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Massachusetts Seeks to Make Solar Power Economically Feasible with Ambitious Solar Power Initiative

 

Massachusetts is placing a high priority on making solar power a viable alternative to non-renewable energy. Governor Deval Patrick’s solar power initiative provides the people and businesses strong incentives to become solar power operators. These incentives include subsidies, rebates, and, in the near future, an option to sell surplus solar-generated energy. The initiative aspires to see 250 megawatts of solar-generating capacity in place by 2017.


The Commonwealth Solar Initiative

On December 14, 2007, Governor Patrick introduced Commonwealth Solar, a program earmarking $68 million in rebates for the installation of solar panels. The program appeared more ambitious than initially contemplated, spending all of the funding in the first 22 months instead of the slated three to four years. Commonwealth Solar exceeded expectations from a developmental standpoint, however. The initiative funded 208 commercial solar projects, creating 10.3 megawatts worth of solar capacity, and will subsidize over 12,000 solar projects by the time all the applications are processed.


Economic Viability

Governor Patrick’s solar power initiative affects economic considerations on both ends of the deal. The program mitigates the start-up expenses for both commercial and residential solar panel users through its rebate program. On the policy end, the legislature created favorable conditions for renewable energy developers. The Massachusetts Green Communities Act, passed in mid-2008, sets a graduated timetable under which utilities must generate an increasing percentage of their electricity from renewable sources. It also requires utility companies to enter long-term contracts with renewable energy developers, making it easier for them to obtain financing. Combined with the already high cost of energy in Massachusetts and new federal tax benefits for renewable energy, the initiative makes installation of solar power generating sources a financially sound decision for many commercial operators.


Third parties entering the solar leasing market help make installing solar panels feasible for homeowners as well. Power Purchasing Agreements allow homeowners to pay an initial fee of about $1,000 to have solar panels installed in their home. The company providing the equipment then charges the homeowner for the solar-generated electricity at a low 18-year locked-in rate. When the homeowner uses more electricity than the unit generates, he or she pays the normal utility rates for the overage. Although the amount of electricity generated by the solar units varies considerably, many customers can expect to recover the installation cost in lower energy bills early in the life of the contract.


The Solar Credit Market in 2010

Massachusetts’s new solar stimulus program for 2010 aspires to provide the same rebates and subsidies as Phase I, but also provide a new economic incentive for solar panel operators by creating a market for them to sell their surplus solar energy. Currently, the Green Communities Act requires utility providers to credit qualifying solar panel operators on future bills if they generate more electricity than they use. The Phase II initiative will go a step further, requiring utility companies to purchase back surplus electricity generated by the operators in the form of solar credits. In early 2010, the Massachusetts Department of Energy Resources plans to unveil the details of the Solar RPS Carve-Out—the arm of Phase II designed to create a market for solar energy credits.


 

Submitted by:
Liz Klingensmith and Ben Allen
Haynes and Boone, L.L.P.
Houston, Texas


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