One has to ask … whose side are they on?
The growth of solar energy represents a virtuous cycle on a number of levels: People can create their own clean, fossil-free power, put it back into the grid, and make a little money doing so. The state has a strong interest in encouraging this, for reasons of reducing pollution; local small business development; and meeting the state’s legally-mandated emissions targets for greenhouse gases, which affect everyone’s well-being.
So who doesn’t like this? The utilities, predictably: The current monopoly placeholders of the legacy power-delivery system. And they are leaning heavily on the Baker administration to bend the rules their way, instead of your way:
THE BAKER ADMINISTRATION, which favors keeping a cap in place on one solar subsidy program, is now tinkering with another solar price support. [SREC, a solar credit that a utility can buy to meet its clean-energy production quota]
State officials say they plan to change the way a key solar subsidy is auctioned to curb price speculation by hedge funds and Wall Street firms. Judith Judson, the commissioner of the state Department of Energy Resources, estimates the changes in auction rules will save electricity ratepayers at least $20 million a year.
But critics of the move say the change is being carried out with no public debate and may actually increase electricity rates rather than lower them. The critics also say the latest move is another sign that concern among utility executives about the high cost of solar power is driving policy within the Baker administration….
A state task force released a long-awaited report in May saying that the growth of solar power is dependent on subsidies and that the subsidies yield more economic benefits to ratepayers than they cost. But some members of the task force said the economic benefits of solar could be attained at far less cost. One utility executive said Massachusetts ratepayers are paying more than twice as much as Connecticut ratepayers for solar power.
via Baker seeks to curb solar speculators – CommonWealth Magazine.
So the administration wants to keep Wall St. out of the SREC market to keep the SREC prices down for utilities. That means *somewhat* lower prices for consumers ($20 million), but also *less incentive* for folks to go solar.
You would need some serious economics-wonking to find the sweet spot where you get robust solar development at the “right” cost. But that cost is more than just an economics question, it’s a value judgment of the public’s interest.
Should there be a thumb on the scale in favor of locally-produced solar and wind, versus — oh, say, gas pipelines? Hell yes, there should be, as a matter of public protection from pollutants, pipelines (and their inevitable ecological and economic disruption), and climate change. And there are local economies, jobs and even city budgets at stake.
In spite of his current popularity, as Peter Ubertaccio has observed, it looks like we elected a corporate Republican. There may well be good alternatives, particularly in a state which ought to lead the nation in clean energy.
Right now we are retreating. Watch your flank, Governor.
merrimackguy says
Look what a pale m-effer he is. Most certainly looks like heck in a bathing suit. I doubt he’s been to the beach in years.
merrimackguy says
hate not being able to edit.
stomv says
Before I dissect the errors, first a comment: we need to ask ourselves: what is the marginal impact of the subsidies? If we reduced the SREC subsidy 10%, how much less solar would we get? If we increased the SREC subsidty 10%, how much more would we get?
This is a really important question. It just might be that the SREC subsidy is large enough to make PV a winner — that, in fact, the barriers relate to uncertainty, sticker shock, marketing challenges, permitting problems, customer confusion, a lack of good siting options, length of timeline from interest to interconnection, or lack of sites. My sense: MA could reduce the SREC prices a little bit without substantially reducing the participation of customers. How much is a little bit? I don’t know — and my clients pay me money for this kind of analysis, so I won’t give it to you for free :P. My hope is that Mr. Baker also or instead focuses on reducing barriers to PV installations — working on that laundry list above. How can he improve permitting? Reduce financing red tape? Etc.
Now, as for the glob article:
> This rate includes payment for benefits and services that solar developments do not provide.
True — but it also includes underpaying for some of the benefits that solar developments do provide, including paying an average energy price instead of the (higher) marginal price in the afternoon, not paying for demand reduction (or supply) induced price effects on the energy or capacity market, avoided transmission and distribution capacity installations, avoided line losses, reduced (FERC required) capacity reserve requirement, reduced Class I REC obligations, reduced demand (and hence price) for RGGI allowances, increased reliability associated with less demand for natural gas, reduced health impacts due to emissions, increased economic activity (including payroll taxes, etc) due to local energy production instead of gas from Pennsylvania or coal from Columbia (South America), and so forth.
> In addition, when solar sites produce more than they consume, they don’t have to pay for services such as the use of the wires and poles operated and maintained by the utility and financed by utility customers.
Nor does any other generator for that matter.
> For large solar projects, these reimbursements far exceed the value they bring to the electric system.
Says who? Acadia Center studied this very question, and in April 2015 determined that the value of a kWh of solar in MA ranges from 29 cents to 35 cents (p 1), which is more than utilities pay. That result, btw, is very similar to the results of a Clean Power Research / Sustainable Energy Advantage study in Maine, which found a value of 34 cents per kWh (p. 6).
> Massachusetts pays more per kilowatt-hour of solar energy than anywhere else in the nation
Nope. Washington DC’s SRECs are for more dear, and that delta is far larger than any $/kWh difference for electricity. Nevertheless, it’s true that MA pays quite a bit, and (see my comment above) might well be able to reduce this dollar value without a tangible reduction in the amount of PV to be installed, especially with other tweaks to the process.
—
Were it up to me, I’d do “SREC-III” differently. Going forward, I’d keep “SREC-II” (nearly?) unchanged, but when it’s time to roll out SREC-III, I’d do things differently. Let’s not use our collective wealth to subsidize PV on individual homes. Let’s instead put it on our buildings. Every single time the Commonwealth, the MBTA, a country, a public housing agency, the MSBA, or another state/regional entity builds new or substantially renovates a roof, bam! it gets PV. Rather then use our collective wealth to put PV on individual homeowners’ roofs, why not build it on our government buildings, so that the savings flow back to our (collective) operating budgets rather than to individuals’ budgets? We as a society get the exact same environmental benefits either way, but in the stomv plan we also get the ongoing financial benefits shared throughout the entire community.
kirth says
stomv said everything I was thinking when I read the original post, and more. In particular, I agree that a small restraint on SREC prices would probably have no impact on the rate of solar installation. As it stands, it’s impossible in practical terms for a homeowner to predict how much SREC money his solar array will get him. This is true for people like me who’ve been receiving SREC checks for years as much as it is for people who haven’t installed any panels. The auction price of an SREC* is wildly variable.
