TESTIMONY OF DAVID GAHL, DIRECTOR OF STATE AFFAIRS, NORTHEAST SOLAR ENERGY INDUSTRIES ASSOCIATION

ON MULTIPLE BILLS RELATED TO NET ENERGY METERING AND SOLAR MATTERS (S.1824/H.2712, S. 1835, S.1842, S.1873)

JOINT HEARING OF THE TELECOMMUNICATIONS, UTILITIES AND ENERGY COMMITTEE October 3, 2017

My name is David Gahl and I am the Director of State Affairs, Northeast for the Solar Energy Industries

Association (SEIA). Thank you for the opportunity to present testimony on these bills.

The Solar Energy Industries Association is the national trade association of the U.S. solar energy industry, which now employs more than 260,000 Americans. Through advocacy and education, SEIA is building a strong solar industry to power America. SEIA works with its 1,000 member companies to build jobs and diversity, champion the use of cost-competitive solar in America, remove market barriers and educate the public on the benefits of solar energy.

There are 45 SEIA member companies with an operating address in working in all market segments as well as many more solar companies from around the country who have local employees and do business in the Commonwealth. SEIA member companies provide solar panels and equipment, financing and other services to a large portion of Massachusetts solar projects. SEIA strongly supports legislation to raise the state’s aggregate net energy metering (NEM) caps contained in S.1824/H.2712 and recommends the legislature passes a bill raising the caps this calendar year.

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My testimony today discusses the state of the solar market in Massachusetts, explains why net metering remains a bedrock solar policy in the Commonwealth, makes the case to raise the statewide NEM caps by 5 percent this year, and describes 124 stalled solar projects currently awaiting a net metering cap allocation worth more than $78 million. My testimony will also briefly discuss several other bills under consideration by the committee. Supplemental materials are included as appendices.

I. State of the Solar Market

The combination of supportive national and state policies, growing consumer interest and declining costs of solar panels has resulted in tremendous growth in the solar industry in the United States and in

Massachusetts.

Legislation passed by Congress and signed by the President in 2015 extended the federal solar investment tax credit through the year 2021, and will provide the foundation for future solar market development in the U.S.

Installed solar system prices in the Massachusetts have decreased by 55 percent since 2012. Supportive state policies, such as net metering and the state’s renewable portfolio standard have worked together to create impressive industry growth.

In 2016 there were nearly 15,000 workers employed in the solar industry in the Commonwealth, ranking 2nd in the nation only behind California.1 As of the second quarter of 2017, Massachusetts ranks 6th in the nation with respect to the total amount of installed capacity with 1,742.8 megawatts, which equals enough electricity to serve 286,000 homes.2 Solar companies completed 455.5 MW of projects in 2016.3 Nearly $5 billion has

1 http://www.thesolarfoundation.org/wp-content/uploads/2017/02/National-Solar-Jobs-Census-2016-Appendix-A.pdf 2 https://www.seia.org/sites/default/files/2017-09/Federal_2017Q2_Massachusetts.pdf 3 Ibid Page 2 of 25

been cumulatively invested in solar projects across the Commonwealth and currently 6.12% of the state’s electricity comes from solar power.4

This economic success was built on a series of forward-looking actions by the State Legislature and the

Governor. But recent events have also created new challenges for the solar industry, and jeopardize continued solar growth in Massachusetts. The 40 percent cut in the export rate for net metering from the 2016 Solar Act, the possibility of fixed bill charges as proposed by Eversource in their general rate case, repeated delays in the implementations of the state’s new solar incentive program, and the possibility of new federal import tariffs on certain solar equipment, combined with lack of availability of net metering in most of Massachusetts, are creating a climate of uncertainty for the solar industry. Therefore, we call on the Legislature to help provide the long-term certainty needed for sustained solar growth and raise the statewide net energy metering caps this year.

