ARE YOU SMART ENOUGH FOR SMART? Presentation by SMART Presentation 1 February 27, 2018 Chad Laurent, Principal
Meister Consultants Group, A Cadmus Company Using global best practices to inform local decisions International sustainability consulting firm specializing in renewable energy policy and strategy Independent practice area within The • Cadmus Group (Strategy & Policy, Strategic Ventures) Strong public sector focus • 4 offices in Germany • SMART Presentation 2
Cadmus Group, LLC Exceed client expectations. Grow and prosper. Engage, challenge, and reward our team. Make a difference. SMART Presentation 3
Overview - Solar Massachusetts Renewable Target (SMART) Program Summary: Tariff-based incentive program that replaces SREC II. » Designed to offer long-term, stable incentive rates. › Goal to provide incentives for the next 1,600 MW, doubling to 3,200 MW. › Focus on rooftop and previously developed sites. › Price: » Competitive auction process sets the base price for each service territory. › Eligible for a base price , plus the adders of X cents/kWh (and subtractor for greenfield › location). Other Program Terms: » Fixed amount based on production , similar to a feed-in tariff for standalone facilities. › Agreement with investor-owned utilities for 20-year term for large facilities (or 10-year › term for small facilities). SMART Presentation 4
SREC II vs SMART Program » The two solar incentive programs differ in the form, value, and term structure of incentive received by a participant. SRECII SMART Form Produces tradeable commodity (‘SREC’) that is sold Compensated at a rate that includes an incentive in to electricity suppliers outright or in an auction. addition to energy value. Value SREC value fluctuates based upon market Behind-the-meter units receive fixed incentive rates; conditions , but has an auction floor price. standalone units receive fixed compensation rates. Term Systems produce auction-eligible SRECs for 10 years Systems above 25 kW receive incentive payments for 20 Structure years . Systems below 25kw receive incentive payments 10 years. Sources: Massachusetts Department of Energy Resources. (2017). Solar Massachusetts Renewable Target (SMART) Final Program Design. http://www.mass.gov/eea/docs/doer/rps-aps/final-program-design-1-31-17.pdf Energy Sage. Solar Massachusetts Renewable Target (SMART): Massachusetts’ SREC II replacement program. 2017. https://news.energysage.com/solar-massachusetts-renewable-target-smart-massachusetts-srec-replacement-program/ SMART Presentation 5
Incentives Over Time – SREC Structure SREC Incentive Structure $0.40 $0.35 $0.30 $0.25 $0.20 Incentive $0.15 $0.10 Value of Energy $0.05 $0.00 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 The example illustrates an SREC at $0.26 /kWh for 10 years that then drops to a Class I REC of $0.025 cents/kWh for » the next 10 years. SMART Presentation 6
Incentives Over Time – SMART Structure The SMART incentive structure depends on whether the facility is a Standalone or Behind » the Meter. Note: Graphs assume the lowest NSTAR rate at a 125% multiplier. » Behind the Meter Incentive Structure Standalone Incentive Structure $0.30 $0.25 $0.25 All-in Compensation $0.20 All-in Compensation Incentive Rate ($/kWh) $0.20 Rate ($/kWh) Incentive Incentive $0.15 $0.15 $0.10 $0.10 Value of Energy Value of Energy $0.05 Value of Energy $0.05 $0.00 $0.00 Standalone units receive fixed all-in Behind the Meters units receive fixed compensation rates incentive rates SMART Presentation 7
SMART: Declining Block Model » Launch with a competitive auction of 100 MW of solar PV, which will establish a base compensation rate SMART Declining Block Program for the remainder of the program. $0.25 › The base compensation rate will vary $0.20 All-in Compensation by utility ; set at average price of Rate ($/kWh) winning competitive bids in each Incentive $0.15 utility territory. $0.10 » SMART will be administered as a Value of Energy $0.05 declining block program with the $0.00 base compensation rate decreasing Block 1 Block 2 Block 3 Block 4 Block 5 Block 6 Block 7 Block 8 4% as each capacity block is filled. Source: Mass.gov. Capacity Block, Base Compensation Rate, And Compensation Rate Adder Guideline. https://www.mass.gov/doc/capacity-block-base-compensation-rate-and-compensation-rate-adder-guideline SMART Presentation 8