My fear is that the proposed restraints are just the camel’s nose, and that if they are implemented, the entire power-industry beast will be in our tent, trampling net metering and all the other benefits to owning solar. How bad can it be? Look at Arizona.
Trickle up says
to kill solar by going after net metering.
The main thing to remember in this effort and others like it is that opponents want to count all the costs to them and none of the benefits to society as a whole, versus all of the benefits of the alternative and none of the costs.
They call this cost-benefit analysis but it’s just a lot of hot air.
In regulatory matters, the struggle to define costs and benefits is often the key battle where the war is won or lost. Are the bad guys opening up a new front?
jconway says
Is strictly what the cost to business is, as opposed to what the benefits and costs to the public are going to be if the regulation is not implemented.
Christopher says
…”we always start with the premise that people are taxed enough.”
Trickle up says
that the costs to me and my neighbors of extreme weather and flooding exacerbated by global warming caused by industry is not, somehow, a tax.
historian says
Baker has learned that he should not say he’s not mart enough to understand global warming, Instead, he now simply tries to throttle clean energy while avoiding the highlight reel quips.
petr says
From the above quoted CommonWealth Magazine article:
… So “two thirds” of one quarter of all SRECs in 2014 were bought by “hedge funds and Wall Street firms”… And curbing this two thirds of one quarter is significant enough to leverage into $20 million/yr worth of savings? Or, conversely, not curbing this two thirds of one quarter presents a risk of speculators doing… what? Auctions are the fall through after all contracts are concluded — it’s a fail safe mechanism — and, by these numbers the bulk of the SREC transactions are contracts. So it’s highly unlikely that investors (I’ll get to ‘speculation’ shortly) have the leverage to move the market significantly especially since they are at least two steps removed from direct involvement in the market.
What’s more troubling (at least regarding the reportage) is that, by definition, a hedge fund doesn’t do speculation… and not all Wall Street firms are speculating … so it’s very likely much much less than one third of one quarter of the SRECs subject to ‘speculation’, possibly even nil.
Most troubling of all (aside from the inability of the Governors people to do math) is the notion that we, the ratepayers, need to be protected from purported speculation in a sliver of the solar market which is, at present, a sliver of the wider energy market, other commodities in which are decidedly more impacted by deliberate and ongoing speculation. If speculation in solar credits is a problem that needs addressing then somebody should ask the Governor when he plans to address speculation in natural gas…
Charley on the MTA says
For this:
jkw says
Hedge funds are misnamed. They do not seek to hedge risks, but are instead mostly involved in speculative trades. “Hedge fund” is basically a generic term for a barely regulated investment fund.
However, hedge funds and other speculators are unlikely to increase costs for the utilities (which pass the costs through to ratepayers). The SRECs are going to expire worthless at some point in the next few years. The hedge funds would not be buying them now unless they expect the utilities to need to buy them at some point in the future. If the hedge funds did not buy them, they would still be owned by the PV owners. The utilities would still need to buy them in the future, and will still pay the minimum market clearing price for the SRECs. The future price is unlikely to be affected by whether the SRECs are owned by the PV owners or by hedge funds. The hedge funds are therefore underpaying the PV owners, not overcharging the utilities. The PV owners may even prefer to sell to a hedge fund, since it gives them $285 now instead of some uncertain, but probably larger amount in 2-3 years.
If the utilities think the SREC prices will be higher in a few years, they can buy the SRECs at the auction. The 2013 auction didn’t clear until the third round. By letting it go to the third round, the utilities increased the SREC requirement for 2014 and future years. The hedge funds are providing cash now to the sellers and taking on the risk that prices will change. This is not a market failure, but is actually the way things are supposed to work. Is anyone going to complain if SRECs end up being oversupplied and the hedge funds lose money on all their SRECs? The hedge funds are taking on risk that the PV owners and utilities do not want to take. They might make some money from that. They might lose money from that. But they only have the option of doing it because the PV owners and utilities do not want to own the SRECs right now, indicating that they are unwilling to accept the risk of holding them.
petr says
…
This is a trenchant criticism of both what I said and the issues raised by the Governors proposals. I would quibble with the notion that all hedge funds speculate. Yes, a lot do but some are set up as straight hedges or specific investment vehicles that don’t have to involve speculation. (I debated with myself on the wording of the fragment “by definition, a hedge fund doesn’t do speculation”, knowing that some do, but ultimately left it alone.) That’s minor though: my point was to note that the reporter didn’t seem to get the questionable nature of the assertions that A) speculation was happening and 2) any such speculation occurring could move the needle on any dial related to the market, much less the specific utility costs. I think it’s entirely possible no speculation is occurring at all but even if so, it couldn’t possibly be enough to make that much of an impact…. certainly not the governing variable it is assumed to be, as in the CommonWealth Magazine article.
All that is to say, I’m in agreement with you that this is how markets are supposed to work, but I’m not sure that the actual mechanism at play here has that much affect: Renewables aren’t the largest component of the energy sector; Solar power is not the majority of the renewables sector; SREC’s at auction aren’t the largest component of the solar sector; speculation isn’t the largest component of the auctions. Some unknown portion of two thirds of a quarter of a one thirteenth (or so) of the market isn’t a whole lot….