We kick off this week's State Bulletin with policy news you might have missed in the aftermath of President Trump’s withdrawal from the Paris climate agreement -- although I will be sure to get into that too.
First, we look at a new solar incentive program in Massachusetts. Next, we track a significant piece of solar legislation advancing in North Carolina, before taking a closer look at a suite of solar bills that passed in Nevada this week. Finally, we'll survey state reactions to leaving the Paris accord -- some of which raise thorny legal questions.
Massachusetts
On June 5, the Massachusetts Department of Energy Resources (DOER) filed regulations for its Solar Massachusetts Renewable Target (SMART) Program, described as “a long-term sustainable solar incentive program to promote cost-effective solar development in the Commonwealth,” according to the program website. The proposal will now go through a public comment period and be subject to public hearings.
SMART is intended to promote an additional 1.6 gigawatts of new solar generating capacity through a “capacity block” incentive structure. This week’s regulatory filing states that all compensation rates will decline by 4 percent per block. It also states that qualifying projects must be 5 megawatts or smaller, must not be net-metered, and must have an operation date of January 1, 2018 or after, among other eligibility criteria.
Because the SMART program won’t come into effect until 2018, DOER extended the state’s Solar Renewable Energy Credit (SREC II) program in March. This announcement allows for residential, community and large-scale commercial solar projects to receive SREC II incentives while the SMART program is being developed. National solar finance and development firm Sol Systems offers a breakdown of the SREC II program, calling it “critical to getting the Massachusetts solar market back on track” after the SREC II program cap was hit in early 2016.
The solar industry welcomed the release of SMART regulations this week as a long-term policy solution in Massachusetts, which currently ranks seventh in cumulative installed solar capacity and is home to the second-largest solar workforce in the nation. However, industry stakeholders argued that the state’s net metering caps also need to lifted, in addition to the SREC II extension, in order for the solar market to grow while new regulations are being finalized.
“For solar’s economic engine to continue running, the Massachusetts state legislature must raise the state’s net energy metering caps before the year is up to allow continued solar market growth until SMART is fully implemented,” said Sean Gallagher, vice president of state affairs at the Solar Energy Industries Association, in a statement.
The Massachusetts net metering program is currently closed for new projects in the majority of the state. The state legislature has proposed the bills that would be needed to lift the state’s net metering caps, but the industry is still waiting on approval.
While the solar industry continues to push for an expansion of net metering, stakeholders will also start to prepare reply comments on the SMART program. Mark Sandeen, co-founder and president of MassSolar, said the SMART program is “well considered.” However, his organization would be much more confident in its long-term success “if it included a requirement to evaluate program performance early and often with an ability to adjust the program in response to market forces, if the SMART program is not meeting its goals,” he said.
Jeff Cramer, executive director of the Coalition for Community Solar Access, told me this week that he has concerns about the proposed limits on community solar under the proposed SMART regulations.
“The newly released regs include some surprising and troublesome components, including a brand-new cap on community solar development in the Commonwealth at 320 megawatts (of the 1,600-megawatt program), and potentially unworkable land requirements that weren’t vetted in the stakeholder process,” he said. “We’ve worked very well with the DOER to date on these, and expect we’ll be able to work through this going forward to get through this uncertainty quickly.”
DOER said it will announce the timing of public hearings and the written public comment deadline in the coming weeks.
North Carolina
The North Carolina House of Representatives passed a major energy bill this week (HB 589) that includes significant reforms to the state’s solar policies. The legislation:
- Establishes a competitive bidding process for new solar
- Requires Duke Energy to request 2,660 megawatts of new renewable energy capacity in the 45 months after the competitive program is approved
- Opens up the state to third-party solar leasing
- Creates guidelines for a 20-megawatt community solar program
- Allows for solar rebates to help customers go solar
Duke Energy has come out in support of the bill, which effectively reforms how the Public Utilities Regulatory Policy Act is enforced. The bill would allow the utility to compete with third parties to build renewable energy projects, which Duke believes will keep costs down. HB 589 would also create a rider program that allows the utility to recover costs from renewable energy projects “provided it is in the public interest.”
