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August 31, 2015

Is solar ready to ease its reliance on state money?

In 2009, the total installed capacity of Massachusetts solar panels stood at less than 10 megawatts, according to the Massachusetts Department of Energy Resources. Earlier this year, the number hit 841 MW. Meanwhile, between 2009 and 2014, the price of small solar arrays installed on residential or business rooftops was cut in half as global prices for solar panels fell, according to a recent federal report.

Massachusetts has long been one of the strongest supporters of solar development, offering various incentives to encourage families and businesses to put up solar panels. Now, though, some are asking whether the solar industry has come so far that it no longer needs nudging from the government. A new plan put forward by Gov. Charlie Baker continues offering strong support for the industry, for the moment. But it raises serious questions about how much the state will incentivize solar in the longer term. Meanwhile, the federal tax credit for solar installations is set to expire at the end of 2016, and no one knows whether it will be renewed again, as it has been in past years.

“We’re pleased that the governor has engaged and is looking to move the ball forward,” said Evan Dube, director of public policy for Sunrun, a California-based residential solar installation company that opened a new office in Marlborough this month. “We certainly look forward to engaging with him.”

Production costs down

Scott Howe, a partner with Hopkinton-based solar installer Solect, said the costs of solar production have come down so far that, depending how you run the numbers, it may already be comparable to buying electricity from the grid. But, he said, that doesn’t mean there’s no longer a need for incentives. Solect works with commercial customers, businesses that understand that mounting solar panels on the roof would help them save money in the long run, as well as providing environmental benefits. The trouble is that it can be hard for them to justify a capital expenditure if they can’t expect it to pay for itself in the shorter term — three to five years.

“They’re weighing that investment versus another machine, more people,” Howe said. “If you can’t get it in a range of a return on investment that makes sense, then they’re not going to spend the money on solar.”

The question of what, exactly, constitutes a subsidy can be surprisingly tough to answer when it comes to the solar industry. The state’s utilities argue that net metering — the requirement in Massachusetts and other states that electricity companies buy renewable energy from their customers at the same rate they sell it—is a huge subsidy. National Grid spokeswoman Mary-Leah Assad said 99 percent of the utility’s customers that don’t have solar will spend $1.5 billion through 2020 to help pay for net metering. Assad said National Grid  pays solar producers all of what they would have been charged for the same amount of power, including distribution and transmission chargers, even though they’re not providing those services.

“The amount paid to those customers is tracked and then the costs are spread over all customers,” Assad said in an email.

But solar producers question the idea that net metering is a cost for ratepayers, and a number of recent studies back them up. One report by Acadia Center, a clean energy advocacy group, found that a solar installation in Massachusetts provided 29 cents per kilowatt hour in total benefits, compared with the state’s average retail electricity rate of 17 cents.

A lot of different variables go into determining the “real value” of solar. If power is being generated at small facilities all over the state, it means less is lost in the course of being transmitted up and down the grid. Meanwhile, solar energy is usually at its strongest in the afternoon, when demand is also high. That means energy from the sun might be substituting not for average-cost electricity, but peak-demand energy made by firing up higher-cost plants.

Benefits for fossil fuels?

And then there’s the question of “subsidized compared to what?” Mark Durrenberger, president of Hudson-based New England Clean Energy, argues that there are a lot of ways oil and gas production benefits from government expenditures.

“What would you call an aircraft carrier in the Persian Gulf to the oil industry?” he asked. “What would you call the tax credits for drilling?”
Durrenberger said it’s also important to account for the costs of environmental damage and health problems that aren’t picked up by fossil fuel industries but get passed on to the public in various ways.

The governor’s plan would continue to offer solar renewable energy credits, or SRECs, for solar production until the state reaches its goal of 1,600 MW of installed solar capacity. It would also raise caps on non-residential net metering from 4 to 6 percent for private facilities and from 5 to 7 percent for public sites, and would let the Department of Public Utilities raise them higher as needed. (Residential installations aren’t subject to the cap.) National Grid, which had already hit the earlier cap, has said it could run up against the new one as soon as October.

For now, solar installers say all this seems fine, but they say the state also needs a longer-term plan to continue to keep solar on a level playing field with fossil fuels.

“We’re such a small percent of power on the grid,” Howe said. “I’d like to see governor’s office come out in excess of 20 percent of power in the state being renewable.”

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