II. Raise the Net Metering Caps This Year

Net metering is a billing mechanism that credits solar energy system owners for the electricity they add to the grid. For example, if a commercial customer has a solar system on the building rooftop, it may generate more electricity than it uses during daylight hours. If the building is net-metered, the electricity meter will run backwards to provide a credit against what electricity is consumed at night or other periods where the building’s electricity use exceeds the system's output. Customers are only billed for their "net" energy use. Net metering is also necessary for some of the types of solar projects that have been given special consideration

4 Ibid Page 3 of 25

by the Legislature, including community solar projects and projects on landfills and brownfields. These projects currently need net metering to be able to allocate credits to customers’ bills.

Under Massachusetts Law aggregate net metering caps have been set as a percentage of total electric distribution utility company load. For private projects, or in other words projects where there is no public entity involved, the current cap on net metered capacity is 7 percent. For a public project, or projects that involve a public entity such as a municipality, school district or other public institution as the offtaker of the power, the cap on net metered capacity is 8 percent.5 Projects must apply for a net metering cap allocation through MassACA, an entity set up to process and award allocations of net metered capacity 6

In addition to net metering, Massachusetts also has a successful solar incentive program called the Solar

Renewable Energy Credit (SREC) 2 program. Extended by the Baker Administration in early 2017, the SREC 2 program provides incentives for large commercial, industrial, and community solar projects, as well as smaller residential projects.

State incentives and net metering work together to provide value to solar customers. Incentives recognize solar’s environmental and societal benefits, and net metering fairly compensates solar adopters for the actual energy they produce. The solar industry, and its customers, need both policies to keep building solar projects and keep creating good jobs in Massachusetts.

5 Residential solar projects are entirely exempt from the net metering caps, so state net metering caps basically apply to commercial, industrial and community solar projects. 6 More information on MassACA, including information on projects awaiting cap allocations can be found here: http://www.massaca.org/ Page 4 of 25

But net metering is no longer available to many businesses and communities across the state because the aggregate net metering caps have been reached in National Grid’s, WMECO’s and Unitil’s service territories.7

Thus, more than half of the state has stalled solar projects, and the benefits that solar provides are unavailable to many customers.

III. The Legislature Should Raise the NEM Caps to Coincide with Governor Baker’s Solar Goals

Although a law last year raised the NEM caps by 3 percent and essentially addressed a backlog of solar projects that could not move forward without legislative action, this proved to be a short-term solution. As early as August 2016, National Grid reached its net metering cap once again. Furthermore, that law also reduced the value of exported energy from solar systems by 40 percent making the value proposition for many solar projects significantly more challenging.

To avoid stalled projects and ensure the continued growth of the solar market, the Massachusetts Legislature should raise each NEM cap by 5 percent for public and private projects this year as contained in bills

S.1824/H.2712, which would raise the private and public caps to 12 and 13 percent respectively.

This level of cap increase (See Figure 1) should support solar development consistent with Governor Baker’s goals of doubling the size of the solar market in Massachusetts. This long-term increase provides the kind of certainty needed to keep building solar projects and creating jobs.

7 http://www.massaca.org/ Page 5 of 25

Figure 1: NEM Cap Increase That Supports SMART Program Goal 25-250 kW 250-1000 kW >1000 kW < 2000 kW 200.0

180.0

160.0 32.0 38.0 35.0 44.0 44.0 42.0 140.0

120.0

100.0 Megawatts 121.3 80.0 117.3 121.3 109.3 109.3 112.0

60.0

40.0

20.0

18.7 18.7 18.7 18.7 18.7 22.7 0.0 2017 2018 2019 2020 2021 2022 Year

Notes: Data from Sustainable Energy Advantage on market sector development in “Developing a Post 1,600 MW Solar Incentive Program: Evaluating Needed Incentive Levels and Potential Policy Alternatives.” Assumed residential market remains uncapped per existing law. Assumed 25% of projects >1 MW would not be NEM eligible (i.e.>2 MW). Long-term ~5% NEM cap increase for public & private projects yields ~1,000+ MW.

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Failure to raise the NEM caps means businesses and communities cannot take advantage of the benefits solar can provide. That results in stalled projects, lost investment, lost jobs and firms shifting their capital to other states across the Northeast.

