Electricity Restructuring Roundtable Policy Support for the Development of a Robust Solar PV Market in MA Dwayne Breger, Ph.D. Director, Renewable and Alternative Energy Division September 16, 2011 Electricity Restructuring Roundtable Boston, MA

Outline Solar Goals and Market Creation since 2007 Policy Design of the MA RPS Solar Carve-Out Current Status of the SREC Market Update on Net-Metering Associated Activities Solarize Massachusetts Renewable Thermal Initiatives 2 2 2 2

Cumulative Obligations of RPS / APS* Programs RPS / APS Minimum Standard 0% 5% 10% 15% 20% 25% 30% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Compliance Year Percent Obligation, % APS Class II - WTE Class II Class I - Solar Class I 2011 Compliance Obligations by Class Class I – 6% SCO – 0.1627% Class II RE – 3.6% Class II WE – 3.5% APS – 2% Solar historically very small part of total compliance (less than 0.1%) SCO will bring it closer to 10% of Class I *Alternative Energy Portfolio Standard (APS) 3 3

Massachusetts Solar Development Strategies (apart from the RPS Solar Carve-Out) Governor Patrick’s goal – 250 MW by 2017 Commonwealth Solar (Rebates) – initiated Dec. 2007 Rebate Program: $68 million, 27 MW Successfully achieved and completed Oct. 2009 Created the beginning of a robust PV development sector in MA Commonwealth Solar II (Rebates) for small (<10kW) systems has maintained residential PV market (managed by the MassCEC) Federal Stimulus/ARRA funds used by DOER to support 10 MW of PV at state/municipal facilities. Green Communities Act allows for Distribution Utility ownership of PV Generation National Grid approved for 5 MW, 3.3 MW installed WMECO approved for 6 MW, 1.8 MW installed 50 installers in 2008, 200 by end of 2009 CS & Cstim: Both launched in January 2010 Stim was in two blocks of $4 million each Supported over 7 MW of projects CSII continues and is slated to last through 2011 Primarily residential, but also small commercial Supports small PV market, where installed costs/watt are higher full SREC value not often realized Over 1,500 projects to date Federal Stimulus: 10 MW of projects at municipal and state facilities (EECBG, DCAM) Most are eligible for SRECs Utility: GCA, must be approved and built by 2012 Unlikely additional projects will be built beyond what is approved 4 4 4 4

Installed Capacity Leading up to Solar Carve-Out CS II & CS Stimulus Utility Owned Federal Stimulus 2007 Pre 2007 Most of Stim, CSII, and Fed Stimulus eligible. Nearly 35 MW of these projects approved or built to date. 2007-2011

RPS Solar Carve-Out Will Carry Market Far Forward Currently at 59 MW installed w/ more than 40 in pipeline If market is relatively balanced going forward, 400 MW should be reached in the 2016/2017 timeframe 6

RPS Solar Carve-Out Program Basics Market-based incentive, part of the broader RPS Program Program is capped at 400 MW of qualified capacity 1 SREC (Solar Renewable Energy Certificate) represents the attributes associated with 1 MWh of qualified generation Units must be qualified by DOER before they can begin generating SRECs All generation is metered and reported to MassCEC’s Production Tracking System (PTS) MassCEC provides data verification and reports generation to NEPOOL GIS where SRECs are minted on a quarterly basis MassCEC is IV for all SREC generation NEPOOL GIS is tracking system for all NE certificates, including SRECs 7

Eligibility Criteria and Qualification Process Have a capacity of 6 MW (DC) or less per parcel of land Be located in the Commonwealth of Massachusetts, which includes municipal light district territories Use some of its generation on-site and be interconnected to the utility grid Have a Commercial Operation Date of January 1, 2008, or later Online application Need Authorization to Interconnect from local utility before SRECs can be generated Review process is quick and straightforward (30 days or less) Ineligible funding sources include nearly all MRET rebate/grant programs prior to 2010 Also includes projects that received ARRA funds in excess of 67% of total costs

SREC Program Design Features Program design features help ensure market stability and balance Adjustable Minimum Standard maintains SREC demand/supply in reasonable balance Forward ACP Rate Schedule proposed; provides investor certainty Solar Credit Clearinghouse Auction Account essential price support mechanism to assure SREC floor price Opt-In Term provides right to use Auction, adjusted to throttle installation growth rate These features work together to ensure the market will remain in balance as more PV is built

Minimum Standard Adjustment  Compliance Year Compliance Obligation (MWh) Minimum Standard Equivalent Full-Year Solar Capacity (MW) 2010 34,164 0.0679% 30 2011 78,577 0.1627% 69 2012 81,559 0.1630% 72 For 2012 and beyond, the Minimum Standard (Compliance Obligation) is adjusted each August according to a formula set in the program regulation. 2012 Min. Stand = 2011 Min. Stand + [Projected 2011 SRECs – Actual 2010 SRECs]  x  1.3 – 2010 ACP Volume +  2010 Banked Volume + 2010 Auction Volume Actual 2012 Calculation 81,559 MWh = 78,577 MWh + [29,056 – 2,738]  x  1.3 – 31,231 +  0 + 0 30% growth rate explanation Base formula vs. adjustments Projected SRECs based on first 6 months of PTS generation data and known pipeline of projects 10 10

