EBC Renewable Energy Program

Environmental Business Council of New England
Energy Environment Economy

Massachusetts Solar Energy Program:
The Transition from SREC-I to SREC-II
Welcome
Steve Barrett
Chair, EBC Renewable Energy Committee

Director, Clean Energy
Harris Miller Miller & Hanson, Inc.
Environmental Business Council of New England
Energy Environment Economy
Introduction
Environmental Business Council of New England
Energy Environment Economy
John Wadsworth
Program Chair & Moderator

Partner
Brown Rudnick LLP
Massachusetts Renewable Market
Overview
Michael Judge
RPS Solar Carve-Out Program Coordinator
Massachusetts Department of Energy
Resources
Environmental Business Council of New England
Energy Environment Economy
Creating A Cleaner Energy Future For the Commonwealth



RPS Solar Carve-Out II Program
Overview

Mike Judge
Associate Manager, RPS Programs
Renewable and Alternative Energy Division



EBC Renewable Energy
Program

Boston, MA

April 23, 2014

COMMONWEALTH OF MASSACHUSETTS
Deval L. Patrick, Governor
Richard K. Sullivan, Jr., Secretary
Mark Sylvia, Commissioner
Creating A Greener Energy Future For the Commonwealth

MA RPS Class I Program
• Established in 1997, first year of compliance in
2003
• Eligible technologies include solar PV, solar thermal
electric, wind, ocean thermal, wave or tidal energy,
fuel cells, landfill methane gas, small hydro, low-
emission biomass, marine or hydrokinetic energy,
and geothermal electric
• Generation Units from New England and adjacent
control areas (i.e. New York, Quebec, and New
Brunswick) may qualify
• Minimum Standard of 9% in 2014
• Set to increase by 1% each year going forward
6
Creating A Greener Energy Future For the Commonwealth

MA RPS/APS Programs
• In 2008, 3 new classes were added to the RPS
 Class II Renewable Energy for facilities in
operation prior to 1998 (mostly small hydro, LFG,
and wind)
 Class II Waste-to-Energy for waste-to-energy
facilities located in MA
 Alternative Portfolio Standard (primarily CHP
projects)
• In 2010, a Solar Carve-Out was added to Class I
• Obligation is part of the Class I total, but has
different market parameters and qualification
process
7
Creating A Greener Energy Future For the Commonwealth

Summary of MA Portfolio Standard Programs
8
RPS Class Sub Class Technology
Minimum
Standard
2014 ACP
Rate, $/MWh
Class I

Wind, LFG,
Biomass, Solar PV,
Small Hydro, AD,
etc.
9% in 2014;
increases by 1%
each year
$66.16; increases
with CPI
Solar Carve-Out
Solar PV; 6 MW or
less, in MA
0.9481% in 2014;
set by formula
annually
$523; reduced
annually per 10-
year schedule
Solar Carve-Out II
Solar PV; 6 MW or
less, in MA
0.0843% in 2014;
set by formula
annually
$375; reduced
annually per 10-
year schedule
Class II
Renewable same as Class I
3.6%; stays
constant
$27.16; increases
with CPI
Waste Energy
Waste to Energy
Plants, in MA
3.5%; stays
constant
$10.86; increases
with CPI
APS
CHP in MA,
flywheels, storage,
etc.
3.5% in 2014;
increases to 5% in
2020
$21.72; increases
with CPI
Creating A Greener Energy Future For the Commonwealth

Solar Carve-Out I (2010-date)
Program designed to ensure market stability and balance
 Adjustable Minimum Standard
maintains SREC demand/supply in reasonable balance
 Forward ACP Rate Schedule
provides investor certainty
 Solar Credit Clearinghouse Auction Account
essential price support mechanism to assure SREC floor price
 Opt-In Term
provides right to use Auction, adjusted to throttle installation growth rate
 Program Cap
Enables sufficient market growth opportunity (exceeds Governor’s goal of 250
MW by 2017)

9
Creating A Greener Energy Future For the Commonwealth

Price Support – Auction Mechanism
• Solar Credit Clearinghouse Auction Account
 Open every year from May 16
th
– June 15
th

 Any unsold SRECs may be deposited into the Account
• Auction held no later than July 31
st
, but after the Minimum
Standard adjustment is announced
• Deposited SRECs are re-minted as “extended life” SRECs (good for
compliance in either of the following two Compliance Years)
• SRECs are offered to bidders for a fixed price of $300/MWh before
being assessed a $15/MWh auction fee by DOER. Bidders bid on
volume willing to buy at the fixed price
• SREC owners will be paid $285/MWh for each SREC sold through
the Auction
10
Creating A Greener Energy Future For the Commonwealth

