Shayle Kann and the GTM Research analyst team give GTM Squared members insight into off-the-cuff internal discussion and debate on breaking news from solar, grid, and energy storage markets in this column.
Cory Honeyman Senior Analyst, Solar: Big news out of Massachusetts. The state legislature just approved a 3 percent increase to net energy metering (NEM) caps plus authorization of minimum bills.
Up next, though, post-SREC II rules need to be established to unfreeze development for commercial and industrial (C&I) projects.
Nicole Litvak Senior Analyst, Solar: You can read the full bill here.
MJ Shiao Director, Solar Research: SREC II also affects residential as well, which doesn't get any relief from the NEM cap expansion. Currently there's a small allocation of capacity left for new residential systems to qualify for SRECs, and that could disappear over the next quarter or two.
Shayle Kann Senior Vice President, Research: The NEM cap increase also decreases NEM compensation for commercial by ~40 percent. But there's 25-year grandfathering for existing systems. Take that, Nevada.
Austin Perea Analyst, Solar: Hmmm... According to industry sources, NEM compensation is also going to decrease 40 percent for community solar as well. Looking through the bill now for the precise language. I suppose that's just for commercial subscribers to community solar projects?
MJ Shiao Director, Solar Research: Actually, that leads to an interesting question: How do you enforce a lower compensation rate for virtual net energy metering (VNEM)? Does the utility now have to compare hourly production data from the site versus hourly consumption data?
And if that's true for community solar, that seemingly has a big effect on economics for residential subscribers. Solar produces during the day, but residential load peaks late afternoon/evening. That misalignment means that the community solar project would seemingly be compensated at 40 percent less than retail for the residential subscribers' chunk. Tough to see economics penciling there. Or you increase acquisition costs, because now you need a larger subscriber list of smaller subscriptions.
By the way, all of this seems like a big accounting nightmare for virtual NEM in general.
Shayle Kann Senior Vice President, Research: VNEM projects don't net out from their customers. So basically 100 percent of output is considered an "export." That's why this is a big hit for VNEM but not so big for on-site (because it's 60 percent of retail on monthly net excess, not hourly).
I assume community solar is the same way, though I don't know that for sure.
Also, a little birdie told me that the bill retains full retail credit for on-site public projects, which is a pretty big carve-out.
Cory Honeyman Senior Analyst, Solar: One other potential impact is that this legislation might encourage more customer-sited projects for C&I customers that are 100 percent self-consumption in order to max out on full retail rate NEM credits.
And also, it's important to note that the new NEM rules take effect once the 1,600-megawatt target is hit, not when SREC II is complete. The Massachusetts Department of Energy Resources has been considering issuing emergency regulations to allow for additional projects above 1.6 gigawatts to qualify under SREC II if they commence construction by the end of 2016. So the final language in the bill sets a clear and limited ceiling on how much additional capacity can be grandfathered in under current NEM rules.
Shayle Kann Senior Vice President, Research: Just one clarification -- on-site projects wouldn't have to be 100 percent self-consumption. They would just have to not have any monthly net export. So you'd just have to undersize the system a bit, but not necessarily mess around with load.
Julia Pyper Senior Writer, Greentech Media: Question -- I thought Massachusetts NEM caps didn't apply to residential. So how does raising the cap help if compensation for C&I and community is lowered?
MJ Shiao Director, Solar Research: NEM caps don't apply to residential but SREC II limits do; that's where residential fits in.
The NEM caps have been hit for non-residential systems in Massachusetts so systems built beyond the 1,600 MW limit until the new cap is hit will be compensated at a 40% reduced rate, but it's still higher than wholesale pricing.