Pursuant to Massachusetts’ law, each regulated electricity supplier serving retail customers in the state must include an ever-increasing portion of electricity from renewable resources in its portfolio of supply resources. This program is called the Renewable Portfolio Standard (RPS). The Massachusetts Department of Energy Resources (DOER) develops and implements the RPS regulations, and oversees the Renewable Energy Certificate (REC) markets. Following on a highly successful program that brought over 400 megawatts (MW) of solar-powered generating facilities online, the DOER is now finalizing rules to incent the construction of an additional 1200 MW of solar generating capacity by 2020.
Solar Renewable Energy Certificates (SRECs) represent the renewable attributes of solar generation, bundled in minimum denominations of one megawatt-hour (MWh) of production. All electricity suppliers must use SRECs to demonstrate compliance with the RPS and its subsidiary solar carve-out obligation. While, the price of SRECs is determined primarily by market availability, the DOER manages extreme fluctuations through use of a floor price from a Solar Credit Clearinghouse Auction (SCCA), and a ceiling (Alternative Compliance Payment or “ACP”) price. The SREC-II program will continue these price volatility-dampening measures in order to reduce risks to investors and to minimize costs to ratepayers.
Solar facilities are typically qualified to create SRECs for a 10-year period. Once that period has passed, the system will generate standard RECs and will be able to sell those for compliance under the Class-I standard for the remaining life of the solar installation. The typical price of a Massachusetts Class-I REC is approximately $65 and this price increases inline with the consumer price inflation index.