Price Support – Auction Mechanism
11
Creating A Greener Energy Future For the Commonwealth

SREC Market Update
• Current program oversubscribed in May/June 2013
• Emergency Regulation was filed on June 28
th
and
extended eligibility to projects that had met certain
project development milestones
• Currently about 680 MW qualified under SREC I
• Qualified projects over 100 kW were able to receive an
extension through June 30
th
if they could demonstrate
50% of construction costs have been incurred by
December 31
st

• Projects <100 kW can qualify if they have submitted an
application and are interconnected on or before April 25,
2014, the start date of SREC II
• No new projects will qualify under SREC I after April 25,
2014
12
Creating A Greener Energy Future For the Commonwealth

SREC-II Policy Objectives
• Provide economic support and market conditions to maintain and
expand PV installations in MA
• Control ratepayer costs
• Maintain robust, progressive growth across installation sectors and
manage growth to reach 1600 MW by 2020
• Maintain competitive market of diverse PV developers, without
undue burdens of entry
• Address financing barriers limiting residential and non-profit direct
ownership, without compromising third-party ownership model
• Minimize regulatory complexity and maintain flexibilities to respond
to changing conditions
13
Creating A Greener Energy Future For the Commonwealth

Key Differences Between SREC I & SREC II
• Larger program capacity cap (1,600 MW – Final SREC I Cap).
• No more Opt-In Terms. Qualified projects generate SREC IIs for 40 quarters
(10 years) from quarter in which they qualify.
• Both ACP Rate and Auction Price decline over time.
• SREC Factors differentiate market sectors and provide different incentive
levels to different types of projects.
• Managed Growth sector helps control market growth. Qualification under
this sector will be limited by Annual Capacity Blocks made available on a two
year forward schedule by DOER.
• Compliance Obligation and Minimum Standard set in regulation for 2014 and
2015. Annual calculations thereafter based on actual and projected supply,
constrained by Yearly Installed Capacity Targets, which help determine
Annual Capacity Blocks for Managed Growth sector.
14
Creating A Greener Energy Future For the Commonwealth

Auction and ACP Rate Schedules
15
$/MWh
Year
Auction
Price Bid
Auction
Price After
5% Fee
ACP Rate
2014 300 285 375
2015 300 285 375
2016 300 285 350
2017 285 271 350
2018 271 257 350
2019 257 244 333
2020 244 232 316
2021 232 221 300
2022 221 210 285
2023 210 199 271
2024 199 189 257
2025
Values announced by DOER each year to
maintain 10-year forward schedule.
2026
2027
2028
2029
2030
Creating A Greener Energy Future For the Commonwealth

Market Sectors and SREC Factors
16
Market Sector SREC Factor
A
1. Generation Units with a capacity <=25 kW
2. Solar Canopies
3. Emergency Power Generation Units
4. Community Shared Solar Generation Units
5. Low or moderate income housing units
1.0
B
1. Building Mounted Generation Units
2. Ground mounted Generation Units with a capacity
>25 kW where 67% or more of the electric output on
an annual basis used by an on-site load.
0.9
C
1. Generation Units on Landfills
2. Generation Units on Brownfields
3. Generation Units with a capacity of <= 650 kW where
less than 67% of the electrical output on an annual
basis used by an on-site load.
0.8
Managed
Growth
Unit that does not meet the criteria of Market Sector A, B,
or C.
0.7
Creating A Greener Energy Future For the Commonwealth

SREC-II Rulemaking Process
• Series of stakeholder meetings
held between March 2013 and
August 2013
• RPS Class I regulation revisions
were filed in early January
• DOER held a public hearing on
January 24
th
and accepted
comments through January 29
th

• DOER filed final revisions to
regulation with the Secretary of
State’s office on April 11
th