Proposed ACP Rate Schedule 2011 ACP Rate set at $550 (reduced from $600 in 2010) DOER recently proposed a 10-year forward ACP Rate Schedule Designed to reduce market risk and uncertainty Maintains current ACP Rate through 2013 before reducing 5% annually DOER accepted written comments on proposal through August 15th Will issue an RPS Guideline after considering comments received Will move to insert schedule into the MA RPS Class I Regulation shortly after the Guideline has gone into effect Compliance Year ACP Rate per MWh 2012 $550 2013 2014 $523 2015 $496 2016 $472 2017 $448 2018 $426 2019 $404 2020 $384 2021 $365 2022 and after added no later than January 31, 2012 (and annually thereafter) following stakeholder review 11 11 11

Program Design: Opt-in Term The Opt-In Term is the number of quarters a qualified project has the right to deposit SRECs into the Auction Account (to be assured floor price). The Opt-In Term is currently 10 years (40 quarters), but can be adjusted each July for subsequent qualified projects. Opt-In Term Adjustments Long Market: Opt-In Term reduced by 4 quarters for each 10% of Compliance Obligation deposited into the Auction Account Short Market: Opt-In Term increased by 4 quarters for each 10% of Compliance Obligation met through ACP Payments Opt-In Term may not increase or decrease more than two years as a result of an annual adjustment, nor can it exceed 10 years. Opt-in term can’t go below 5 years for the first 7 years of the program Max. opt-in term is 10 years Adjustments are announced by July 20th Only affects new projects 12 12 12 12

Price Support – Auction Mechanism Solar Credit Clearinghouse Auction Account Open every year from May 16th – June 15th Any unsold SRECs may be deposited into the Account Designed as option of last resort for SREC owners that have not found buyers for their SRECs by the end of the Compliance Year Auction held no later than July 31st, but after the Minimum Standard adjustment is announced Deposited SRECs re-minted as “extended life” SRECs (good for compliance in one of the following two Compliance Years) SRECs offered to bidders for a fixed price of $300/MWh before being assessed a $15/MWh auction fee by DOER. SREC owners will be paid $285/MWh for each SREC sold through the Auction. Bidders bid on volume willing to buy at the fixed price. Auction clears if bid volume exceeds volume deposited. Multiple rounds of Auction are used, if necessary, to clear deposits. DOER would only expect to hold an auction during years when there is an oversupply of SRECs.

Current SREC Program Statistics – 9/16/11   Number of Systems Capacity (MW) Applications Received 1,038 49.7 Applications Qualified 1,008 41.0 Qualified but Installation Incomplete 31 14.1 Installed 977 26.9 Over 1,000 applications received and qualified Approximately 41 MW qualified Nearly 27 MW of projects are installed 2,741 SRECs created in 2010 2,358 SRECs created in Q1 2011 More than 6,000 SRECs expected to be created in Q2 2011 14

Current SREC Program Statistics – 9/16/11 Activity by System Size Bulk of applications (77%) are for small systems. However, these only represent 8% of the total capacity qualified. Projects over 100 kW represent 8% of total applications, but 79% of the qualified capacity. 15

Solarize Massachusetts Goals Utilization of community networks and local marketing to decrease the installer’s customer acquisition cost (soft costs) Reduce cost of materials through bulk purchasing (hard costs) Increase adoption rate of solar PV Methods Educating community about solar PV Partnering with the town and solar integrator to offer reduced pricing to community members Tier pricing structure – the more people sign up, the more everyone saves! Initial Outcomes are encouraging Pilot program in Harvard Hatfield Scituate Winchester Collaboration between MassCEC and DOER Green Communities Program

Net Metering Changes Adopted in 2010 Requires DPU to adopt an “assurance of net metering process” New definition for public net metering facility Owned or operated by a public entity; OR 100% of output is assigned to the public entity New Caps of 1% for private projects and 2% for public projects Currently DPU Dockets 11-10 and 11-11 are addressing implementation of these and other changes.

Solar Hot Water Pilots and Low-Income Program (MassCEC) Commonwealth Solar Hot Water Residential Pilot Program $1 million budget for SHW systems serving 1-4 units 129 projects awarded to date Commonwealth Solar Hot Water Commercial Pilot Program $1 million budget for pre-design study grants and construction rebates $350,000 for pre-design studies and $600,000 for construction rebates with the goal of supporting 100 projects. Low Income Solar Thermal Program MassCEC awarded the Low-Income Energy Affordability Network (LEAN) $2 million to manage program Install SHW systems at multi-family residential and nonprofit facilities serving low income residents and participants Pre-Design Studies: -Building owner must have procured an experienced consultant Report should analyze site, the roof structure, the hot water load (to be measured through metering), and project economics and specify system design. Time to Complete Study: 3 months Construction Rebates: - Estimated performance-based incentive (same as residential program)

Renewable Thermal Policy No comprehensive policies supporting development of renewable thermal in place Despite large potential for decreasing dependence on fossil fuels, meeting GWSA GHG reduction commitments, and job creation MA Clean Energy Plan 2020 calls for Policy Framework DOER/MassCEC RE Thermal technology assessment (ongoing) Solar, Biomass, High Efficiency Heat Pumps, Biofuels In fall 2011 RE Thermal policy options will be assessed MassCEC Implement pilot programs (solar ongoing)

Production Tracking System Commonwealth Solar Hot Water Links and Contact Info DOER Website: www.mass.gov/energy/solar Contact: DOER.SREC@state.ma.us Production Tracking System Website: www.masscec.com/pts Contact: pts@masscec.com Commonwealth Solar II Website: www.masscec.com/solar Contact: cs@masscec.com Solarize Mass Website: www.masscec.com/solarizemass Contact: solarize@masscec.com Commonwealth Solar Hot Water Website: www.masscec.com/solarhotwater Contact: solarhotwater@masscec.com 20

Appendix Slide

Price Support – Auction Mechanism Explain what clear means 22