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INITIAL COMMENTS OF THE SOLAR ENERGY INDUSTRIES ASSOCIATIONON THE NEXT GENERATION SOLAR INCENTIVE STRAW PROPOSALTo the Massachusetts Department of Energy Resources10.28.16The Solar Energy Industries Association (SEIA) thanks the Massachusetts Department of EnergyResources (DOER) for soliciting comments on the Next Generation Solar Incentive StrawProposal (Straw Proposal). Through the stakeholder process, SEIA representatives are workingwith DOER, the utilities, and other interest groups on designing an incentive program that helpsthe Commonwealth achieve its energy and environmental goals, reduces costs, and continuesto create solar industry jobs.Established in 1974, SEIA is the national trade association of the United States solar energyindustry and is a broad-based voice of the solar industry in Massachusetts. Through advocacyand education, SEIA and its 1,000 member companies are building a strong solar industry topower America. There are approximately 40 SEIA member companies in operation inMassachusetts working in all market segments – residential, commercial, and utility-scale. SEIAmember companies provide solar panels and equipment, financing, and other services to alarge portion of Massachusetts solar projects.SEIA commends the Baker Administration and specifically the DOER for advancing an initialproposal for a new incentive program that would support a new 1600 MW (AC) of solardevelopment in the Commonwealth. While there are many critical details that still need to beworked out, and we recognize many design elements are subject to change, the DOER StrawProposal is a solid foundation upon which to build.SEIA provides limited initial comments on the Straw Proposal. Our failure to comment on anyaspect of the Straw Proposal does not signal support or opposition to any particular issue. SEIAreserves the right to file additional comments throughout this regulatory docket. We alsounderstand that the Straw Proposal may be subject to potentially significant changes given thediscussions already underway.These comments: 1) discuss the overall program objectives; 2) advocate for the need to closethe current gap between incentive programs for solar projects larger than 25kW; 3) brieflydiscuss the consultant analysis and the proposed incentive levels themselves; 4) discuss blocksize, block management and the application process; 5) address issues related to billing andcrediting; 6) urge caution on implementing the proposed siting restrictions on solar for certainPage 1 of 9

areas; 7) address specific issues related to community solar; and 8) discuss mechanics and theneed to see draft regulatory language as soon as possible.1. Overall Program ObjectivesSEIA commends the DOER for advancing an initial proposal that supports another 1600 MW ofnew solar development in the Commonwealth. SEIA supports and shares the BakerAdministration’s overall goal of providing more predictable incentives to the solar industry at alower cost to ratepayers.As proposed, DOER’s new incentive structure attempts to level the playing field between netenergy metered (NEM) and non-NEM projects in Massachusetts. We commend the BakerAdministration and the DOER for advancing a proposal that attempts to protect the solarindustry from market disruptions caused by delays in addressing the state’s utility net meteringcaps.A) Straw Proposal Should Not Be Considered a Replacement for Net MeteringDespite the proposal’s laudable intent on this issue, SEIA cautions that the proposal should notbe a replacement for NEM in the Commonwealth. SEIA acknowledges that DOER is notadvocating a specific position on NEM through the proposal, but notes that NEM is afoundational policy upon which successful solar markets have been built across the country.NEM remains a key to the solar industry’s success in Massachusetts, and will be thecornerstone of solar policy in a post-incentive market within the Commonwealth.SEIA supports the DOER’s efforts to provide market certainty for non-NEM projects through theincentive program, but policymakers should remain cognizant that non-NEM compensationstructures for solar energy in Massachusetts currently fail to accurately capture the broaderbenefits solar systems bring to the grid. A robust net metering program, or other moreaccurate compensation structures and rate designs, are still needed and should be the goal offuture efforts by DOER and the Massachusetts Department of Public Utilities (DPU).B) Revisit the Stakeholder Process TimelineThe DOER has launched an ambitious stakeholder process to consider the implementationdetails of the new incentive program. The stakeholder process is intended to produce a set ofconsensus recommendations to inform a final DOER emergency regulation to be issued byJanuary 8, 2017. Based on the initial meetings, it is clear that this timeline is too aggressive fora program that is meant to fundamentally change the solar incentive regime in Massachusettsfor the next several years.SEIA encourages DOER to revisit its timeline to allow the consideration of proposals and newsolutions from working group participants. A process moving on a less aggressive timetable willgive stakeholders a greater ability to understand how the new tariff-based approach will impacttheir firms and the overall market. SEIA strongly supports having a new incentive program inPage 2 of 9