• Updated regulation promulgated
on April 25, 2014

17
Creating A Greener Energy Future For the Commonwealth

Important Dates
April 25th
1. SREC I application deadline for systems <=100 kW DC
2. SREC II regulation promulgated
May 6th SREC II application process begins
May 16th 2013 Auction Account opens for deposits
June 15th
1. End of 2013 trading year
2. 2013 Auction Account closes
June 16th or 17th Auction volume announced
June 30th SREC I Interconnection/Construction Deadline for Systems >100 kW DC
Mid-July 2014 Preliminary 2015 Minimum Standard for SREC I announced
July 31st
1. Final SREC I capacity announced no later than this date
2. First round of 2013 auction must occur no later than this date
August 8th Final round of 2013 auction will occur no later than this date
August 30th
1. Final 2015 Minimum Standard for SREC I announced
2. 2016 Annual Capacity Block announced for SREC II
Creating A Greener Energy Future For the Commonwealth

Online Registration (OLR) Platform
• DOER and MassCEC have developed a new online registration (OLR)
application for SREC II
• The application uses MassCEC’s Production Tracking System (PTS)
platform and supports direct entry of SREC II applications applicants
• OLR will automate registration process, improve data sharing, and
significantly reduce the time needed to approve and register PV
applications
• Will significantly improve the administrative process, which had
created significant delays in SREC I as application volume increased
over time
• More information on new application process was presented by
DOER and MassCEC in an April 24
th
webinar
• A webinar recording and a copy of the presentation given can be
found on DOER and MassCEC’s respective websites
Creating A Greener Energy Future For the Commonwealth

Residential Loan Program
• DOER estimates that a robust residential direct ownership market would
need to be supported by $20-50 million in loans at the start of SREC II, and
$300-600 million cumulatively through 2020. This represents a significant
opportunity for the financing/banking industry.
• DOER announced, in parallel with the SREC-II rulemaking, a financing support
program using ACP funds. Final development of the program will be done in
coordination with stakeholder input, including direct discussions with the
banking industry.
• DOER anticipates using approximately $30 million of ACP funds for this
purpose. Leveraging funds will be important, along with strategies to enable
banking sector to sustain lending as ACP support is diminished.
• MassCEC will maintain CommSolar II rebate program through the
development of the financing program.
20
Creating A Greener Energy Future For the Commonwealth

SREC-II and Net Metering
• Many non-residential and most
municipal solar projects depend on
the net metering credit incentive,
along with SREC revenue
• MA market is non-uniform in the
availability and value of Net Metering
credits by utility territory
• DOER is cognizant of Net Metering
caps being reached and impact on
solar (and other renewables)
economic feasibility
• Any change to the Net Metering caps
or other related provisions must be
made by the legislature.
21
Creating A Greener Energy Future For the Commonwealth

MA Ranks High Among States Supporting Solar
• Governor’s goal of installing 250 MW by 2017 met four years early; new goal
of 1600 MW by 2020.
• 348 of 351 MA cities and towns have a solar installation. Over 130
municipalities are hosting solar projects on town facilities.
• Solarize Mass program has supported 9 MW of residential solar in 33 towns
(another 15 towns are underway).
• More solar was installed in 2013 than in all prior years combined
• Massachusetts is well ranked nationally (SEIA and Solar Foundation 2014)
 4
th
in solar capacity installed in 2013
 5
th
in cumulative installed capacity
 2
nd
in commercial installations; 6
th
in residential installations
 4
th
in total solar jobs; 6
th
in per capita solar jobs
• Over 1,800 firms in MA work primarily in the renewable energy sector,
employing over 21,000 workers. Nearly 60% of renewable energy workers
support the solar sector (2013 MassCEC Jobs Report).
22
Creating A Greener Energy Future For the Commonwealth

23
Remarkable Solar Growth in Massachusetts
0.04 0.29 0.59 0.81 1.84 1.64 3.63 9.64 22.95 42.51
135.80
242.53
0
50
100
150
200
250
300
350
400
450
500
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Installed Solar Capacity in Massachusetts (as of January 1, 2014)
Annual Installed Capacity (MW) Cumulative Installed Capacity (MW)
463 MW
Creating A Greener Energy Future For the Commonwealth

Thank You
DOER RPS Website: www.mass.gov/energy/rps
RPS Contact: DOER.RPS@state.ma.us
DOER Solar Website: www.mass.gov/energy/solar
SREC Contact: DOER.SREC@state.ma.us
24
Status of Effort to Improve the
Interconnection Process
Gerry Bingham
Senior Coordinator / Distributed Generation
Massachusetts Department of Energy
Resources
Environmental Business Council of New England
Energy Environment Economy
Creating A Cleaner Energy Future For the Commonwealth
Status and Challenges of
DG Interconnection