The price of inaction on NEM has created waiting lists of more than 51.2 MW, resulting in 124 stalled projects in certain areas of the state, totaling more than $78 million in a stranded amount of investment.

Table 1. Stalled Solar PV Projects in Massachusetts by County

County Capacity (kW-dc) Count of Projects Homes Powered Equivalent Value of projects

Berkshire 18,390.9 17 1,925 $ 28,138,031

Bristol 5,948.0 13 623 $ 9,100,501

Essex 1,233.3 11 129 $ 1,886,934

Franklin 1,458.9 5 153 $ 2,232,071

Hampden 506.3 17 53 $ 774,593

Hampshire 6,975.3 14 730 $ 10,672,148

Middlesex 2,707.0 13 283 $ 4,141,695

Nantucket 93.2 1 10 $ 142,596

Norfolk 1,251.9 10 131 $ 1,915,376

Plymouth 4,243.0 7 444 $ 6,491,729

Suffolk 30.3 2 3 $ 46,390

Worcester 8383.27 14 878 $ 12,826,403

GRAND TOTAL 51,221 124 5,362 $ 78,368,467

Source: SEIA

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A detailed list of stalled projects broken down by legislative Senate and House District can be found in

Appendix A.

IV. The Interaction Between Net Metering & SMART

Although much attention has been paid to the roll out of the Solar Massachusetts Renewable Target (SMART) program, a declining block incentive program that is delivered through a utility tariff, SMART is unlikely to be fully implemented until the middle of 2018. Furthermore, the SMART program is not a replacement for net metering, but rather a replacement to the SREC 2 incentive program. And projects enrolled in the SMART program will receive an incentive that is the difference between baseline value and the energy provided through net metering. Under the SMART program, therefore, raising the net metering caps reduces the amount of incentive provided for solar projects.

While the Department of Energy Resources (DOER) envisions having a mechanism within SMART that provides an alternative to net metering through the creation of an “on bill crediting mechanism,” this mechanism is far from settled and would also not apply to certain “behind the meter” systems, which limits its ability to serve as a net metering replacement. This administrative mechanism is currently under consideration at the

Department of Public Utilities. While SMART remains promising, significant questions remain about the level of compensation this tariff would provide, the cost recovery mechanism for the program, and other features of the utility proposal. Furthermore, with SMART not being available until at least mid-2018, the current net metering caps will continue to stall project development for nearly a year. In summary, the SMART program is not a replacement for net metering and the legislature should still act to raise the NEM caps in the

Commonwealth.

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V. Comments on Other Bills Under Consideration

A. S. 1835 – SEIA recommends that the Committee report this bill. This legislation seeks to remedy

some of the problems between community solar developers, the utilities, and community solar

subscribers. As it stands today, a project owner (developer) can only adjust the list of

subscribers and the pro rata share of their credits through filing known as a Schedule Z form

twice per year. Based on the use of this antiquated form, changes to a community solar

customer’s status can be delayed for at least six months. This legislation improves the customer

experience by allowing month-to-month changes to subscriber information. The legislation also

sets up a process for the resolution of billing issues between the parties.

B. S.1842 – SEIA recommends the Committee significantly amends this legislation or holds it in

committee. SEIA supports the use of solar disclosure forms to ensure residential customers

understand all aspects of the transaction. SEIA has developed model disclosure forms for its

member companies and these forms have been adopted for use several jurisdictions, and are

under consideration for use in New York and New Jersey. Our model disclosure form is included

as Appendix B. As drafted, this legislation is flawed.8 For instance, UCC-1 filings are placed on

third party owned systems, not the home, and are meant to show that the company owns the

system not the homeowner. The provisions related to an itemization of the total price over the

lifetime of the contract should be amended. While the total cost of the product should be clear,

a short description of the system and monthly payments should be clear, an itemized

