Keeping the Solar Boom Booming

By Cynthia A. Arcate 6 April, 2012

Massachusetts state Senate began debate last week on Senate Bill 2200, An Act Relative to Competitively Priced Electricity in the Commonwealth—a huge piece of legislation which, among other things, alters parts of the Green Communities Act (GCA).

Debate on the bill will resume this week, but it’s worth noting that it has two provisions which have a critical impact on the ability of Massachusetts nonprofits to take advantage of PowerOptions’ important new solar program. Without the bill, the development of solar projects in the Commonwealth would effectively come to a standstill.

One of the improvements proposed is an increase to the net metering cap for each of the distribution utilities. This cap sets the maximum amount of wind or solar energy the utilities have to buy from a project when the output exceeds the usage on site. The cap increase would help temporarily ease the current logjam of interconnection requests at each distribution utility—the long line of customers waiting to have their renewable projects tied into the grid. Without the increased cap, the queues would most definitely deter developers from even starting the pre-development process given the low probability of coming in under the cap. The bill doubles the total cap from 3 percent to 6 percent of the total amount of peak usage on the system of each utility. The cap for private customers jumps from 1 percent to 3 percent and for governmental entities the cap is increased from 2 percent to 3 percent. Without this fix, it’s clear to us that the rush to solar development would effectively stop just as it has gotten started.

The other important proposed change in the bill provides clarity on property tax treatment for solar PV projects, particularly ones located on tax-exempt property. The current property tax is ambiguous for many entities, especially non-profit organizations that do not pay property tax. The new proposal exempts almost all solar PV projects where the output is consumed on site and sets a Payment in Lieu of Taxes (PILOT) formula for larger projects that is transparent for developers and host organizations. How valuable is a property tax exemption? Depending on where in the Commonwealth the project is sited, it could reduce the price the customer pays for the output of the solar facility by upwards of $0.05/kWh based on a very high commercial property tax rate of $30-$35/$1000 property valuation—bringing the cost down from $0.15 to $0.10 per kWh, or 30 percent. The tax rate varies by town and typically ranges from $10 – $20, which impacts a purchase power price by $0.02 – $0.03/kWh and can make projects uneconomic, adding 20 – 30 percent to the cost of power.

These property tax changes are critical to making solar projects successful in the Commonwealth. Failure to adopt them will cripple the effort and make the other incentives previously enacted under the GCA, such as the Solar Renewable Energy Credit, less effective. These issues, interconnection queues and property taxes, are good examples of how making renewable energy policy work takes more than just vision and passion. It takes on the ground execution skills and tireless work to overcome each and every hurdle.

Implementing these changes will underscore the successful components of the GCA in nurturing renewable energy in Massachusetts. The Commonwealth has made itself very attractive for solar developers, helping to achieve renewable energy goals and create new jobs. Several of the provisions in this new bill will keep up momentum in the industry and help provide for a thriving solar market. These provisions should be passed by the legislature expeditiously.

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