By Tony Clifford, Chief Development Officer, Standard Solar
In a move that everyone in the Maryland solar industry is celebrating, the legislature yesterday overrode last year’s veto by Gov. Larry Hogan of the Clean Energy Jobs Act.
If you don’t remember what the bill does (and you may not – the veto was more than six months ago), I’ll summarize what my colleague Scott Wiater said in advocating for the override late last year:
The Clean Energy Jobs act raises the renewable portfolio standard (RPS) 5 percent (from 20 to 25 percent) and one-half of a percent rise in the solar carve-out portion of the bill (which would rise to 2.5 percent from its current level of 2 percent). The impact of even such a small increase, however, is huge.
It allows companies like Standard Solar and other solar-industry-related companies to build on the more than 4,200 well-paying jobs that can’t be outsourced in the fastest growing sector of the country’s economy. And the state’s ratepayers benefit, too, with grid modernization and increased efficiency, which can lead to lower electricity rates.
So today’s override was a great step forward for the state’s solar industry, but for the state’s solar advocates, the question is this: What aspect of solar policy should we focus on next?
To truly capitalize on the veto override, the solar industry should focus on rebuilding the state’s solar renewable-energy-certificate (sREC) program. If you’re not familiar with what an SREC is, they are certificates that provide solar project developers credit for the environmental attributes from a facility – specifically, the benefits produced each time a solar system produces 1,000 kilowatt-hours (kWh) of electricity.
For every 1,000 kWh of electricity produced by an eligible solar facility, one sREC is awarded. Depending on the market price for a sREC, they can significantly enhance the value of a project, making the projects easier to finance and construct.
In Maryland, the SREC program was originally created in 2007, and it has functioned exceptionally well in encouraging solar development in the state – that is, until February 2016.
At that time, the price for Maryland SRECs was $120 per SREC. But in early 2016, nearly 1 GW of Maryland-based utility-scale solar projects entered the planning queue, and the SREC market cratered. From the previous levels, the price of SRECs dropped to $35 by April 2016 and now stand at around $18.
The sudden flood of projects resulted from two primary factors: the cost of solar dropping so much that very large, utility-scale projects can now be economic without SREC support; and the current language in the Maryland RPS does not distinguish between the state’s distribution grid and the regional transmission grid making any solar project in the state eligible for SREC support.
Thus, many national utility-scale developers eyed the easily exploitable flat, fallow farmland on the Eastern Shore as an easy opportunity to erect utility-scale projects – with Maryland SRECs really juicing their profits. But those projects generate so many SRECs that, as we discovered in 2016, the market floods and crashes their value.
While utility-scale projects can still be financed with very low (or no) SRECs, the SREC price drop does serious harm to smaller commercial and residential projects that depend on SRECs to help get funding. Moreover, utility-scale projects sell electricity directly into the regional transmission grid and all of the profits over the life of the project go to the system owners.
The smaller projects sell into the local distribution grid and provide power directly to local residents, businesses, non-profits and government entities – saving them money and contributing to the Maryland economy.
My focus – and the focus of many solar colleagues in Maryland – will be educating legislators on the SREC market and explaining to them that utility-scale solar projects – as evidenced by projects in neighboring Virginia and other states – no longer need SRECs for viability. With that truth before them, our goal is to get legislation introduced that would phase out the use of SRECs for utility-scale projects, clearing the way for them to be used by residential and commercial projects that actually need them.
If the industry could eliminate utility-scale solar’s eligibility for SRECs, we believe the market would rebound and allow more small-scale commercial and residential projects to flourish.
But Maryland’s success story are part of a larger solar narrative, to wit: The battles for solar’s long-term viability have shifted sharply from the federal to the state levels. Just in the past two weeks, we’ve seen:
- a bill introduced in Indiana that would effectively kill net-metering;
- a defiant Gov. Jerry Brown insist that California will carry on with its clean-energy revolution no matter what happens in Washington D.C.;
- New Hampshire’s Public Utilities Commission’s staff suggesting tweaks to its net-metering policies;
- Hawaii’s electric utility filed its latest plan for integrating solar on its grid (godspeed – they’re the one state in the union that is struggling because solar is too popular); and
- Minnesota’s solar incentive under attack in its legislature.
And, of course, there was Arizona’s surprising decision in December to eliminate net-metering on an accelerated time schedule.
It’s true: State-level battles are more challenging because there are so many more of them. But that doesn’t absolve us of our responsibilities to fight for our livelihoods just because it might be hard. Get active. Make sure your local solar association is as strong as it can be. Contribute, both in money and time.
It may seem overwhelming at first glance, but together I know we can do it.
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The author seeks to cast blame on least-cost large-scale projects as the reason for SREC price declines, but even with zero large projects in the transmission queue, SREC prices would still be very low due to the huge oversupply of small/distributed solar projects being built in Maryland (like those developed by Standard Solar). This inconvenient truth, combined with the fact that Maryland ratepayers benefit from the kind of least-cost solar power generated by utility-scale projects, should point rate-payers and policy-makers alike to prefer more low-cost, large-scale solar projects vs. the expensive variety championed by the Standard Solar’s of the market. After all, despite record low SREC prices, the of growth of small/distributed solar projects in Maryland has continued at a very steady pace.
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