-Out.  The conditions in the emergency regulation were previously announced by DOER at its solar stakeholder meeting and described in an earlier article. The emergency regulation changes the date for extension of the construction schedule from March 31, 2014 to June 30, 2014.   In addition, the emergency regulation clarifies that all solar projects under 100 kilowatts will qualify for the Solar Carve-Out so long as they have submitted their Statement of Qualification Application and receive authorization to interconnect or permission to operate by the effective date of the next Solar Carve-Out program or June 30, 2014, whichever is earlier.

Along with new qualification requirements, the emergency regulation changes the formula used to calculate the compliance obligation of retail electricity suppliers, who must fill a minimum percentage of their electricity sales from generation qualified under the Solar Carve-Out program.  The updated compliance obligation formula is based on the new Program Capacity Cap, which will be announced by DOER on or before July 31, 2014, and will reflect actual supply beyond 400 MW.  However, DOER will provide exemptions to the additional compliance obligations for load that was under contract before the effective date of the emergency regulation.

Under Massachusetts law, the emergency regulation is only effective for three months unless DOER gives notice and holds a public hearing to formalize the rule.  According to the explanatory release accompanying the emergency regulation, DOER plans soon to schedule a public hearing and comment period in order to finalize the regulation.




Massachusetts DOER Unveils Emergency Regulation to Address Oversupply of Solar Applications

 by William Friedman

At a recent solar stakeholder meeting, the Massachusetts Department of Energy Resources (DOER) outlined its emergency regulation that will address the recent influx of applications for the Massachusetts Solar Carve-Out.  The Solar Carve-Out program, which was established in 2009, is currently capped at 400 megawatts (MW) of installed capacity.  DOER announced this spring that the program cap had been exceeded months earlier than expected with applications totaling more than 550 MW.  While reaching the 400 MW cap four years before Governor Patrick’s target is a remarkable step for the Commonwealth of Massachusetts and its renewable energy goals, it left the solar industry in Massachusetts, particularly those developers with projects on the waiting list, with questions about solar’s present and future in the state.

In Massachusetts, participation in the Solar Carve-Out enables a solar system to produce Solar Renewable Energy Certificates (SRECs).  For each megawatt-hour generated by a qualified solar system, it receives one SREC, which can be sold on the open market or at auction.  Distribution companies purchase SRECs to meet their compliance obligations under Massachusetts’ Renewable Portfolio Standard, which requires distribution companies to fill a minimum percentage of their electricity sales with generation qualified under the Solar Carve-Out.

At the stakeholder meeting, DOER announced that it will scrap the 400 MW cap; all projects that applied to DOER and executed an Interconnection Service Agreement with a local distribution company by June 7, 2013 will qualify under and be able to participate in the existing Solar Carve-Out if they meet prescribed project construction deadlines. Specifically, a solar project must be completely installed and receive authorization to interconnect from a local distribution company by December 31, 2013.  If a project does not meet the December 31 deadline, it may receive an extension until March 31, 2014 if it can demonstrate that it expended at least 50 percent of its total construction costs by December 31, 2013.  Finally, if a project can demonstrate that it is ready to begin operations and is only waiting for a distribution company to issue its authority to interconnect, the qualification deadline is extended indefinitely.  DOER also intends to recalibrate the Solar Carve-Out compliance obligations of distribution companies to match the extended cap. The emergency regulation is expected to be published this month.

DOER’s emergency regulation comes as welcome news to developers and investors who faced the possibility that projects in which they have already placed substantial investments would lose access to the potentially significant revenue stream created by the Solar Carve-Out.  DOER’s extension of the Solar Carve-Out program demonstrates the agency’s preference for solar projects that are well invested and significantly developed and its awareness of the vital role that the Solar Carve-Out has played in the rapid growth of the solar industry in Massachusetts. 

DOER has also begun the rulemaking process for a new Solar Carve-Out to meet Governor Patrick’s recently announced goal of an aggregate of [...]

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