Gerry Bingham, MBA
Sr. Coordinator / Distributed Generation

EBC Renewable Energy Program
Boston, MA
4/29/14
Creating A Cleaner Energy Future For the Commonwealth

27
Implementing Incentives and
Improving Interconnection
Incentive
Implementation

Interconnection
Improvement
7/2/08: Green Communities Act
3/15/09: DG Website created / DG Workshops / Reporting
Jan 2010: SREC launched
8/18/11: DOER Petitioned DPU for interconnection reform
1/23/12: DPU Order 11-175 created a DG Working Group
2/17/12: Virtual Net Metering Regs
9/14/12: DGWG Report Filed
11/1/12: Net Metering Caps Revised
3/13/13: DPU Order 11-75-E
5/1/13: SRECI 400 MW Goal met; new goal of 1.6 GW announced
5/2/13: New Interconnection Tariff in Effect
10/2/13: Enforcement Proposal Filed
2/27/14: TSRG Penetration Screen Revision filed
4/17/14: Final Tariff to stakeholders (Group Study)
4/25/14: SRECII Regs in Effect
Creating A Cleaner Energy Future For the Commonwealth

28
Interconnection: Aggregate Trends
Incentive Implementation Interconnection Improvement
Creating A Cleaner Energy Future For the Commonwealth

29
Application Process Times
(Calendar Days by MW)
Year >2MW 1-2MW <1MW
2009 125 25
2010 100 212 37
2011 337 200 25
2012 325 287 65
2013
(partial) 350 325 50
Creating A Cleaner Energy Future For the Commonwealth

30

Application Process Times
Expedited Process Projects
Creating A Cleaner Energy Future For the Commonwealth

31
Application Process Times
Standard Process Projects
Creating A Cleaner Energy Future For the Commonwealth

32
DPU 11-75-E Order = The Road Map
• Approves Work Plan in the DGWG Report
• Pre-Application Reports
• Technical Standards Review Group created
• Ombudsperson: Trial period of 12 months
• Continued Monthly Workshops and Reporting
• Interim Penetration Screen
• Interim Enforcement: Refund Policy
• Withdrawal Process approved
• New Timeframe for “Complex” projects
• Circuits in Reporting
• Compliance: Tariff changes
• Compliance: Final Enforcement Mechanism
• Compliance: Penetration Screen; Group Study
Creating A Cleaner Energy Future For the Commonwealth

33
Proposed Performance Metric
Statewide Performance on Expedited Projects
without Supplemental Review (2009-Nov '13)*
* The interconnection timeline Enforcement Mechanism is not in
effect. Slides portraying the impact of the enforcement metrics
are for demonstration purposes and do not take into account
delays due to (a) customer responses; (b) high volume
applications; (c) increased complexity, and (d) clogged circuits.
Creating A Cleaner Energy Future For the Commonwealth

34
Proposed Performance Metric
Statewide Performance on Projects in the Metric (2009-Nov '13)
*Early ISA EXP projects are not identified. Est. assumes no early
ISA's and all marked "TBD" did not require upgrades.
**COMPLEX project types are not identified. Est. assumes all STD
projects with modifications required substation mods and
>$200k.
Creating A Cleaner Energy Future For the Commonwealth

35
What’s next?
It’s key to watch for …
• DPU Order on Timeline Enforcement
Will the metric include all projects or limited
sets?
• New Tariff
Group Study (1-yr trial)
Penetration Screen (100%)
Enforceable Timelines
• Continued Interconnection Progress
• Net Metering Legislation?
Creating A Cleaner Energy Future For the Commonwealth

DOER’s New Improved DG Website

Interactive Interconnection Charts

Aggregate Trends

Application Process Time

Dispute Resolution

Workshops

Hosts Grid Modernization and DG Integration

Hosts Technical Standards Review Group

36
http://www.bit.ly/MADGIC
Creating A Cleaner Energy Future For the Commonwealth

Helpful Links / Contacts
• DG Interconnection
DG Website: http://bit.ly/MADGIC
distributed.generation@state.ma.us
• Solar Carve-Out
DOER Solar Website:
www.mass.gov/energy/solar
Contact: DOER.SREC@state.ma.us
mike.judge@state.ma.us
37
Additional Material
(not presented)
DPU 11-75-E Order (w/ notations)
• Approves Work Plan in the DGWG Report
• Pre-Application Reports (to limit the # of speculative applications)
• TSRG created (to allow non-utility engineer review and response)
• Ombudsperson: Trial period of 12 months, now permanent (4/1/14)
• Continued Monthly Workshops and Reporting (to track performance)
• Interim Penetration Screen (67%; being revised to 100%)
• Interim Enforcement: Refund Policy (Penalties proposed 10/2/13)
• Withdrawal Process approved (streamlines utility work)
• New Timeframe for “Complex” projects
• Circuits in Reporting (to address clogged circuits)

