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 Massachusetts 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. Page 1 of 25 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. Page 6 of 25 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.