“This bill is a victory for customers and for the state of North Carolina,” said David Fountain, president of Duke Energy North Carolina, in a statement. “First, it makes solar energy more affordable and efficient for all customers -- while providing a balanced, reliable approach to connecting solar energy onto the grid. Second, it helps maintain North Carolina's competitive position as a leader in energy policy and economic growth, both of which are important to preserving a pro-growth business climate for our state.”
While several aspects of the bill are appealing to solar advocates, they have also highlighted some potentially problematic issues. For one thing, it sets compensation for competitively procured solar projects at the avoided cost of energy, which industry stakeholders say is too low.
The bill would also revise the state’s net metering rates for residential solar customers, following a cost-benefit analysis conducted by the public utilities commission. “The Commission shall establish net metering rates under all tariff designs that ensure that the net metering retail customer pays its full fixed cost of service,” the bill states. “Such rates may include fixed monthly energy and demand charges.” Customers that purchase solar before the new rates take effect are eligible for grandfathering, but only for 10 years or until January 2027.
The Charlotte Business Journal reports that the bill is supported by Gov. Roy Cooper, but it could still struggle to pass in the Senate.
Nevada
Solar advocates celebrated three big wins in Nevada this week. The legislature passed a bill (AB 206) that boosts the state’s renewable portfolio standard to 40 percent by 2030, and establishes some very attractive incentives for energy storage, as GTM’s Julian Spector explains. It passed a bill (SB 392) that creates a 200-megawatt community solar program. And it passed a bill (AB 405) that reinstates net energy metering for residential solar projects, which has already started to revive the state’s home solar market, which tanked after regulators approved crippling policy changes in late 2015.
AB 405 allows for net metering compensation at 95 percent of the retail rate, declining in blocks of roughly 7 percent each for every 80 megawatts of solar deployed, to a floor of 75 percent of the retail electricity rate. In addition to establishing attractive reimbursement levels for solar exports, the bill guarantees the right for customers to self-generate solar. “That’s never been put in law in any place in the country, to my knowledge,” said Jon Wellinghoff, former policy director at Tesla/SolarCity and FERC commissioner, who helped craft key parts of the Nevada legislation. I’ll take a closer look at AB 405 in an interview with Wellinghoff in the coming days.
While solar players are still waiting for Governor Sandoval to sign these bills into law, several companies have already announced plans to return to Nevada. Sunrun, Vivint Solar and Tesla have all said they’re making arrangements to return after pulling out of the market in 2016.
“We view the week's events in the Silver State as evidence of the silver lining emerging from Trump's Paris decision,” Credit Suisse analyst Andrew Hughes wrote in a note to investors on Friday. “It is clear that climate and renewable leaders are going to emerge at the state and corporate level with far more actionable and impactful actions to catalyze renewable investment and greenhouse gas mitigation than D.C. can muster.”
On the downside, Hughes noted that “investors were far more interested in the demise of the Nevada market than they seem to be in its resurrection.” Sunrun’s stock price has inched up in recent days, but it has yet to recover from the blow delivered by Nevada regulators at the end of 2015. Vivint Solar’s stock has also been in decline since December 2015 and growth remains flat.
While there are a number of factors affecting residential solar stock prices, the Nevada net metering decision was significant because it highlighted how policy-sensitive the market is. The PUCN’s decision to apply rate changes retroactively sent a chill through the entire solar sector, because the break with precedent created an enormous sense of uncertainty. The legislation passed this week goes a long way toward restoring confidence.
California goes to China
California Governor Jerry Brown wrapped up a five-day trip to China on Thursday, where he met with Chinese President Xi Jinping, the leaders of Sichuan, Jiangsu and Hebei provinces, and China’s Minister of Science and Technology and Minister of Commerce.
