IMPORTANT NOTE: If you are already in the SREC I or SREC II program, nothing changes. You will continue to earn SRECs for the remainder of your 10-year period. People signing up for SRECs and going solar in the next few months also get 10 years of SRECs. People signing up for solar in 2018 will not get SRECs; they will be eligible for the SMART program instead.

For the past seven years, Massachusetts solar owners have been able to earn Solar Renewable Energy Certificates (SRECs) for the energy produced by their solar energy systems. Sadly, this program is coming to an end. The replacement program will provide much lower “green income” to those going solar.

This article doesn’t discuss why the SREC program is ending. (OK, just a smidge on that: The positive take is that solar incentives were always designed to decline over time. The cynic in me thinks state leadership bought the utilities’ “cost” arguments hook, line, and sinker. Since solar has cut into the monopoly utility business by a whole 4%, it must be slowed down…)

What’s replacing SRECs? The Solar Massachusetts Renewable Target program. Yes, that’s SMART, subject to individual interpretation. I’ll explain how SMART works in a minute.

First, let me save you the agony of waiting and put the big reveal upfront: A typical homeowner going solar in 2018 with the SMART program will get $8,000 less from the state than if he or she goes solar in 2017 in time to get SRECs.

 

My Analysis

Here’s how I reached that figure. I calculated the SREC payments for a typical system:

  • Average system size – 8,000 watts (about 24 SunPower panels or 29 conventional panels)
  • Roof quality 80% of ideal
  • 9,300 kWh of production in the first year
  • About 91,000 kWh over the 10-year term of the SRECs
  • SRECs start out at the 2017 floor price of $0.27 per kWh and drop about 6% to a new floor price each year. In the tenth year, SRECs are worth about $0.17 per kWh.

SREC income for this system is about $19,000, or about $1,900 per year. That’s above and beyond the electricity savings you see from net metering, if you’re a customer of the big utilities. (Net metering values vary by municipal utility.)

If this same system is installed in 2018, the SMART benefit is about $10,400 over 10 years – or about $1,000 per year. That’s a 45% decrease from SREC prices. Therefore, if you wait for the SMART program, you give up more than $8,000.

Bottom line: If you are thinking about going solar and $8,000 is important to you, now is the time.

It’s even worse for homeowners in towns served by municipal light departments, who are eligible for SRECs but aren’t eligible for SMART. So going solar in 2018 means $19,000 less benefit than going solar in 2017. Read more about the muni situation here.

How SMART Works

This is based on my interpretation of the program as described by the Massachusetts Department of Energy Resources (DOER) in this presentation on SMART. Program details are not final, but my understanding is that the numbers are unlikely to change.

Step 1. The SMART incentive will be set through an auction. Large solar installers will bid to do solar farm projects in the Commonwealth. However, they won’t bid on the project cost, they will bid for the incentive. The lowest bid wins. The incentive starts at $0.15 per kWh. But say an installer of large commercial arrays thinks they can be successful getting paid at $0.13 per kWh. Then that’s what they bid. Another installer thinks they can be successful at $0.11 per kWh so they bid that. All the bids are collected and the winner is the installer with the lowest bid.

Step 2. The DOER program dictates that residential programs will receive 2 times (or 2.3 times, for low-income households) the incentive that the large commercial projects settled at, in the process described in Step 1.

Thus, if commercial projects settle at $0.15 per kWh, the residential incentive is $0.30 (or $0.35 for a low-income household). This does not mean you get $0.30 above and beyond your net metering (as the SREC does now). Instead, you receive $0.30 for every kWh you produce minus the volumetric distribution + transmission + transition charges and the 3-year average basic service rate. Simple, right? For a typical National Grid customer, that number is about $0.18 per kWh. Therefore, every kWh your solar system produces is worth $0.30 minus $0.18, or about $0.12 per kWh.

As I stated upfront, this incentive is low compared to the SREC program. Under the current SREC-II program, the average customer received $0.25 per kWh above the net metering benefit in each of the last four quarters. (See recent SREC prices here.) So the SMART solar incentive is worth less than half what the current SREC incentive is worth.

Oh, and by the way, once we reach 200 megawatts of solar in the first SMART block, the process starts over but 4% lower.

Again I say: If you are a National Grid, Eversource or Unitil customer thinking about going solar and $8,000 is important to you, now is the time. If you are a municipal light department customer and $19,000 is important to you, now is really the time.

Sign up soon to get into the SREC program before it goes away. August 31 is a safe deadline, as it takes several months to go solar. After that, you may or may not get into the program. As long as you sign up in time, you will get 10 full years of SREC green income, worth on average $19,000.

 

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