State and federal incentives keep solar projects in the black
With federal tax incentives available for the next two years and an updated carve-out program in Massachusetts, renewable energy experts say the conditions are still ripe to invest in solar.
In May last year, Gov. Deval Patrick announced the state reached its goal of generating 250 megawatts of solar energy projects installed across the state, up from a paltry 7 megawatts in 2007, thanks to an aggressive set of state incentives. Four years ahead of its 2017 target, Patrick set a new goal of 1,600 megawatts by 2020. The state Department of Energy Resources (DOER) is currently soliciting input on a new Solar Renewable Energy Credit (SREC-II) program to support the continuing development of solar energy projects across the commonwealth.
“We were expecting we’d slowly reach that target and at least get to 250 megawatts by 2017,” said Dr. Dwayne Breger, director of renewable energy generation at DOER. “It was a huge success and built a major market and industry in Massachusetts that is now in the top five for solar businesses and jobs.”
Massachusetts was named one of the “Dazzling Dozen” states in renewable energy generation in a July report by Environment America. According to the report, the top 12 solar energy-generating states account for only 28 percent of the U.S. population and 21 percent of the country’s electricity consumption, but contribute a whopping 85 percent of installed solar electricity capacity and 87 percent of the solar photovoltaic capacity installed during 2012.
Although the incentives proposed for the state’s second round of solar renewable energy credits are not as high as their predecessors, renewable energy consultants say it’s still a great time to invest. The new carve-out program is set to go into effect in March or April, Breger said.
“There were a couple years when it was incredibly amazing and now it’s just really amazing,” said renewable energy consultant Eric Grunebaum, founder of Cambridge Energy Advisors and producer of the environmental documentary, “The Last Mountain.” “The first couple years were particularly well incentivized, and now those incentives have come down a little bit, but they’re still one of the best in the country.”
Breger said there are a number of reasons the state is looking to boost the solar industry in Massachusetts aside from the benefits to the environment. A big part of the impetus came out of the 2008 Green Communities Act, which specified a percentage of electricity that is required to come from renewable energy sources, including solar photovoltaic systems.
It was in the state’s interest to promote the burgeoning industry, Breger said. The first solar carve-out program was submitted to the state in December 2010, establishing a managed marketplace for the energy credits.
Without the added sweeteners, solar would be a lot less attractive, said Barun Singh, founder and CTO of WegoWise, an energy efficiency consulting firm. The federal government currently offers accelerated depreciation and has a 30 percent tax investment credit for commercial businesses that will be reduced to 10 percent in 2016. Homeowners’ 30-percent tax credit will disappear entirely.
“The subsidies make it possible,” Singh said. “Solar on its own doesn’t necessarily make economic sense without any subsidies or anything else. But the trajectory is that the cost is going down over time.”
According to a report released in July by DOER, the price per kilowatt of installing a photovoltaic system had been cut nearly in half since 2008 and is anticipated to drop another 25 percent or more by 2020 for large-scale systems.
One of the big changes over the last three to five years, Singh said, is the increase in third-party owners who assume the financing burden and manage the sale of SRECs in the market and then extend the benefits of lower electricity costs to their clients, who host the photovoltaic systems on their roofs.
“Most new solar companies are really solar financing companies,” Singh said. “They allow homeowners to get solar on their homes without having them pay for it all themselves.”
By pooling SRECs from multiple sources and selling it back on the state’s clearinghouse, along with taking advantage of net metering, Singh said they are able to generate profits.
There’s still a long way to go in financing solar projects, said Quincy Vale, founder of the renewable energy consulting firm MassAmerican Energy LLC. Most of the investment to date has come from Wall Street, Vale said, but he’s hoping local lenders will soon see the light.
“It’s not a newfangled technology any more. It’s been dealt with,” Vale said. “The technology has gotten better and better and better. It’s very robust, has no moving parts, has extended warranties, and proven performance.”
With electricity prices trending upwards, Vale said property owners are able to fix their electricity costs.
“(Utilities) have to upgrade their transmission distribution systems, and we’re all going to pay for that,” Vale said. “But by investing in solar, you’re building a little power plant on your roof.”