On March 26, 2021, Governor Baker signed Chapter 8 of the Acts of 2021, “An Act Creating a Next-Generation Roadmap for Massachusetts Climate Policy” (the “Climate Act” or “Act”). Many of the Climate Act’s headline provisions involve greenhouse gas emission reduction targets, utility offshore wind energy purchasing requirements, and other items that are exciting and commendable as part of the Commonwealth’s quest to decarbonize but do not directly impact solar development in Massachusetts. The Climate Act does, however, contain specific provisions relating to net metering and property tax matters that could have a significant impact on solar development. This post focuses on the net metering provisions. A companion post focuses on the provisions relating to property tax and PILOT agreement matters.
A Boost for Behind-the-Meter Private Net Metering Facilities
After much lobbying by the solar industry pressing the legislature to understand that the SMART program does not fully or fairly compensate behind-the-meter facilities, the legislature responded by including Section 85 in the Act to provide more net metering opportunities for such facilities.
Simplifying somewhat, Section 85 of the Climate Act amends the net metering statute to exempt (some) behind-the-meter facilities from the existing net metering program cap and provide these exempt facilities with “full value” Class II net metering credits (those calculated at the “full value” of basic service, distribution, transmission, and transition kWh charges) or Class III net metering credits (those calculated at the “full value” of basic service, transmission, and transition kWh charges) as opposed to market net metering credits worth only 60% of full value.
Background
Prior to this change, the net metering statute contained two caps for participation in the program set as a percentage of historic peak load for each electric distribution company. The first cap, applicable to public net metering facilities (defined by statute) and commonly known as the “public cap,” currently stands at 8%. The second cap, essentially applicable to everything that does not qualify for the public cap and commonly known as the “private cap,” is at 7%. All solar net metering facilities in the private cap that submitted an application for cap allocation after September 26, 2016 only generate market net metering credits (60% value).
The statute already had a cap exemption and Class I net metering credits (full value) for certain small facilities – those 10 kW AC or less on single phase lines and 25 kW AC or less on three phase lines. While the solar industry pushed to expand that category to all 25 kW or less facilities, the legislature did not incorporate that change into the final version of the Climate Act. It does, however, add language to remove the cap on “new” private behind-the-meter net metering facilities and allow such facilities to generate Class II or Class III (full value) net metering credits.
To be eligible for this new cap exemption and full value credits, a facility must: (1) be a renewable Class II or Class III net metering facility; (2) serve on-site load other than station service or parasitic load; and (3) have an “executed interconnection service agreement on or after January 1, 2021.”
The Climate Act does have one little wrinkle for these facilities – it provides that any net metering credits that are “accrued” in excess of annual electricity consumption (set at April-May), shall be “paid out” at the relevant utility’s avoided cost rate.
While on its face this is a fantastic opportunity for behind-the-meter facilities to leverage their value in serving load in ways that were limited by the SMART program’s structure (no alternative on-bill credits for behind-the-meter facilities) and the absence of net metering cap space in some service territories, there is also a fair amount of parsing of this language that will need to be done through regulatory proceedings at the Department of Public Utilities (“DPU”).
As is often the case with legislation of this heft and breadth that was heavily negotiated in a conference committee, implementation will require thoughtful and timely executive action. There are certainly some aspects of these changes that DPU will need to clarify with the benefit of substantial stakeholder input. For example, the phrase “executed interconnection agreement . . . on or after January 1, 2021” raises the question of which net metering facilities are cap exempt: facilities with an executed interconnection service agreement ("ISA") in effect on January 1, 2021 or those with an ISA executed on or after January 1, 2021? In addition, DPU will need to define “accrued” net metering credits and otherwise detail which credits will be paid out at the lower value of avoided cost. Will this mean any net metering credits generated above the annual load or will it be only those credits that “accrue” in the host customer account and are not allocated to other electric accounts or otherwise consumed?
As a result of these changes, developers of behind-the-meter solar energy projects should plan to take a close look at whether and how to take advantage of these new features of the Massachusetts net metering program, including whether to participate in the net metering program in addition to or instead of the SMART program.
Greater Flexibility for Sale of Market Net Metering Credits
Section 84 of the Climate Act amends the net metering statute to provide that a solar net metering facility can allocate market net metering credits (the 60% value credits mentioned above) to customers of any distribution company in Massachusetts. Prior to the Act, a net metering facility interconnected with the distribution grid of a particular distribution company could only allocate credits to other customers of the same distribution company and then only to customers located within the same ISO New England load zone. (There has been an opportunity for a standalone solar facility participating in the Commonwealth’s SMART program to generate alternative on-bill credits that could be sold to other utility customers regardless of load zone but only within the same distribution company territory.)
This minor modification of statutory language is likely to be of very significant benefit to community solar facilities located in Western Massachusetts that were developed under the net metering program (both the SREC II program and SMART) and that generate market net metering credits. Such facilities will now be able to sell their net metering credits to customers in the more populous Eastern portion of the state.
Victory for Small Facilities Serving Public Entities
In a somewhat convoluted belt-and-suspenders approach, Sections 82 and 83 of the Climate Act amended the net metering statute to allow Class I net metering facilities (those that are 60 kW AC or less) to qualify as public net metering facilities. Previously, the statutory definition of a public net metering facility had been limited to Class II or III facilities.
Implementation Hurdles
While these provisions of the Climate Act take effect immediately, accessing the benefits of these provisions is likely to take some time. DPU’s net metering regulations and the distribution company net metering tariffs will need to be updated to reflect these changes and solar stakeholders can expect that DPU will take the view (as it has with previous net metering statutory changes) that both of these steps will have to occur in order to implement these changes in law, and stakeholders should be prepared to participate actively in the regulatory process to ensure that the resulting regulatory and tariff changes are consistent with the ambitious climate policy roadmap laid out by the legislature.
FURTHER INFORMATION
For further information about these matters, please contact Courtney Feeley Karp at cfeeleykarp@klavenslawgroup.com or 617-502-6284 or Jonathan Klavens at jklavens@klavenslawgroup.com or 617-502-6281.
DISCLAIMER
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