8 Additional forms should specifically be developed for community solar customers and other market segments and it is worth noting the MA DOER has begun a process to consider the content of disclosure forms through the SMART program. Page 9 of 25

breakdown of component costs is unnecessary. Furthermore, tax law does not allow

homeowners to depreciate the cost of their system – only businesses can depreciate. Providing

a “depreciation schedule” would imply that depreciation is available for homeowners which is

misleading. We recommend modeling any disclosure requirements for residential customers on

SEIA’s existing forms

C. S.1873 – SEIA respectfully suggests that the Committee amended this legislation to remove

solar projects. The land use requirements included in the bill are already required and

implemented by the water and land use agencies. Furthermore, the SMART program, when it is

implemented next year, uses the incentive structure to steer development away from

environmentally sensitive areas. This structure was developed with the input of many solar

stakeholders and environmental parties and has received broad support. The existence of the

land use provisions in SMART make these additional regulations suggested in this bill

redundant.

VI. Conclusion

Thank you for the opportunity to submit testimony. We urge the state legislature to raise the NEM caps this year to provide certainty and allow for additional growth of the solar industry in Massachusetts. I can be reached at the contact information below.

David Gahl Director of State Affairs, Northeast Solar Energy Industries Association [email protected]

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APPENDIX A – Stalled Solar Projects Analysis

Table 2. Stalled Solar PV Projects in Massachusetts by House District District Name Representative Capacity Count Homes Value of projects (kW-dc) of Powered Projects Equivalent Barnstable, Dukes & 93.2 1 10 $ 142,596 Nantucket 1st Berkshire Vacant 44.5 1 5 $ 68,085 2nd Berkshire 14.6 1 2 $ 22,277 3rd Berkshire Tricia Farley-Bouvier 9,289.2 10 972 $ 14,212,491 4th Berkshire William Smitty Pignatelli 9,057.2 6 948 $ 13,857,455 1st Bristol F. Jay Barrows 4,405.7 2 461 $ 6,740,660 2nd Bristol Paul Heroux 23.0 2 2 $ 35,190 4th Bristol Steve Howitt 35.6 2 4 $ 54,422 5th Bristol 87.9 5 9 $ 134,472 8th Bristol 13.5 1 1 $ 20,686 9th Bristol 1,382.4 1 145 $ 2,115,072 1st Essex 57.6 1 6 $ 88,128 2nd Essex Leonard Mirra 16.4 1 2 $ 25,123 3rd Essex Brian Dempsey 11.9 1 1 $ 18,161 5th Essex Ann-Margaret Ferrante 39.1 2 4 $ 59,762 7th Essex 275.0 1 29 $ 420,811 15th Essex 11.4 1 1 $ 17,427 17th Essex Frank A. Moran 757.7 2 79 $ 1,159,220 1st Franklin Stephen Kulik 2,086.3 5 218 $ 3,192,054 2nd Franklin Lee 14.2 1 1 $ 21,711 1st Hampden 16.5 1 2 $ 25,276 2nd Hampden 330.8 3 35 $ 506,124 3rd Hampden 25.2 2 3 $ 38,480 6th Hampden 25.9 2 3 $ 39,596 7th Hampden 28.4 2 3 $ 43,437 9th Hampden 13.7 1 1 $ 20,930 10th Hampden Carlos Gonzalez 37.5 3 4 $ 57,314 11th Hampden 10.4 1 1 $ 15,851 12th Hampden 34.6 3 4 $ 52,862 18th Essex James J. Lyons, Jr. 64.3 2 7 $ 98,303 1st Hampshire Peter Kocot 388.4 3 41 $ 594,313 2nd Hampshire 5,873.1 5 615 $ 8,985,812 3rd Hampshire Solomon Goldstein-Rose 41.0 3 4 $ 62,776 1st Middlesex 47.2 3 5 $ 72,155 4th Middlesex 1,014.3 4 106 $ 1,551,940 Page 11 of 25

