October 31, 2012

10 Significant State Policies for Distributed Solar Energy

California and New Jersey receive frequent coverage for the state policies that have helped them claim and hold onto the first and second spots, respectively, for US solar energy installations.

But there are other state programs worthy of emulation especially as smaller residential and commercial projects account for more US clean energy capacity.

For example, 16 states now include specific targets for solar or distributed generation in their renewable portfolio standard (RPS) requirements, and community solar programs have been proposed or adopted in seven seven states, according to a trends report by Interstate Renewable Energy Council (IREC).

Another great example of state-level innovation involves six states in New England – Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont – that are embracing regional procurement of renewable energy.

And some states are broadening their RPS to include solar hot water and other thermal energy sources, such as New Hampshire. In doing so, however, it drastically reduced incentives for solar electricity, greatly watering down the law.

Strong state policies are crucial for the continued growth of the US solar industry, especially in this year of market and industry turmoil. In some states, policymakers have moved proactively to make sure solar markets remain strong but inaction in other states has contributed to a shriveling market. 

Here are the 10 most important state solar policies implemented last year. 

The 10 most important state policy developments this year are:

The rate at which California continues to devise and implement renewable energy policies is impressive. Just last week, Governor Jerry Brown signed 19 laws that promote renewable energy, several of which apply directly to solar.

Even though community solar legislation has failed for now, its net-metering policy and California Solar Initiative (CSI) are encouraging more systems under 1 megawatt (MW), and its feed-in tariff (FiT) and Renewable Auction Mechanism (RAM) are helping streamline the procurement process for installations between 1 MW and 20 MW.

In May, California clarified its policy for how utilities calculate their limits on net-metering – effectively doubling the number of systems that can qualify. The FiT and RAM were also revised in the past year in response to market conditions and to provide more flexibility for developers.

And California continues to increase funding: $200 million was added to the CSI budget after the original money was spent, which will help grow on-site commercial projects, says IREC.

Why it matters: By continuing to scrutinize and modify various programs and policies as different sectors of the solar market evolve, and by implementing innovative changes to keep the state’s overall PV market healthy, California policymakers continue to lead by example, even amidst a strong but turbulent solar market.


In the past year, Connecticut launched two major programs to support renewables - particularly solar - as the result of legislation enacted in July 2011 (Public Act 11-80). 

Under one program, the state's two investor-owned utilities will spend up to $8 million a year on renewable energy credits (RECs) from zero-emission Class I renewables to comply with the states RPS. 

Utilities can enter into 15-year contracts with a set price per megawatt-hour for ZeroEmissions Renewable Energy Credits (ZRECs). ZRECs cover customer-sited facilities larger than 100 kW and up to 1 MW. A plan for ZRECs covering smaller systems will be developed in the future.

Connecticut also has created a Residential Solar Investment Program that provides $40 million to support 30 MW of residential solar PV development by 2022. 

Rebates are available for systems up to 10 kilowatts (kW), and the state offers a performance-based incentive of $0.30 per kilowatt-hour (kWh) for up to six years on leased systems.

There is a bonus payment for systems made with components principally manufactured in Connecticut.

Why it matters: Connecticut has never had an SREC (solar Renewable Energy Credit) market. However, the availability of long-term ZREC contracts will make the economics of PV much more attractive, especially given that Connecticut has the second-highest average retail electricity price in the United States.


Delmarva Power launched a pilot program this year for long-term SREC contracts, providing payments in tiers based on the size of the system - 50 kW or less to 2 MW. Smaller systems get fixed prices and larger ones are subject to competitive bids.

Systems with locally-sourced components get preference.

Why it matters: Delaware is a small state where relatively little electricity is consumed, but it has established one of the most aggressive solar carve-outs - 3.5% PV by 2026 - in the country.

This pilot program will help ensure that suppliers meet SREC obligations under the state's RPS and bolstersmarket confidence by creating long-term SREC price certainty.


Illinois made major changes to its RPS policy and net metering policies in 2011, creating a distributed generation carve-out in the state RPS and clarifying some contradictions.

Investor-owned utilities must now buy 1% of their renewable energy from distributed sources by 2016, and at least half of that has to come from small systems under 25 kW.

Why it matters: The distributed generation carve-out in the RPS along with measure to facilitate it (i.e., DG aggregation, longer-term contracts) are a very positive development for solar developers. And true net metering would no longer have been available without SB 3811, which clarified two contradicting bills from 2011. 


Maryland amended its RPS in May through a series of new bills, including S.B. 791, which accelerates the state’s solar target   from 2013-2020.

Under the new law, the solar requirement for 2013 was increased from 0.2% to 0.25%, and the ultimate 2% target was moved forward from 2022 to 2020. 

