Massachusetts Legislature Passes Controversial Solar Energy Bill
After months of negotiation, the Massachusetts Legislature finally reached a compromise to raise the caps on the state’s controversial “net metering” program. The net metering program enables solar (and other alternate energy) producers to sell excess power their systems produce back to the grid for a credit on their account. However, the previous law capped the amount of energy that power companies can accept as a percentage of each company’s highest historical peak load. That is, power companies are currently limited by law from accepting more than 4% at private companies and 5% at public companies of the most electricity historically consumed by their customers at any one time. These restrictions threatened to make the fledgling solar energy industry in Massachusetts a victim of its own success. By the end of 2015, some advocates reported that 171 Massachusetts communities had already reached their cap, including much of Eastern Massachusetts. As these caps were reached, new solar projects were stuck in the shade—with owners unable to capitalize on their solar investments. Time was also of the essence because federal renewable energy tax credits—which help further incentivize solar development—are set to expire at the end of 2016. Solar projects hoping to take advantage of these credits need to begin construction soon, and some worried that without an update to the law would result in millions of dollars in solar investment moving out of state.
Although the Senate introduced legislation to alter the cap in July 2015, and Governor Baker introduced his own legislation a month later, the House waited until November 17—two days before the legislature was scheduled to enter a recess—to file it’s version: H. 3854. Although members of the House and Senate joint committee tried to quickly negotiate a compromise between the two proposals, after a short 90-minute session they conceded the issue was too complex and that it would take more time than they had before the recess to reach an agreement. The House bill—which was considerably more conservative than the Senate or Governor’s versions—was quickly decried by many solar advocacy groups. While the House agreed with the Senate that the cap should be raised to 1,600 megawatts—a 2 percent increase over existing caps—it also included utility industry friendly provisions allowing for the addition of a “minimum monthly reliability contribution” to net metering bills, reduced future net metering compensation rates from retail to wholesale prices above the 1600 megawatt cap, included a provision switching all net metering compensation rates to wholesale rates after 15 years, and organized a solar incentive program under the ultimate oversight of the Department of Public Utilities. The House’s last-minute submission drew objections from some lawmakers, including Senate President Pro Tempore Marc Pacheco, who referring to the House’s proposal as “the utility bill.”
Of course, the question remains whether the net metering program is in the best interest of the public. Some argue that net metering—particularly residential net metering— essentially shifts electricity distribution costs onto energy customers that do not produce solar energy. This amounts to a subsidy for alternate energy producers from non-alternate energy producers. In fact, a recent MIT study and a report from the Louisiana Public Service Commission both concluded that residential net metering should be abolished altogether, in part because pushback from utilities companies will threaten solar power development in general. However, many solar advocates dispute these conclusions. In fact, several other state reports have found either neutral or positive effects from net metering programs—including studies from Vermont, Nevada, and Mississippi. And while net metering remains controversial, states have overwhelmingly chosen to adopt some sort of net metering approach, with only 4 states (South Dakota, Tennessee, Mississippi, and Alabama) currently rejecting any sort program. However, states almost all impose some sort of cap on net metering credits, with only 3 states (Arizona, New Jersey, and Ohio) imposing no net metering capacity limits.
With the mixed opinions on the effectiveness of net metering credits, Massachusetts lawmakers cannot be blamed for taking a cautious approach, and ultimately, that is what happened when Governor Baker signed a compromise bill into law in April 2016. The new law raises the net metering cap by 3% for public and privately owned installations while decreasing the value of the credits for power sold by many of the solar producing customers by 40%. Residential customers, municipalities and small commercial projects will continue to receive retail rate credits and existing projects will be grandfathered in at the retail rates they receive now for 25 years. According to the State House News, lead Senate negotiator Sen. Benjamin Downing (D-Pittsfield) stated, “Solar will continue to grow and play a vital role here in Massachusetts and its going to do so in a cost effective way.”
This, however, is not the end of the issue. The Legislature will likely have to revisit the caps within a year when they are again reached. California and New York have both put into place a long-term and comprehensive plan for increased solar energy production and net metering. Massachusetts should do the same in the next session, which begins in January 2017.
Tyler L. Spunaugle is from Miami, Oklahoma and graduated from Dartmouth College majoring in both Philosophy and Native American Studies. Tyler is scheduled to graduate from Boston University with a Juris Doctor in Spring 2016, with active participation in two of BU’s clinics. After graduation, Tyler will be working as a staff attorney for the Government Accountability Office in Washington, DC.