8th Middlesex 79.0 1 8 $ 120,870 14th Middlesex 926.8 3 97 $ 1,418,019 22nd Middlesex 938.3 1 98 $ 1,435,523 32nd Middlesex Paul Brodeur 9.7 1 1 $ 14,887 36th Middlesex 196.8 3 21 $ 301,165 2nd Norfolk 115.2 1 12 $ 176,256 3rd Norfolk 24.9 2 3 $ 38,051 6th Norfolk William C. Galvin 984.7 3 103 $ 1,506,591 7th Norfolk Jr. 77.0 1 8 $ 117,810 14th Norfolk 14.0 1 1 $ 21,420 5th Plymouth David DeCoste 435.0 2 46 $ 665,611 8th Plymouth Angelo D'Emilia 32.1 2 3 $ 49,082 10th Plymouth Michelle DuBois 77.5 1 8 $ 118,606 12th Plymouth 3,698.3 2 387 $ 5,658,430 19th Suffolk Robert DeLeo 30.3 2 3 $ 46,390 2nd Worcester 7,018.2 1 735 $ 10,737,877 3rd Worcester 286.1 3 30 $ 437,718 5th Worcester 348.5 1 36 $ 533,174 6th Worcester 145.0 1 15 $ 221,850 8th Worcester Kevin Kuros 50.1 3 5 $ 76,668 9th Worcester David Muradian 47.7 3 5 $ 73,012 18th Worcester Joseph D. McKenna 18.6 1 2 $ 28,489 GRAND TOTAL 51,221 124 5,362 $ 78,368,467

Table 3. Stalled Solar PV Projects in Massachusetts by State Senate District District Name Senator Capacity Count of Homes Value of Projects (kW-dc) Projects Powered Equivalent Hampden James T. Welch 115.8 9 12 $ 177,128 Berkshire, Hampshire, Franklin & Adam Hinds 19,032.9 18 1,993 $ 29,120,291 Hampden Second Hampden & Hampshire Donald Humason, 49.7 4 5 $ 76,087 Jr. Hampshire, Franklin & Worcester Stanley Rosenberg 7,707.7 12 807 $ 11,792,735 First Hampden & Hampshire 408.7 9 43 $ 625,326 Worcester, Hampden, Hampshire & 7,383.2 3 773 $ 11,296,327 Middlesex Worcester & Middlesex Jennifer Flanagan 299.9 4 31 $ 458,786 First Worcester Harriette Chandler 31.3 1 3 $ 47,920 Second Worcester Michael O. Moore 47.7 3 5 $ 73,012 Worcester & Norfolk 213.7 5 22 $ 327,007

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First Middlesex Eileen Donoghue 44.8 3 5 $ 68,575 Middlesex & Worcester James B. Eldridge 1,062.0 4 111 $ 1,624,891 Third Middlesex Michael J. Barrett 940.8 4 98 $ 1,439,439 Second Essex & Middlesex Barbara L'Italien 943.1 4 99 $ 1,442,897 First Essex Kathleen O'Connor 80.9 3 8 $ 123,716 Ives First Essex & Middlesex 119.7 5 13 $ 183,187 Second Essex 275.0 1 29 $ 420,811 Fifth Middlesex Jason Lewis 9.7 1 1 $ 14,887 Fourth Middlesex 938.3 1 98 $ 1,435,523 First Suffolk & Middlesex Joseph A. Boncore 30.3 2 3 $ 46,390 Bristol & Norfolk Vacant 4,464.2 6 467 $ 6,830,272 Norfolk, Bristol & Plymouth 1,061.7 4 111 $ 1,624,401 Norfolk & Plymouth John Keenan 547.9 3 57 $ 838,272 Plymouth & Norfolk Patrick O'Connor 12.2 1 1 $ 18,635 Second Plymouth & Bristol Michael Brady 3,790.9 4 397 $ 5,800,046 First Plymouth & Bristol 47.2 3 5 $ 72,216 First Bristol & Plymouth Michael Rodrigues 86.3 5 9 $ 132,024 Second Bristol & Plymouth 1,382.4 1 145 $ 2,115,072 Cape & Islands 93.2 1 10 $ 142,596 GRAND TOTAL 51,221 124 5,362 $ 78,368,467

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APPENDIX B – SEIA Solar Disclosure Forms

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