BOSTON -- Massachusetts officials are preparing to take a number of steps to shore up one of the state’s key solar power subsidies, including spending millions of dollars to buy up the credits developers use to help finance their projects.
Solar installations have spread rapidly in Massachusetts over the last year and a half, thanks in large part to a series of state and federal subsidies. Gov. Deval Patrick just last month held a press conference on the solar-paneled roof of a South Boston building to announce that the state had achieved his goal of 250 megawatts of installed solar capacity four years ahead of time. He set a new target of 1,600 megawatts by 2020.
But the rapid growth of solar power in Massachusetts has flooded the market with one of the special credits developers use to finance their projects, driving down their price and threatening to bring a halt to the industry’s expansion. The Patrick administration is now trying to siphon off some of the excess supply so prices can stabilize.
“There’s an oversupply in the marketplace,” said Dwayne Breger, the state’s director of renewable and alternative energy development. “We’re trying to get the market back into equilibrium.”
The moves by the Patrick administration are another sign of how dependent solar power is on two subsidies that are ultimately paid for by electric customers across the state. One credit pays solar power generators an inflated price for their electricity. The other credit, called a solar renewable energy credit, or SREC, pays them simply for producing solar electricity.
For every 1,000 kilowatt hours of electricity a solar developer produces, the developer is issued one SREC. The SREC has value because state regulators require companies that sell electricity in Massachusetts to buy solar credits equal to .27 percent of their electricity sales. The price of the credits fluctuates with supply and demand. In 2010 and 2011, when demand for the credits outstripped supply, the credits were selling for as much as 55 cents a kilowatt hour, more than three times the current retail price of electricity. But as solar production ramped up in 2012, SRECs flooded the market and their price dropped precipitously to around 20 cents a kilowatt hour.
Starting Friday, regulators plan to start bringing stability to the SREC market by taking three steps. First, companies selling electricity in Massachusetts will be required to increase their SREC purchases to .38 percent of their sales. The state Division of Energy Resources also plans to begin buying up $8 million to $11 million of SRECs. And next month the DOER plans to hold a first-of-its-kind auction with the goal of selling off surplus SRECs at the price of 28.5 cents a kilowatt hour.
Breger says the goal of the initiatives is to stabilize the market for SRECs so the solar power industry can continue to grow in Massachusetts. “We’re not targeting a certain price” for the SRECs, Breger said. “We’re trying to help the market get back into a supply-demand balance.”
This story was cross-posted in the Clean Energy Finance Center’s biweekly newsletter, the Clean Energy Finance Source. Subscribe to CommonWealth Magazine to read more Massachusetts-oriented energy stories from MassINC.
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