Two other new laws allow geothermal heating and cooling systems commissioned after January 1, 2013, and thermal energy from biomass systems fueled primarily by animal waste to qualify in the state RPS.

Why it matters: The acceleration of Maryland’s solar target, although modest in the near term, represents a pre-emptive strike against SREC oversupply and plummeting SREC price problems currently plaguing other Mid-Atlantic states. And the inclusion of other kinds of renewable energy is an example of a growing interest in expanding RPS policies to thermal energy.

New Hampshire

New Hampshire made major changes to its RPS policy in June.

It raised its RPS to 24.8% by 2025 (up from 23.8%) and created a specific target for thermal energy, including solar water heating.

Thermal energy must account for 0.2% of retail electricity in 2013 and the share increases by 0.2% a year through 2025.

But it reduced its payment for solar-generated electricity by a whopping 67%. The rate for solar PV (Class II) was cut from $168.13/MWh to $55/MWh, for example.

Why it matters: These changes, which create the first thermal carve-out in a state RPS, will benefit the biomass industry significantly as well as the solar-thermal industry, but the economic viability of solar PV projects will suffer. After years of steady progress on the solar carve-out front, this new law represents the most serious watering-down of such a policy, and it could embolden similar efforts in other states.

New Jersey

In July, Governor Christie approved a plan to accelerate the solar portion of its RPS by about four years – in part to help prop up prices for the state's RECs.

Utilities now must get 2.05% of their electricity from solar by 2014, up from less than 0.5% now, and 4.1% by 2028. 

In NJ, utilities have to buy RECs for every MWh a solar plant produces. With prices for solar dropping so much, utilities started building their own solar plants, dramatically cutting demand for credits and thus, a major revenue source for solar developers. Prices for credits crashed from $500 per megawatt-hour a year ago to less than $100 this year.

Under the new law, utilities have to speed up solar energy purchases by about four years, which means they will have to buy extra solar energy (credits) they can't produce themselves.

The law also promotes solar project development on brownfields and landfills, and allows aggregated net metering for public entities, such as schools or government agencies.

The state also set incentives in place to support up to 180 MW of net-metered projects over the next three years.

Why it matters: New Jersey is the second-largest solar market in the US, but its recently chaotic SREC market has wreaked havoc on new projects. The acceleration of the state’s solar carve-out and related changes will help remediate SREC oversupply in New Jersey, provided that installation rates are lower than last year’s rates.

New York

The New York-SUN Initiative sets the stage for the state to quadruple customer-owned solar capacity by 2013.

The New York State Energy Research and Development Authority (NYSERDA), the Long Island Power Authority (LIPA), and the New York Power Authority (NYPA) are all collaborating with incentives that support this target.

In July, for example, NYSERDA made $107 million available to support solar systems of at least 50 kilowatts. NYPA launched the Solar Market Acceleration Program (Solar MAP), a $30 million, five-year effort to support solar technology research, demonstration projects, and soft-cost reduction strategies. AND LIPA created a FiT tariff program for mid-sized solar systems, ranging from 50 kW to 2 MW.

Why it’s important: NY’s solar initiative didn't require new legislation. NYSERDA expects its programs to support 108 MW of PV during 2012-2013 and LIPA's FiT may add up to 50 MW of PV by mid-2014.


The state's "third-party ownership bill" (S.B. 981) outlines new parameters for ownership of distributed renewable energy  systems. 

Among other things, it exempts an owner of a Distributed Renewable Generation system from the definition of an electric utility if electricity production doesn't exceed annual consumption; and it expands the definition of owner to cover those with behind-the-meter installations.

Why it matters: Texas is the largest electricity market in the US, consuming more electricity than any other state. Reducing  major regulatory barriers related to third-party ownership will greatly benefit the solar PV market and likely attract significant private investment in solar in the state - especially in the residential sector, where third-party ownership is growing swiftly nationally. Since the law doesn't apply to municipal utilities or electric coops, its impact will be limited.


Vermont's “SPEED” Resources program (similar to a FiT) was originally capped at 50 MW of projects, but when that sold out immediately, the state expanded it to 127.5 MW this year. The cap will be raised each year for the next decade.

Vermont also moved to streamline the permitting process required for small solar projects under 10 kW. 

Why it matters: Expansion of Vermont’s SPEED program - the first state-level feed-in tariff in the US - sets a clear, long-term path for renewable energy development in the state. It's  a stark improvement over the unpredictable, open-and-shut nature of many incentive programs that support PV. Expediting and streamlining PV permitting processes across all jurisdictions in Vermont is extremely beneficial because it minimizes confusion among installers and reduces the soft costs of PV installations.

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