On April 15, 2020, the Massachusetts Department of Energy Resources released its long-awaited updates to the state’s Solar Massachusetts Renewable Target (SMART) program. Through an emergency regulatory process, the DOER conducted a mandatory regulatory review triggered by the first 400 MW of capacity subscribed to the program. The DOER sought stakeholder input regarding several components of the program including size, land use provisions, and compensation structure and adders. The SMART Application Portal began accepting new applications on May 18, 2020.
The DOER published several significant changes to SMART, including:
- Adding 1,600 MW of capacity, effectively doubling the SMART Program
- Establishing a six-month extension period for projects due to COVID-19
- Requiring that developers couple Energy Storage Systems with all Solar Tariff Generating Units greater than 500 kW
- Imposing stricter land use provisions, including increasing the Greenfield Subtractor by 2.5-times
- Increasing the requirements for projects that are applying as Community Solar or Low Income Community Solar Adders
- Permitting Community Shared Solar and Low Income Community Solar projects to participate in alternative programs created through municipal aggregation or established by the Electric Distribution Companies
The publication of the SMART emergency regulations satisfied the industry’s question of how large the SMART program would be, but new policies have created new questions requiring clarification. The biggest outstanding questions concern reconciling operating and mid-development projects with the new regulations. Some of the newly introduced policy initiatives, especially the new land-use restrictions, allow for grandfathering, while others do not, so it is unclear how each project will fit into the new SMART structure. Additionally, the consumer protection enhancements may fail in light of the current environment created by COVID-19. The current pandemic has halted developers’ ability to exercise customer interaction, making it difficult to establish the 90% subscriber base now required by the regulations. Finally, the requirement that energy storage systems must be paired with large scale Solar Tariff Generating Units may be a policy initiative that is more aspirational than practical for some projects.
Another factor unique to SMART is that the incentive is a product of a utility tariff that must be reviewed and approved by the Massachusetts Department of Public Utilities (DPU). DPU approval calls into question the actual effective date of some of the SMART provisions. Policy components of the SMART Program are outside the jurisdiction of the DPU, but the main financing factor, the incentive payment, must go through a regulatory review before it is finalized and developers can be certain of payment structures. While the SMART Tariff is under review at the DPU, certain provisions of the regulation such as the compensation amounts and the behind-the-meter calculations remain unsettled until approved by the DPU. Awaiting DPU approval of the final SMART Tariff creates further uncertainty in an industry currently feeling the impacts of COVID-19. The sooner the updated monetary components of the SMART program can be approved and implemented, the less monetary risk will be experienced by pending and new projects.
The utilities have yet to submit their tariffs to the DPU, which prolongs the approval of the financial piece of SMART. Like all regulatory programs, SMART 2.0 will have some growing pains in order to align the policy aspirations with the market realities.
Beth A. Goldstein is a partner in the Real Estate Department of Boston law firm Sherin and Lodgen. She has extensive experience representing buyers, sellers, developers and lenders in the sale, acquisition, financing, development and leasing of commercial real estate throughout the country. As chair of the firm’s Renewable Energy Practice Group, Beth’s clients are typically engaged in complex financing transactions including construction and permanent financing of solar facilities, New Markets, Historic and Low Income Tax Credit financing, and hotel development.
Tanya M. Larrabee is an associate at Boston law firm Sherin and Lodgen. She represents renewable energy clients in the acquisition, development and financing of solar, wind and energy storage projects, including advising on state incentive programs.