place as soon as possible, but numerous open implementation questions require carefulconsideration and review. Increasing time pressure is at odds with the worthy goal of aconsensus-building stakeholder process, and more time is likely needed on certain issues(identified below) to ensure the smooth implementation of a new policy regime.Executing an extension of SREC II for projects of greater than 25kW in size would allow DOER torelax the stakeholder process timeline and allow more time for stakeholders to reachconsensus on program recommendations.2. Close the Current Gap Between Incentive Programs for Projects Greater Than25kWSEIA appreciates the DOER’s prior efforts to prevent market disruption at the close of the SRECII program by issuing emergency regulations, finalized on July 1 and further clarified throughthe DOER’s issuance of the August 31 Guideline.As a result, projects of less than 25 kW remain eligible for the SREC II program until theeffective date of the new solar program established by the DOER. But no such continuitycurrently exists for projects greater than 25 kW.With the new incentive regime not expected to be effective until summer of 2017 at theearliest, this gap between the programs has largely frozen the market for large scalecommercial, industrial and municipal solar projects. Solar projects that cannot be completed byJanuary 8th, or will not reach 50 percent spending by that date, are effectively on hold until thenew incentive structure is put in place.In short, the current expected gap between incentive programs will slow the overall growth ofthe solar industry and the jobs the industry creates. An even longer gap between programswould have a chilling effect on the market and may undermine the Baker Administration’s longterm solar development and job creation goals.On September 30th, several aligned organizations representing the solar industry – and the vastmajority of solar firms in the Commonwealth – submitted a letter requesting that DOER takeimmediate steps to eliminate this potential gap between the SREC II program and its successor.We proposed that DOER could: Adjust the current extension of SREC II to expand eligibility to all projects that submit aStatement of Qualification Application by January 8, 2017. We further proposed thatthe extension for mechanical completion should then be tied to the effective date of thenew program;Allow any project greater than 25 kW to retain its Statement of Qualification providedthat it can demonstrate it is mechanically complete by the later of July 8, 2017 and theeffective date of the new incentive program; andPage 3 of 9

Issue revised Guidance to clarify that the lack of a final, effective successor incentiveprogram would constitute good cause for an extension for all projects that meet thecriteria described above. This option could be a way forward without issuing a newemergency regulation.The letter is attached as Appendix A.3. Incentive Levels & Consultant AnalysisBased on initial feedback from our member companies, at minimum, incentive levels should notbe reduced below the amounts initially proposed by DOER. SEIA’s individual membercompanies will comment in more detail on areas where incentive levels may be insufficient tosupport activity in their various market segments.Regarding the analysis that informed the development incentive levels, without moreinformation on the specific calculations performed, the consultant analysis is difficult tocritique, and does not invite a clear understanding of the reasonableness of the initialassumptions used. For example, comments from our colleagues at the Coalition for CommunitySolar Access (CCSA) raise important questions about the extent to which specific communitysolar customer acquisition costs were factored into the analysis. The answers to this questioncould have an impact on the final level of the adder.While we understand the consultant is no longer under contract with DOER, SEIA requests thatDOER provides, in the near future, a briefing for all stakeholders on this analysis in an effort tohelp industry understand the assumptions and calculations that informed the incentive levels.4. Block Management & Reservation Application ProcessA) Block SizeSEIA recommends maintaining the capacity-based block structure described in the StrawProposal but recommends increasing the initial block sizes to 400 MW per block for the firsttwo blocks. Given the expected gap between incentive programs for solar projects greater than25kW, SEIA members remain concerned that pent up demand for incentives will yield asignificant number of reservation applications upon the start of the program. Theseapplications will quickly fill up the first two blocks.Furthermore, the expected demand for the initial blocks from large scale projects that requiremore capacity may crowd out smaller commercial or residential projects, and ultimately mayhinder DOER from fulfilling its statutory requirement of supporting “diverse installation typesand sizes that provide unique benefits” through the creation of an incentive program.1 SEIArecommends that larger initial blocks of 400 MW each would allow for a more orderly transitionto the new program. Later blocks could be reduced to 200 MW of capacity each.1The Acts of 2016, Chapter 75, An Act Relative to Solar Energy, Section 11.Page 4 of 9