According to a report from the Governor’s office: “During the trip, Governor Brown also struck climate agreements with China’s national government through the Ministry of Science and Technology in Beijing, with Sichuan Province during his trip to Chengdu and with Jiangsu Province while visiting Nanjing. In addition, the California Energy Commission signed a clean technology pact with Haidian District and the Regents of the University of California and Tsinghua Holdings, a subsidiary of Tsinghua University, announced a partnership to develop the California-China Clean Technology Funds."
The report continued: "Additionally, Governor Brown convened dozens of regional and business leaders from around the world for the Under2 Clean Energy Forum, where former United Nations Framework Convention on Climate Change (UNFCCC) Executive Secretary Christiana Figueres was named Global Ambassador for the Under2 Coalition and five new coalition members were announced. The Governor also participated in events associated with the Clean Energy Ministerial, an annual meeting of national energy ministers and other high-level delegates from nearly two dozen countries.”
Interestingly, the governor secured a meeting with President Xi while in Beijing, but Energy Secretary Rick Perry, who was also in town, did not meet with the Chinese leader. The timing of Brown’s trip, on the heels of President Trump’s decision to withdraw the U.S. from the Paris climate accord, underscored California’s ongoing leadership role on climate and clean energy issues.
“The world, through the Paris accord, has made the commitment to make the turn to a decarbonized future. Good, we're for that,” said Brown, in a speech delivered at Tsinghua University. “Now, maybe some people in Washington aren't so sure about that, but California is sure. We believe in the Paris accord, and we are going to stick to our commitments. And we're going to persuade other states and do everything we can to get the whole United States of America fully supporting all the efforts needed to decarbonize America's economy -- and, in fact, the world's economy.”
Hawaii and the “climate rebellion”
California wasn’t the only state to reaffirm its commitment to the Paris climate goals this week. Virginia, Connecticut, Delaware, Hawaii, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington, plus California and Puerto Rico became members of the U.S. Climate Alliance and remain committed to achieving the U.S. carbon reduction goals pledged in Paris -- cutting emissions by 26 to 28 percent from 2005 levels. Officials from 10 states and the District of Columbia pledged to follow the Paris Agreement but did not formally join the alliance.
Some 274 cities -- and counting -- have signed on to the Mayors National Climate Action Agenda, which reinforces their commitment to lowering emissions at the local level. National Geographic created a handy map showing all of the states and cities that are part of the “climate rebellion” against President Trump. On a related note, Santa Barbara this week became the 30th U.S. city to commit to 100 percent renewable energy, according to the Sierra Club.
Hawaii took one of the most officially rebellious steps in the wake of Trump’s Paris decision, becoming the first to pass legislation in support of the treaty. On June 6, Governor David Ige signed a bill that commits the state to reducing greenhouse gas emissions in alignment with the Paris Agreement. The island state has already set a mandate to reach 100 percent renewable energy for electricity by 2045.
"We are the testing grounds. [...] We are especially aware of the limits of our natural environment," Ige said before signing the document. "Tides are getting higher, biodiversity is shrinking, coral is bleaching, coastlines are eroding, weather is becoming more extreme. We must acknowledge these realities at home. That is why Hawaii is united in its political leadership on tackling climate change."
States that take action to support the Paris goals could face some legal pushback, however. In an interview with E&E News, Northwestern University law professor Eugene Kontorovich pointed out that states could be legally challenged if their climate alliances raise constitutional questions under the foreign affairs pre-emption doctrine or the compacts clause. However, these challenges would face an uncertain path in the courtroom.
State governments cannot negotiate directly with foreign governments or sign on to international treaties in the absence of federal action. But states can create their own state-level targets, which appears to be the route Hawaii took. Plus, legal experts note there’s nothing to say states cannot set voluntary targets. Furthermore, the Paris Agreement itself is a non-binding compact. So the U.S. Climate Alliance amounts to a non-binding agreement to the non-binding agreement, and yet, these state-level commitments are significant.
Governor Brown and Secretary Perry greet each other on an escalator at an energy conference in Beijing. Photo by @AaronBerkovich.