Compliance:
• Tariff changes (due w/in 30 days, effective 5/2/13)
• Final Enforcement Mechanism (due 10/1/13, on schedule)
• Penetration Screen; Group Study (due 2/28/14, on schedule)

Impact Study: 55>>75 days
Detailed Study: 30>>75 days
Nuts & Bolts of Transition from
SREC-I to SREC-II
Tom Michelman
Principal
Sustainable Energy Advantage, LLC
Environmental Business Council of New England
Energy Environment Economy


Sustainable Energy Advantage, LLC
EBC Renewable Energy Program
The Transition from SREC-I to SREC-II
April 29, 2014
Nuts & Bolts of
Transition from
SREC-I to SREC-II

Sustainable Energy Advantage, LLC
Objective analysis supporting the analytical needs
of a diverse set of public and private sector clients.
Practice Areas Include…
• Renewable energy public policy and market
analysis, tracking, development &
implementation
• Renewable Energy supply & procurement
• Strategy development
• Solar market tracking and analysis
• Financial analysis & economic feasibility
• Quantitative analysis and modeling
• Transaction facilitation, contract development
and negotiation support
• Business infrastructure development
Mission: Sustainable Energy Approach: Sustainable Advantage
We help build Renewable Energy Businesses, Markets, Policies & Projects…
through Analysis, Strategy & Implementation.
Services
• Interdisciplinary consulting &
advisory services (regional &
national)
• New England Renewable
Energy Market Outlook
sm

(REMO) REC market
fundamentals analysis
subscription briefings
• New England Eyes & Ears
sm

Regulatory, Policy & Legislative
Tracking and Analysis
Subscription Service
42
Solar Qualifications: Market & Financial Analysis
• Team lead for analyses of costs and incentive requirements under different
futures to inform SREC-II program development
MA Department of Energy Resources (DOER)

Policy support for NYSERDA, NYPA, CEFIA, RI OER), NJ Office of
Clean Energy (NJ OCE)
• Solar screening model available for license.
• Project- and portfolio-specific model customization.
• Developed the Cost of Renewable Energy Spreadsheet Tool (CREST) model for NREL.
Financial Modeling & Advisory Services
• Multi-state solar market assessments.
• Net metering analysis.
• PPA due diligence & negotiation support.
Project Development Consulting
• Detailed market fundamentals analysis.
• Testimonials
SEA Solar Toolkit
• Tracking and analysis of solar regulation, legislation and policy since 2007.
Solar Eyes & Ears Policy Tracking & Analysis Service (E&E)
• Deep dive into SREC market
Massachusetts Solar Multi Client Study (In works)
43
Begging the Questions
• Final size of SREC-I and its impact?
• Will SREC-II reach its 2014 goals and what happens if it does
or does not?
• How might … impact SREC-II market
– Exempt load
– Utility programs
• Auction mechanisms and impact?
• SREC-II Pricing?
• Affect of ITC changes?
• Political risks?
• To be answered by other speakers / panelists
– What is the status of net metering?
– How do you think Community Shared Solar will do?
– How about landfill / brownfield development?