1 st Phase of SMART: Competitive Request for Proposals (RFP) Process » Competitive RFP (auction) for large solar PV projects (1 MW to 5 MW). » What happened: › Electric Distribution Companies (EDCs) jointly issued RFP for Solar Tariff Generation Units (STGUs)- RFP released - Nov. 13, 2018. › Bid submissions from developers accepted Nov. 27 – Dec. 5, 2018 › Winning bids announced - Jan. 11, 2018 (see next slide) » The competitive costs from the RFP process used as the baseline for establishing the SMART Program incentives going forward. Source: REQUEST FOR PROPOSALS FOR THE 100 MEGAWATT COMPETITIVE PROCUREMENT UNDER THE SOLAR MASSACHUSETTS RENEWABLE TARGET (“S MAR T”) PROGRAM. Issued November 13, 2017. https://www.mass.gov/files/documents/2017/11/13/SMART%20100%20MW%20RFP%20%2811-13-2017%29%20final.pdf SMART Presentation 9
Timeline of SMART Program Development Nov. 2017 Apr. 2016 Distribution Bill passed Sept. 2016 Companies Directed DOER DOER began released RFP to to phase out developing procure 100 MW SREC II SMART of solar facilities SREC II reaches Aug. 2017 Jan. 2018 1600 MW goal, Published the RFP auction was extended final regulations results until SMART for SMART announced started SMART Presentation 10
Estimated Timeline for SMART Implementation ISA must be signed by the utility before it is possible to apply for the SMART program block. » Block 1 currently paused and cannot reopen until the SMART tariff proceeding with the Massachusetts » Department of Public Utilities has been finalized, which will not be before May 2018 . Note that the timing of each subsequent block opening varies by Utility and depends on how quickly their » Block 1 fills. Feb 2018- Block 1 After May 2018- Block 1 currently paused* to reopen Anticipated May 2018 TBD- Blocks to continue closing and opening DPU Approves the subsequent number block per each EDC based on its fill rate Source: MA Solar http://masmartsolar.com/ SMART Presentation 11
Calculate your incentive SMART calculations vary significantly from the previous SREC calculation. » SMART calculations are slightly different for standalone units and behind the meter units. » Previous SREC program SMART calculation: SMART calculation: calculation Standalone Behind the Meter • Net Metering Credit Rate • (Baseline Price Auction Price) • (Baseline Price Auction Price) • + SREC of approx. 27 • x (Size Multiplier) • x (Size Multiplier) cents/kWh • + (Adders) • + (Adders) •– (Greenfield Subtractor) •– (Greenfield Subtractor) • x (total kWh generated) •– (Value of energy generated) • – (Value of energy generated) SMART calculation sourced from 225 CMR 20.00: SOLAR MASSACHUSETTS RENEWABLE TARGET (SMART) PROGRAM: https://www.mass.gov/files/documents/2017/11/14/225-cmr-20-00-draft.pdf SMART Presentation 12
Overview of Incentives Calculation Factors » Size Multiplier - increases as system size decreases » Adders › Four types › 1. Location, › 2. Off-taker › 3. Storage › 4. Tracking › >25kW can stack Adders, <25kW can only stack storage adder » Subtractor: Greenfield SMART Presentation 13
Incentives Calculation Factors: Size Multiplier » Size multiplier increases as system size decreases Base Compensation Generation Unit Capacity Rate Factor Low Income less than or equal to 230% 25 kW Less than or equal to 25 kW 200% Greater than 25 kW to 250 kW 150% Greater than 250 kW to 500 kW 125% Greater than 500 kW to 1,000 kW 110% Greater than 1,000kW to 5,000kW 100% SMART Presentation 14
Incentives Calculation Factors: Adder #1 - Location » Provides incentives for development of solar in certain types of locations. Location Unit Type Value ($/kWh) Building-Mounted $0.02 Floating Solar $0.03 Brownfield $0.03 Eligible Landfill $0.04 Canopy $0.06 Agricultural $0.06 SMART Presentation 15
Incentives Calculation Factors: Adder #2 – Off-Taker » Provides incentives to support development for designated groups of off-takers. » Specifically community-shared, low-income, and public entities. Off-Taker Unit Type Value ($/kWh) Community Shared $0.05 Low Income $0.03 Community Shared $0.06 and Low Income Public Entity $0.02 SMART Presentation 16
Incentives Calculation Factors: Adders #3 & 4 (Storage & Tracking) and Greenfield Subtractor » The storage adder varies Storage* depending on capacity and Unit Type Value ($/kWh) discharge duration – equation Energy $0.0247-$0.0763 detailed on the next slide. Storage » The tracking adder is a constant *varies with capacity and discharge duration Tracking value to encourage development of solar tracking. Unit Type Value ($/kWh) Solar Tracking $0.01 » The greenfield subtractor is a constant value that lowers incentive for projects developed Greenfield Subtractor: $0.0005/kWh per acre on greenfields. occupied by solar development SMART Presentation 17
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