B) Proposed Incentive Level Step Downs Between Blocks Too AggressiveSEIA supports the Straw Proposal’s declining block incentive program design. However, SEIArecommends reducing the percentage step down in incentive levels between blocks from 5% to3%. The current proposal to reduce the incentive levels by 5% per block would result in anoverall reduction of more than 30% in the incentive levels over the eight proposed blocks. Thisreduction is too steep.SEIA instead proposes a 3% reduction. This level of reduction would provide a more moderateglide path and is more consistent with the current pace of cost reductions in the industry. Therecent experience curve for the solar industry shows that for every doubling of capacity there isa roughly 20% decline in costs. Furthermore, recent industry forecasts through 2020 predictsolar capital cost reductions ranging from approximately 1.5-3% per market segment during theexpected life of the new incentive program. A 3% reduction between blocks would yield anapproximately overall 20 percent reduction in incentive levels and is more consistent withindustry trends.C) Incentive Level Step Downs Should Not Apply to AddersSEIA supports the use of incentive adders to drive investment in beneficial projects andpromote solar development in specific market segments and certain areas (i.e. communityshared solar, low income communities, on brownfields and landfills). However, we recommendthat DOER should not apply stepwise incentive reductions to the proposed adders. While werecognize this has the impact of essentially increasing the impact of the adder over time thepublic policy rationale for incentivizing these activities will remain in place for the duration ofthe incentive program. Instead, decisions about whether to reduce adders for communityshared solar projects or other beneficial solar projects should be based on whether theincentive has achieved the objective of stimulating market activity in the chosen sector.D) Block Allotments by Utility TerritoryFurther, SEIA is concerned that the current proposal to subdivide blocks by utility serviceterritory creates inequities and inefficiencies in block management. Based on distribution ofload, some utility blocks would be orders of magnitude smaller than others. For example, it’sconceivable that one 2 MW project in Unitil’s service territory would reserve the entire blockcapacity.DOER should consider consolidating blocks for some of the smaller utility service territories, orcombine blocks of firms that share a parent company, or potentially even regionally to allow fora more efficient block management. New York’s declining block incentive model accounts forpotential market disparities by separating blocks regionally between downstate and Long Islandand upstate New York. A similar division by region or by ISO zone could be workable in theCommonwealth.Page 5 of 9

E) Block QualificationSEIA supports a block reservation system based on the criteria currently used by MassACA.That process requires applicants to demonstrate they have obtained all non-ministerial permits,have established site control and have an executed Interconnection Service Agreement. SEIAstrongly recommends that these should be the minimum thresholds for firms receiving a blockallocation.Many complex questions remain including: how long does an applicant’s block reservationperiod last, how does attrition within the block impact subsequent blocks; and questions aboutsplitting capacity across blocks. We look forward to working with DOER to develop solutions tothese problems.5. Billing & CreditingSEIA recommends that incentives should be paid on a monthly basis to the system owner inorder to encourage the most efficient financing and align more tightly with the marketstandards in the capital markets.Further, although not included in the Straw Proposal presented in September, SEIA supportsthe concept of hiring a third party administrator, or several administrators performing differentfunctions, to implement aspects of the new incentive program. A third party administratorshould measure and verify the output of the solar systems, and review block allocationapplications and certify applicant eligibility.Despite attempts by the utilities to improve their billing processes, utility billing systems are stillinadequate, are in some cases still hand-billed, and should be considerably improved. A thirdparty administrator taking on some or all of this functionality on behalf of the utilities may offerconsiderable value for all solar customers.Many complex questions on billing and crediting also remain including on issues related to theownership of production meters, timing of reporting, and how credit calculations would workas time of use rates are implemented across utility territories.6. Solar Siting & RestrictionsSEIA supports responsible siting of solar systems and responsible project development in theCommonwealth. However, SEIA recommends that issues related to environmentallyresponsible solar siting should be handled outside the context of preparing DOER’s emergencyregulation on incentive program design.SEIA is concerned that the siting restrictions proposed by the DOER in their current form wouldsignificantly decrease the amount of land available for solar development throughout the state,Page 6 of 9