44
SREC-I Market Size History
• Original total SREC-I program goal was 400 MW (250 MW by 2017)
• Accelerated run-up to cap (Spring 2013)
– ~184 MW installed by EOY 2012
– Before DOER could shut the gate in an orderly fashion, over 900 MW had
applied for the 400 MW program
– DOER expanded targets to recognize developer commitments and that DOER
system for managing the run-up to the cap was imperfect (not upping target
would have stranded a lot of investment)  allowed projects with
interconnection service agreements (ISAs) within a week of notice to qualify.
• Subsequent projects await start of more controlled “SREC-II” market
• 676 MW currently qualified for SREC-I as of March 17, 2013
– 423 MW installed
– 253 MW qualified but not yet operational
• Met 1
st
extension milestone (expended > 50% of total construction costs by 12/31/13)
• Unknown level of attrition expected, from projects failing to meet 6/30/14 COD deadline
45
SREC-I Market Activity: A Snapshot
This reflects projects installed and reported thru March 17, 2014: 423 MWs
46
SREC-I Market Trends:
Installations by System Size
• Diverse Market
• Evolving mix of project scales
Through March 17, 2014
47
SREC-I Build Rate over Time
Growing but Erratic
48
Race to qualify
as 400 MW
target
approached
Spike due
to expiring
Cash
Grants
One more
spike to
come
For perspective largest SREC-I quarter to date was 2013-Q4
with 115 MWs installed
423 MW
installed as of
March-17-2014
What Will be the Final Size of SREC-I?
• 2014-Q2 will end up with the most MWs installed
of any quarter
• Additional MWs will qualify for SREC-I
– One month extension for projects Broadway left in
limbo will help
– Projects that are all but interconnected may get an
extension
– The last half of March 2014 was not included in the
423 MW reported as installed; two extra weeks to
squeeze in more projects
• Prediction: ~590 to 650 MW will be installed as
SREC-I qualified
49
• Annual Capacity Goal for SREC-II will be determined by the final
size of SREC-I. The goal is for SREC-I + SREC-II to total 1600 MW
by 2020
– Table shows the stated capacity goals for SREC-II, given the final SREC-I tally












SREC-II Supply/Demand
Mechanics & Expectations (1)
50
Total SREC-II MW Incremental SREC-II MW
Year
SREC I =
550 MW
SREC I =
600 MW
SREC I =
650 MW
SREC I =
550 MW
SREC I =
600 MW
SREC I =
650 MW
2014 85 85 85 85 85 85
2015 230 230 230 145 145 145
2016 397 380 364 167 150 134
2017 561 536 511 164 156 147
2018 725 692 658 164 156 147
2019 887 845 804 162 154 146
2020 1050 1000 950 163 155 146
SREC-II Supply/Demand
Mechanics & Expectations (2) – Scenarios Based on SREC-I MW
51
The final SREC-I market size will have a moderate impact on
SREC-II market size overall, but every MW difference will affect
the ultimate size of the MG sector in 2016 and thereafter
SREC-II Compliance Obligation
• Obligation fixed in 2014/2015 as follows:
– CY 2014: set @ 41,279 MWh
– CY 2015: set @ 161,958 MWh
• For CY 2016 and thereafter compliance obligation is set
by formulas that includes increases for historic banking
and clearinghouse auction participation
• So a predicted exceedance or shortfall by DOER for the
end of 2015 will affect demand for SREC-IIs via the
“Installed SREC-II Supply” component of the compliance
obligation formula
– Details further below
52
Will SREC-II Reach its 2014 Goal of
85 MW / 41,279 MWh?
• Probably will reach 85 MW 2014 goal because…
– Not a big reach. 2013 was largest year with 223 MWs installed, so need
a little over a third of that to make SREC-II goals
– If some SREC-I projects don’t make the SREC-I deadline (& those
projects are not MG), then they could help attain goal
• But there is concern because …
– Aggregate pipeline is murky
– Net metering availability
– Virtually all construction resources should be focused on SREC-I projects
thru June 30, and even some thereafter
– While only 26 MWs of MG allowed for SREC-II for 2014
• Project <=2MW constituted 102 MWs or 46% of MWs installed in 2013
• This means some big community-shared, landfill, brownfield projects probably will
need to take up the MG slack to make the goal, and we have heard of a lot of
activity in that sector
53
41,279 MWh implies ~mean install date during July for 85 MW. Most of
the 2014 SREC-II projects will be installed in Q3/Q4. Whether enough
SREC-II development occurs early enough in 2014 to make the MWh
compliance obligation goal is dicey.
What Will Happen if SREC-II Exceeds its or Does
Not Reach its 2014 MWh Goal?
• Exceeds MWh goal?
– SREC-II market will be long, SREC-II prices likely hover in
the $200-$250 range in the near-term, and excess SREC-
IIs will be deposited into the auction
– Auction deposits will increase 2016 demand and may
cause shortfall ripple effect and a bounce in SREC-II
prices
• Does not reach MWh goal?
– SREC-II market will be short, SREC-II prices likely to hover
just below SACP of $375
– Could decrease demand in 2016 and have smaller ripple
effects thereafter if 2015 supply does not fully satisfy 2014
MWh deficiency and the added 2015 MWh obligation
54
Shortage or surplus in 2015 could exacerbate 2014 deltas
What is this about Exempt Load, and
Why Should I Care?
• Load of competitive retail contracts
executed or extended prior to April 25th
are exempted from SREC-II compliance
obligation for their duration
– LSEs may pay Class I ACP (~$66/MWh in
2014) in lieu of buying SRECs
– Doesn’t change SREC aggregate market
obligation


