Massachusetts officials, advocates, and businesses are hoping proposed changes to the state’s solar incentive program will help reinvigorate a flagging market and give more disadvantaged residents access to the benefits of renewable energy.
“The program has been pretty set in stone since it first launched,” said Katie Moffitt, project development manager for solar investment firm Sunwealth. “I am very excited about making the program more responsive to the needs of the solar industry and allowing us to adapt with the times.”
The state’s energy department earlier this month unveiled an extensive set of proposed adjustments to the Solar Massachusetts Renewable Target, or SMART, program, the first major overhaul since the program launched in 2018. The suggested changes include strategies to ensure subsidy rates keep up with the solar market, incentives to encourage more installation of solar on buildings and previously developed land, and plans to make solar power more accessible to low- and moderate-income residents.
The state is accepting feedback on the proposal until August 2, and expects to file final draft regulations in the fall.
The proposal comes at a moment when the state has seen significant declines in new solar power coming online. In 2021, Massachusetts saw more than 600 megawatts of new solar installed, according to the Solar Energy Industries Association; in 2022 and 2023, less than 400 megawatts were installed each year. Yet the state’s climate plan calls for at least 27 gigawatts of solar to meet its goal of going carbon-neutral by 2050.
“We know, based on historical deployment rates, that we’re falling behind those goals,” said Samantha Meserve, director of the state’s renewable and alternative energy division. “We need to spur more development.”
Adaptable rates
Much of the slowdown in solar development is due to a mismatch between market conditions and state incentive rates, said those in the industry. SMART works by providing a fixed rate for every kilowatt-hour of power generated by a solar installation, with increased rates (called “adders”) available to projects that advance certain policy goals, like serving low-income populations. The set rates were intended to help encourage development with financial support and also create stability and predictability for developers.
The base rates were set when the program launched in 2018, and were designed to decline as more installations were built. The idea was that the solar market would gain steam and prices would continue falling, making state support less necessary over time.
However, the market did not cooperate with this vision: Supply chain problems made equipment more expensive, inflation increased costs for materials and labor, and rising electricity rates canceled out much — and sometimes all — of the financial benefit the SMART payments provided.
“That model theoretically would have worked fine in a noninflationary environment, but worked very poorly in the inflationary period,” said Isaac Baker, co-CEO of solar developer Resonant Energy.
The proposal tackles this problem by instituting an annual system for setting rates. Each year, the state will undertake an analysis of the current market conditions and progress toward state solar targets, and use this information to determine the program’s rates and capacity for the following year. Developers will provide real cost details to ensure the accuracy of the process.
“We achieved a lot of certainty in the last program, but we now need certainty with flexibility,” Meserve said. “We know we’re losing momentum to get to some of our goals because of that certainty.”
The proposal’s approach to deciding how much capacity to support each year, however, has some in the industry a bit wary. For the first two years, the capacity for projects larger than 25 kilowatts would be set at 300 megawatts; in subsequent years, the annual analysis would determine the capacity.
This limit does not help encourage more development, said Lindsay Bourgoine, vice president for policy for the Solar Energy Business Association of New England. And the starting point of 300 megawatts a year does not come close to supporting the state’s goal of hitting 10 gigawatts of solar power by 2030, she said.
“We remain pretty concerned about the use of caps,” Bourgoine said.
Getting siting right
Additional changes to the program aim to encourage more solar installations on buildings, parking lots, and other already-developed land.
“We’re making it more attractive to site projects in the built environment,” Meserve said.
A 2023 study found the state has highly suitable sites for 54 gigawatts of rooftop and canopy solar potential. At the same time, some environmental groups have been raising concerns about large solar installations disturbing important wildlife habitats and forests that can pull carbon from the air.
“We can’t be doing that with state money,” said Michelle Manion, vice president of policy and advocacy for Mass Audubon.
However, the economics of building large, ground-mounted arrays on previously undeveloped land have generally been more favorable. The new SMART proposal lays out several ideas to rebalance that equation. The proposal would lift the cap on subsidizing developments smaller than 25 kilowatts, a category that includes most residential projects and many installations for nonprofits, houses of worship, and small businesses.
The proposal also increases adders connected to projects in the built environment. The adder for building-mounted projects would go from 2 cents to an estimated 3 cents, and the adder for building over a landfill would increase from 4 cents to 6 cents.
Canopy-mounted systems would see both an increased adder — from 6 cents to 8 cents per kWh of energy produced — and a new definition. Whereas the current program awards a canopy adder only to projects over parking lots, pedestrian walkways, and canals, the revamped program would widen the criteria to include any array mounted on a structure high enough to maintain the function of the area beneath. This change opens the door for canopy projects shading everything from junkyards and gas stations to compost piles and picnic areas.
“You’ll start to see a lot more interesting and creative applications like that,” said Ben Underwood, Baker’s co-CEO at Resonant Energy.
A new adder, likely starting out at 4 cents per kilowatt-hour, would also be created for raised racking on rooftops: mounting systems that raise solar panels up high enough that other equipment such as climate control systems can still operate and be accessed beneath them. This addition has the potential to unlock enormous amounts of roof space for development, Underwood said. On some of Resonant’s smaller projects, it could even triple the size of projects that could fit on a roof, he said.
While the changes incentivize solar in the built environment, they also attempt to narrow the criteria for building in previously undeveloped greenfields to make sure only “cream of the crop” sites are developed, Meserve said. While the existing program decides whether land can be developed by looking at the entire parcel, the updated iteration would look more closely at the footprint of a proposed array to make sure it is not disturbing the most valuable green spaces and habitats.
The proposal also calls for an increased “subtractor” — a reduction in the base SMART rate — for greenfield developments. The rate would go down 6 cents plus an additional 0.4 cents per acre of land affected, a significant increase from the current subtractor which tops out at 0.1 cents. Developers can earn back the 6 cents through a community engagement adder by proving they’ve worked with the community to mitigate the impacts the project will have, an element Meserve said will help the state focus on only the best developments.
Bourgoine, however, said many solar installers are worried that the hefty subtractor will slow down solar development too much at a time when the state needs to be accelerating its move to renewable energy.
“There are situations where the subtractor could cause damage where it doesn’t need to,” she said.
Sharing the benefits
New strategies could also make the benefits of solar energy more accessible to low-income households, which have so far made up only a very small fraction of the consumers using SMART-subsidized power.
The proposal would expand the list of facilities that qualify for low-income adders to include deed-restricted affordable condominiums, homeless shelters, domestic violence shelters, and other affordable housing buildings not covered by the current definition.
The new plan would also broaden the definition of a low-income customer. Under current guidelines, a low-income customer is someone who receives a discounted rate from the electric utility or who lives in a designated low-income area. The new definition would also include consumers enrolled in other needs-based programs to qualify as low-income, and those who self-attest that they fall under the set income caps.
“This will make participating in low-income solar a much more accessible option,” Moffitt said.
Furthermore, community solar developments will now be required to enroll a minimum of 40% low-income customers to receive the community solar adder of 7 cents. Though community solar is fairly widespread in Massachusetts, customers have generally been those with higher incomes and credit scores. The current program includes an adder for low-income community solar, but it is not often used because of the obstacles of locating customers — obstacles the new definitions would lower significantly.
“This new program will lead to there being a massive shift in value coming from stand-alone community solar,” Baker said. “A huge amount of that value is going to be directed to low-income tenants and ratepayers throughout the commonwealth, which is a really positive step.”