and substantially increase overall project costs, undermining the purpose of the incentiveprogram altogether.As proposed, DOER’s siting restrictions, as stated in a working group meeting, would placemore than 99% of Massachusetts’ land area effectively off limits to solar development, evenbefore applying other constraints such as land usability, interconnection, or landowner interest.In brief, DOER should avoid duplicating the land use restrictions that currently exist in law andare currently managed by the state’s environmental, land use and local land use agencies.DOER should avoid creating new requirements that potentially conflict with current agency andlocal practices. We also urge caution with the use of identified GIS layers and designations thatare not designed for nor are appropriate for regulatory use.For example, it is our understanding that the prime forest land, prime farmland, and perhapsother identified land classifications and GIS layers in DOER’s straw proposal were not developedfor a regulatory purpose, nor were they vetted through an open stakeholder process. It wouldbe inappropriate for DOER to prohibit siting in an area that a non-regulatory body has identifiedfor a particular purpose that is unrelated to solar siting.Rather than creating limits that will restrict private landowners’ rights in ways that no otherstate program currently does, DOER should consider providing additional incentives for projectsthat best promote the state’s conservation goals (e.g., for projects that meet specifiedperformance standards for soil management and tree clearing). This would reflect theadditional costs that meeting these goals imposes on project development.SEIA strongly recommends that DOER separate the discussions on responsible solar siting fromthe stakeholder process to inform the emergency regulation and pursue siting questions withthe other appropriate state and local officials on a separate path.7. Community Shared SolarAll of the issues currently under discussion in the working groups will have an impact on allcommunity shared solar (CSS) projects. But one area of particular concern is the lack ofunderstanding of the ways in which community shared solar projects would operate in a nonNEM context.DOER has said it is open to suggestions and ideas about how these projects would operate andis seeking input from the industry. While SEIA appreciates the intent to make market segmentsindifferent to NEM through the incentive program design, the lack of a viable path for non-NEMprojects is troubling. DOER has designed incentive adders for CSS projects and low income CCSprojects, but has not offered specific ideas on how these projects could be structured outsidethe net metering frame. There are major barriers to creating a community solar arrangementPage 7 of 9

without net metering, and we have not yet seen examples of this structure arise inMassachusetts, even during the times when net metering capacity was unavailable.This suggests that community solar without net metering may still require some role for thedistribution utilities or state agencies, beyond the provision of an incentive. The presentconversation would benefit from specific suggestions from DOER.This issue reinforces our previous argument that the new incentive program should not beconsidered a replacement for NEM, but must work in tandem with net metering as acompensation mechanism.Additionally, any mechanism introduced through the incentive program to enable non-netmetered CSS should resemble the existing virtual net metering structure to the extent possiblefor consumer and business model continuity. Indeed, SEIA acknowledges that the introductionof a third party administrator may also yield improved efficiency and flexibility to the billcrediting currently allowed through net metering.As the working group process continues we will continue to explore pathways for non-netmetered CSS models.8. Mechanics & DPU ProcessBased on working group discussions to date, the DOER has stated that it has prepared draftregulatory language implementing the Straw Proposal. We strongly recommend that DOERrelease this draft regulatory language for stakeholder review and initial comment prior to theconclusion of the working group process.SEIA recognizes that the final draft language may change based on decisions made in theworking groups, but the “pre-release” of the language will provide all stakeholders theopportunity to better understand proposal details and identify any problems in advance.Other states, such as New York, routinely provide pre-release regulatory language to keystakeholders as a way of identifying issues before final draft regulations are issued for formalpublic comment.Based on discussions in the working groups, it is also our understanding that the DOER mustfinalize its regulations prior to DPU taking up model or compliance tariffs for consideration.This means at the earliest, DPU would take up tariffs sometime after April 2017.Although this new delay will not impact projects of less than 25kW in size which would beeligible for SREC II incentives, it puts further pressure on DOER to close the gap betweenincentive programs for projects greater than 25kW. We urge DOER to put forward a gap closingproposal as soon as possible.Page 8 of 9

We thank you for the opportunity to submit these comments. I can be reached at (518) 4871744 or at [email protected] with any questions.We look forward to working with the DOER to design the next iteration of incentives for solarprojects and we appreciate DOER’s ongoing leadership to date.Yours sincerely,David GahlDirector of State Affairs, NortheastSolar Energy Industries [email protected](518) 487-1744Attachment APage 9 of 9

to create solar industry jobs. Established in 1974, SEIA is the national trade association of the United States solar energy industry and is a broad-based voice of the solar industry in Massachusetts. Through advocacy and education, SEIA and its 1,000 member companies are building a strong solar industry to power America.