55
SREC-II Load Exemption Wildcard
• SEA expects increased quantity of exemptions… but there will be no
official visibility into quantities until DOER 2014 Annual Compliance
Report issued ~ April 2016
• However, unlike SREC-I DOER left the door open to sign new
contracts between draft regs and final… & LSEs have been actively
marketing retail contracts pitching avoidance of the SREC-II cost
– Typically few retail supply contracts exceed 3 yr. term
• No explicit provisions to make purchases/retirements to balance the
exemption ‘missing SREC-II demand’ in final regulations
• Creates a ‘missing SREC-II demand’ issue  can force SREC-II
surplus, and impact demand formula later
– Could cause soft demand and soft prices in early years, forcing SRECs into
auction in a manner that will increase subsequent demand to compensate
56
Largest unknown of the SREC-II playing field. Significantly greater use of
exemption than during SREC-I would help create downstream market volatility
How Might Utility Programs Affect SREC-II?
National Grid Solar Program Phase II
• National Grid seeks to own 20 MW of solar DG systems with
advanced inverters, reliability benefits, targeted to desired
locations on the grid with high load density
• DPU opened Docket 14-01, under which National Grid seeks
pre-approval of its range estimates for the upfront capital and
ongoing annual costs
– The docket is still open
• Seeking projects 60 kW – 1 MW
• RFP issued in January 2014
• Program is targeted to utilize the rest of statutory
authorization to own projects in-service before statutory June
2015 sunset date, and will be SREC-II projects
57
Every MW of the EDC ownership program decreases the
size of the addressable merchant market by a MW
Proposed Competitive EDC Program for Larger
Projects within SREC-II Creates Uncertainty
• Proposed Competitive EDC Long-Term Contracting Pilot Program for MG
Sector/projects > 500 kW
– Prompted by National Grid request, SREC-II regulations allow EDCs to petition to DOER to
establish a competitive program for all or some of the Managed Growth Sector’s annual
capacity block and other SREC-II generation units
– Provides long-term SREC-II price certainty, justified on cost reduction
• Could be extended to all solar classes/market sectors
• Program design TBD, but National Grid’s unofficial proposal:
– Tariff-based competitive procurement offering EDC 10-20 yr purchase commitment
– Resembles combination of Rhode Island Distributed Standard Contract Generation Program
and the Connecticut LREC/ZREC Program
– Multiple classes of solar projects, annual target for entire program & targets for each class
– 3 solicitations per year
– Bid price value is received in the form of performance based incentives tied to 100% of
generator output over the term of the tariff
– Bids from larger classes used to determine standard performance-based incentives for small
& medium classes. (similar to Connecticut's LREC/ZREC program)
– EDCs resell SRECs to market, with savings passed through to all EDC wires customers


58
Growth of this program would decrease the size of the
addressable merchant market by the program increase
How Does the SREC Clearinghouse Auction Work
for a Participant?
59
10 SRECs
1
st

Auction
Deposit in
Auction
Account
Auction
Clears
Paid $285 x 10
Auction Doesn’t Clear
2nd
Auction
Deposit in
Auction Account
Auction
Clears
Paid $285 x 10
Auction Doesn’t Clear
Re-minted SRECs
get a 3 year life
span  option to
sell in later years
when demand
formula will
accelerate, likely
driving prices
towards ACP
within 2-3 yrs.
SREC holders
then can monetize
SRECs above
floor. This is also
the incentive for
LSEs to buy from
auction instead of
being exposed to
higher prices.
3
rd

Auction
Deposit in
Auction Account
Auction
Clears
Paid $285 x 10
Auction Doesn’t Clear
10 Re-Minted
SREC
Paid $285 x 6
4 Re-Minted
SRECs
Auction
Partially
Clears (60% of
deposited
SRECS
purchased)
SREC-II Compliance Obligation
Modified Supply-Responsive Demand Formula
• For CY 2016 and thereafter, compliance obligation equals:







• Thus CY 2016 market size will be a function of:
– Size of the market for 2016 estimated in August 2015, plus
– Results of 2014 banking, plus
– Results of 2014 auction that takes place in July / Aug 2015
• If market does not meet goal, the SREC-II compliance obligation
reacts more or less commensurate with the difference from growth
goal
– Longer SREC lifespan from auction deposits for all participants creates
options to wait for the price increase from additional demand to be harvested

