Massachusetts has one of the best solar incentive programs in the country: the SREC II Program. Along with the 30% federal investment tax credit and the state’s net energy metering (NEM) program, the SREC II Program makes going solar very attractive in the Commonwealth. However, the program was slated to be replaced with the less lucrative SMART Incentive Program in January 2018.
Fortunately, the SMART program delayed it's launch for the Massachusetts Department of Public Utilities (DPU) to provide final approval. The date of final approval is unspecific, but a June 27 meeting presentation expected it "in the coming weeks." As of today's article update (8/22/2018), the SMART program is still under final review...
Here's why you should opt into the SREC II program if you can, as soon as you can.
SREC II vs. SMART
To get started here's a quick overview comparison of the two programs:
|Credit value is dictated by market and uncertain||Credit value is set by program in a declining block structure and guaranteed|
|Credit value is greater||Credit value is lower|
|Net metering and incentive credits are calculated independently||Compensation rate that accounts for NEM and incentive credit, reducing the combined value|
|10-year program for residential solar||10-year program for residential solar|
A History of the SREC II Program
Massachusetts introduced its SREC II Program in April 2014 to continue the success of the original SREC Program.
An SREC, or Solar Renewable Energy Credit, is given to a homeowner for every MW hour of solar electricity their system generates. A 7kW system generating 8.5MWh would therefore earn 8.5 credits annually. Homeowners can sell their credits to a utility in an open market in which credit value is dictated by market supply and demand.
For example, if utilities face a shortage of credits, homeowners selling credits will receive a higher price for each MW hour of energy they generate. On the other hand, if many homeowners are trying to sell their credits, the price will drop.
MA's SREC credits fluctuate price based on utility demand for clean energy (source)
The design of the system allows for the market, rather than the government, to regulate the price of solar electricity. It also provides a secure method for utilities to comply with Massachusetts’ Renewable Portfolio Standard (RPS). An RPS requires utilities to obtain a certain percentage of their annual generation from renewable sources. In Massachusetts’ case, the RPS rises 1% annually and will reach 25% by 2030. This means that utilities’ demand for SRECs will likely grow each year as the state’s RPS increases.
Time is Running Out for SREC II
The SREC II Program was initially supposed to end in January 2017. However, the Massachusetts Department of Energy Resources (DOER) conditionally extended the program until the new Solar Massachusetts Renewable Target (SMART) incentive program is enacted, which was supposed to be January 2018 but is now up in the air (but likely soon).
Before the extensions, given a floor price per SREC is $170 per MW, if your 7kW system generated 8.5MWh utilities would pay you a minimum of $1,445 before fees. SRECs are awarded for 10 years, and though the actualized price of SRECs may vary from year to year, you can expect to earn much more over the period than what you would receive solely through NEM.
Under the terms of the SREC II Program’s extension, projects installed now until the SMART Program commences will receive 80% of a credit for each MW hour of solar electricity generated. Using the previous example, you would receive 6.8 credits and your initial payment would be $1,156 before fees. This amount would then vary over the next 9 years depending on the market.
Though the lower rate under the extended SREC II Program may sound discouraging, it is a much better deal than what’s coming next: the SMART Incentive Program.
Lower Incentives for the SMART Solar Program
SMART is aimed at developing 1,600 more megawatts of solar power in Massachusetts, which is twice the current amount in the state. Though that’s a great goal, there are some key elements that make the SMART Program distinctively less lucrative for the majority of residential solar projects. The program has not been officially approved by the Department of Public Utilities but it is unlikely that the major components will change.
In its current form, SMART will use a declining block structure made up of 200 MW increments. Each block will receive a lower incentive rate. SMART will utilize a competitive auction process to procure the first 100 MW of solar energy from commercial solar installers with projects over 1 MW. These installers will be bidding on the lowest incentive price per kWh that would still make their project viable (i.e. make business sense). For example, one bid might be for $0.12 per kWh, while a second bid might be $0.10 per kWh. The project for the second bid will win and set the incentive amount for all commercial projects in the first block.
What does this have to do with your home's solar system incentive?
Residential solar systems will receive twice the incentive amount of the winning commercial bid. However, this price will only apply to the first 200 MW of solar generation installed.
The next 200 MW block will receive an incentive 4% lower, and the incentive will continue to decrease for each subsequent 200 MW block until the state reaches its goal of adding 1,600 more megawatts of solar. Furthermore, the actual incentive awarded in each block will vary depending on what the value of energy is under NEM.
The credits homeowners receive from the SREC II program are calculated independently of their revenue from Net Metering. As shown in the graph above from the Massachusetts DOER’s presentation on SMART, though incentive level may fluctuate due to market variation, the amount is added on to “Energy,” or the amount of revenue from NEM.
The SREC II Program is one of the most lucrative solar financing options in the country, so if you’ve been considering going solar don’t wait until the SMART Incentive Program rolls out.
To get the best deal on solar, take advantage of the SREC II pricing system and the ability to completely combine your credits with your net metering revenue. If the uncertainty of prices under SREC II worries you, our financing partner Sungage offers a program that will take your SRECs and pay you a 10 year fixed rate regardless of how the market fluctuates. Alternatively, they could also take the amount off your loan payments.
To take advantage of SREC II before time runs out, get initial estimates for solar system size and pricing on our homepage.