One of the top state markets for commercial solar in the U.S. is set to have a worse-than-expected year in 2016.
Last night, the Massachusetts legislature failed to pass a compromise bill that would have lifted the net metering cap for commercial solar in the state. And with the legislative session over until January, lawmakers in Massachusetts won't address the cap for another couple of months.
The solar industry has already reached its cap in National Grid's service territory, and will soon hit its limit throughout the rest of the state. The solar industry says nearly 200 towns and cities across Massachusetts are already out of reach for commercial PV development because of uncertainty around compensation rates.
The legislature's inability to pass a last-minute bill could put dozens of large installations in jeopardy next year. With lead times of a year or more, developers need to start working on projects immediately in order to qualify for the 30 percent federal Investment Tax Credit.
"With the ITC cliff looming, even if a net-metering cap extension does get approved when the next legislative session starts up, many developers may have insufficient time to bring projects on-line," said Cory Honeyman, GTM Research's senior analyst for solar markets.
Retail net-metering rates for non-residential projects are capped at 5 percent of historical peak load for municipal buildings and 4 percent of peak load for private buildings.
Solar companies and utilities have been lobbying Massachusetts lawmakers over changes to the net metering program for the last six months. The solar industry has called for increasing the cap and keeping net metering compensation at the retail rate (around 17 cents per kilowatt-hour). In exchange for lifting the cap, utilities in the state want to pay for non-residential solar electricity at the wholesale rate (around 5 cents per kilowatt-hour).
This summer, Massachusetts Governor Charlie Baker filed a bill that would have raised the cap by 50 percent for public buildings and 40 percent for private buildings. It also called for replacing the state's solar credit trading market once 1,600 megawatts of solar are installed.
"This is mostly a good bill; it’s mostly good public policy that would provide a pathway forward for solar in Massachusetts, but which would also lay the statutory groundwork for a next generation of solar rules that would more efficiently use ratepayer investments in renewable energy," wrote Borrego Solar's Dan Berwick at GTM this summer.
However, Berwick and others worried about another component of the bill: the switch to wholesale compensation.
"The monthly net-excess proposal represents a serious threat for solar viability in Massachusetts, and would dramatically slow the solar momentum here," he wrote.
The Senate crafted a bill that would have maintained retail net metering for commercial solar projects, with a few modest reductions for community solar and large commercial projects.
In the final hours of the legislative session, however, lawmakers in the House and Senate couldn't reconcile their differences.
Jesse Grossman, co-founder and CEO of the commercial developer Soltage, called the situation "unfortunate."
"The short-term result will be tens -- if not hundreds -- of megawatts of solar that will not be installed," said Grossman. "The worst thing that a market can do is to introduce timing uncertainty in what has heretofore been an exemplary and orderly market rollout."
Soltage currently has 10 projects operating in Massachusetts cumulatively worth 27 megawatts of capacity.
Grossman's concerns are line with what analysts are predicting.
"Residential solar will be fine in Massachusetts and will continue to grow like gangbusters since it's not subject to the NEM cap. But commercial solar -- and in particular, community solar development -- could miss out on over 100 MW of additional development in 2016," said Honeyman.
According to GTM Research, non-residential solar installations in Massachusetts dropped from 46.6 megawatts in the first quarter of 2015 down to 26.6 megawatts in the second quarter, largely because of permitting challenges and the uncertainty around net metering.
For a detailed overview of policy changes around the country, read the State Bulletin from GTM Squared.