60
Installed
SREC-II
Supply
+
Qualified but
not Installed
SREC-II
Supply
+
Projected New
Supply
+
Re-minted
Auction-II
Generation
Attributes (CY-2)
+
Third Round
Auction Volume
Doubling
(CY-2)
Banked SREC-II
Generation
Attributes(CY-2)
Theoretically the method should support prices
Prediction of Where SREC-II Prices will Go?
Perspective: SREC-I Spot Price History
61
Source: SRECTrade http://www.srectrade.com/srec_markets/massachusetts
Swing
from
shortage
to surplus
Price holding
at time-value
of $ discount
to price floor
One Possible Future of Many Modeled
Potential SREC-II Price Trajectory

• Assumptions / Drivers
– Auction behavior
– SREC-I size
– Initial long / short
– Retail exemptions
– Net metering status &
changes
– Evolving economics
• Utility rates
• Extension of ITC
• Install costs
– Organic growth of Sectors
A, B & C
– Varying SREC Factors

62
How Will the Expiration of a 30% ITC Affect
MA Solar Development? 1-DOER’s Levers
• Modified Supply-Responsive Demand Formula and the interaction
with SREC-II Clearinghouse Auction provides a formulaic market size
adjustment
• Control of Build Rate
– Assurance of Qualification and Statements of Qualification provide
gating
– While market Sectors A-C are allowed to grow organically DOER will
set annual MW constraints on Managed Growth sector to fill gap
between annual MW targets and projections of Sector A-C
unconstrained development
63
DOER has enough controls and levers now to make sure the SREC-II
market does not stray wildly long or short for long time periods
How Might the Expiration of a 30% ITC Affect MA
Solar Development?
• SREC factors initially set based on economic analysis (projections
of differential required economic incentives)
• DOER will review market performance in 2016, may choose to
adjust SREC factors (up or down) to catalyze or depress market
growth according to their goals and schedule.
– Changes would take effect 1/1/17 at the earliest
• For example if ITC is not extended (and / or net metering cap is
constraining growth) and the market supply is falling behind, DOER
can:
– Adjust upward across the board as response to loss of ITC &/or net
metering
– Make differential adjustments to balance economics of desired sectors



64
TBD if increasing the SREC Factors would be sufficient in a
flagging market, and if DOER could / would be willing to have a
SREC Factor(s) > 1 (DOER has indicated that Factors > 1 not
allowed per GIS rules; how difficult to change those rules?)
What are the Political Risks to SREC-II?
• Gov. Patrick, a strong renewable energy supporter, not running for re-
election in 2014
– Neither Democratic front-runner Martha Coakley nor Republican front-runner
Charlie Baker are known as strong renewable energy advocates
– SREC program costs are a constant concern for political backlash
• SREC market is a regulatory creation of DOER
– Thus, MW / MWh goals, SREC Factors, even the choice of solar technology
can be changed by the executive branch
– Nonetheless, the legislature has been very supportive of the SREC market
construct and DOER actions, and MA has history of not undermining current
investments
• So regulatory risk to SREC-II (and SREC-I) is likely one of emphasis
rather than dismantling SREC market structure (e.g., adjusting SREC
factors more to the liking of a new administration's preferences)
• The compromise legislation being discussed could change the future
market structure; it would likely grandfather current investments within
current SREC structure with no or modest changes

65
Overarching risk: With no new legislation, additional market segments
will hit their net metering caps and market growth will be stunted
Looking Forward
• Major Market Factors Are Uncertain:
– Federal ITC
– Net metering
• Potential Market Trends:
– A high quantity of load exemptions
– Market may be long or short based on each year’s solar generation vs.
historic output
– Phase-out of ITC may cause construction boom at end of 2016 trying to
beat the deadline, and a construction bust at the start of 2017
• In the long-run:
– Potential transition to competitive-procurement policy
– Technology continues to exert downward pressure on SREC prices
– The passage of an industry / utility consensus bill could be a game
changer
66
SREC-II’s ability to quickly and effectively
adapt to market changes will be put to test
SEA Contact Information
• Tom Michelman: 508-665-5854
tmichelman@seadvantage.com

• More about Sustainable Energy
Advantage, LLC at www.seadvantage.com

67
Networking Break
Environmental Business Council of New England
Energy Environment Economy

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