The Baker administration, which favors keeping a
cap in place on one solar subsidy program, is now tinkering with another solar
price support.
State officials say they plan to change the way a key solar
subsidy is auctioned to curb price speculation by hedge funds and Wall Street
firms. Judith Judson, the commissioner of the state Department of Energy
Resources, estimates the changes in auction rules will save electricity
ratepayers at least $20 million a year.
“We think if there’s an opportunity to save $20 million and
keep moving forward on our clean energy goals, we’re going to pursue it,”
Judson said in a telephone interview.
But critics of the move say the change is being carried out
with no public debate and may actually increase electricity rates rather than
lower them. The critics also say the latest move is another sign that concern
among utility executives about the high cost of solar power is driving policy
within the Baker administration.
Elise Zoli, an attorney at Goodwin Procter who represents
clean tech clients, urged Judson in a letter to withdraw the new auction rules.
She said the changes will lead to auctions “dominated and controlled by retail
electric suppliers, to the exclusion of financial, environmental, and solar
sector participants.” She said restricting the number of bidders at the auction
could lead to lower prices for solar credits and less income for solar
developers.
Solar power in Massachusetts receives two major state
subsidies. One subsidy, called a net metering credit, is provided for each
megawatt hour of solar electricity fed into the power grid. The other is a
solar renewable energy credit, or SREC, which is awarded to developers for each
megawatt hour of solar electricity they produce. Both subsidies are paid for by
the state’s electric utilities and passed along to their customers through
their bills.
A state task force released a long-awaited report in May saying
that the growth of solar power is dependent on subsidies and that the subsidies
yield more economic benefits to ratepayers than they cost. But some members of
the task force said the economic benefits of solar could be attained at far
less cost. One utility executive said Massachusetts ratepayers are paying more
than twice as much as Connecticut ratepayers for solar power.
The Baker administration is moving to reduce the ratepayer
cost of solar power. For example, the administration sided
with utility executives on net metering credits. The
availability of net metering credits is capped in each utility service area.
The cap limit has already been reached in the National Grid service territory
and is nearing the limit in the Eversource territory. A majority of the state
task force backed raising the net metering cap, but the Baker administration
came out in favor of keeping the existing cap in place until a more
cost-effective solar energy program can be developed.
The Baker administration is now moving to change the way
SRECs are auctioned. Solar power generators are issued one SREC for each
megawatt of solar power they generate. The credits are a source of funding for
solar developers because companies selling electricity in Massachusetts are
required to buy credits equal to a small percentage of their sales. Some
SRECs are sold through contracts between solar developers and companies selling
electricity to consumers. Each year, however, SRECs not sold through contracts
are put up for auction.
Judson said half of all SRECs in 2013 were sold at auction,
while in 2014 a quarter of the credits were auctioned off. She said a
significant number of the credits sold at auction – more than two-thirds of
them in 2014 – were purchased by hedge funds and Wall Street firms on the
assumption that the market for SRECs will tighten this year and next and the
SRECs can be sold at a profit. Judson declined to name the hedge funds and Wall
Street firms.
State officials hope to curb future speculation in SRECs by
establishing a two-tier bidding system starting with an auction scheduled later
this month. The pot of SRECs up for auction will be split in two, with half
available only to utilities and other entities selling electricity directly to
customers who need the credits to comply with state law. The remaining half of
the SRECs can be purchased by anyone, but no one party could buy more than 10
percent of the credits.
Zoli, in her letter to Judson, said the changes violate
existing regulations and laws, but state officials say only the rules of the
auction are being changed. “All auctions have rules,” Judson said. “This is
simply designing rules for an effective market.”
Judson said the state’s utilities didn’t lobby directly for
the changes, but she said the companies have been supportive of the changes.
Janet Gail Besser, vice president of policy and government
relations at the clean energy group NECEC and a member of the solar task force,
said she wasn’t troubled by the new auction rules. “The changes proposed
are intended to reduce the cost of the SREC program for electricity customers
and do not appear to be unreasonable,” she said.
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