The Solar Project – This Might Actually Be Possible (MA)

[This post is part of a series about our net-zero residential solar project – see a list of links to the full series here, a list of frequently asked questions here or click here to bring up all Green-related postsNext Post in Series / Previous Post in Series.]

So after letting this dream of going solar rest for a few years, I finally got things cooking again last Spring (2011) as a result of discussions with a friend who was in the tortuous process of building a LEED Platinum-certified house not far from mine. Heads-up: this is one of two wonky posts without much of a narrative thread – bear with me.

An engineer by training and a thoughtful and deliberative guy by temperament, my friend had put a great deal of careful research effort into both the consumption and the production of power for his house. What got me excited was his overview of the recent changes hitting the market.

In talking to him and researching the market, I learned that Massachusetts had finally passed revised legislation in 2009 requiring utilities to support net-metering. Net metering means that when your house produces more energy than it consumes, your meter runs backwards and the power company buys the power from you at then-prevailing rates, netting the resulting credit against your existing bill. The importance of this cannot be over-stated. It means that you can suddenly have it both ways. In situations where net metering isn’t supported, it typically meant you had to isolate your system from the grid and store excess power in batteries for use when your needs exceeded your generation capability. With net-metering, your system becomes much less expensive, and much more reliable. In essence, the grid becomes your battery and your back up supply. It supplies you with power at night or during snow storms or when you need more than you can produce, but it soaks up and pays you cash for excess power when you have more than you need.

That was one major hurdle out of the way. I also learned that in 2007 Massachusetts passed the Commonwealth Solar Rebate Program. This is a rebate of a thousand dollars or more against the cost of a typical system. In addition, Massachusetts fosters a rebate program from utilities against the cost of installation. This rebate can be worth several times the Commonwealth Solar Rebate. Both rebates are designed to stimulate the adoption of clean energy production and to allow the local utilities to delay or avoid having to build new hydrocarbon-fuled production energy production capacity. Together the rebates have the effect of lowering both the initial outlay and the time until payback.

And these financial incentives do help a bit, but they don’t radically change the economics of installing a system. Solar systems sized to produce most or all of the energy used by a typical American home are still expensive and still take a while to pay back if you are relying only on rebates.

Fortunately, and amazingly, in Massachusetts, you don’t have to. In January 2010 Massachusetts approved the establishment of an auction market for SRECs, which stands for solar renewable energy credits. This is essentially a market that will pay you cash for each unit of solar energy you generate. This is not net left-over power, this is the total raw aggregate power generated by your system. Each SREC can be sold on a spot market managed by the Massachusetts Department of Energy Resources (DOER).  The statue guarantees that a system can sell SRECs for at least ten full years from the date your system is first certified eligible, though there is no plan to phase the program out any time soon, so it may be considerably longer.

The pricing and mechanics of the SREC market are complicated (and sort of fascinating in a weird way), but the net effect is that a typical residential system will generate about one SREC’s worth of power or more in a month (with some seasonal variation). In 2011 SRECs were worth about $550 each, which means that if you are generating one SREC a month, not only have you offset most or all of your power bill, your system is also generating something on the order of $550 each month which can be used to pay down the price of the installation. Since it is a market price, your income could drop if the price drops, but the regulations stipulate that they cannot drop more than 10% a year and, further, that they cannot go beneath a floor of $300 no matter what the market conditions. The design of this SREC market including the price stabilization features were lessons learned by Massachusetts from watching other states such as California and New Jersey which experienced some dramatic swings in supply and demand and some volatility in pricing as generating capacity came online.

So that is the State situation. What about the national scene?

Story continues…  This post is part of a series about our net-zero residential solar project – see a list of links to the full series here, a list of frequently asked questions here or click here to bring up all Green-related postsNext Post in Series / Previous Post in Series.

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  1. Hi Christopher, Your articles are very informative. I understand that your solar panel installer handles your SREC. Do you know if 1) I have to register with MA DOER in order to claim the credit; and 2) I have to sell the points to electrical utility company in MA? Thanks in advance.

    • Christopher says:

      My installer doesn’t handle the SRECS directly, they got me registered and set up with the state (I assume it was MA DOER, but I am sorry, I do not recall) and then created my account with their preferred partner for handling SRECs, SRECTrade handles all the details and you have a choice of having either a partially-self-managed account where you are in charge of the sales strategy and timing of your SREC sales, or a fully-managed account where they run your trading strategy to maximize your SREC sales prices. I did self-managed for a while, but it was work to stay on top of it, so I switched to fully-managed. It is much more convenient that way. Regarding your second question about having to sell to a local utility, I don’t know if it is possible to sell to some other utility – it might be, but I am not sure how easy it would be, and I am not sure why you would want to – MA has high utility rates and an attractive net metering policy, so just letting your meter run backwards and getting a credit with your MA utility for the full retail value of the electricity you generate is a pretty easy way to maximize the value of your solar production. Time of use pricing in MA would further improve the situation – that would allow you to sell expensive electricity when rates are high during the day when peak industry and peak air conditioning happens and then use cheaper electricity at night while your panels are off-line. But time of use pricing is not yet adopted in MA (it has been proposed, but has not yet been adopted.) Hope that helps.

      • jianping zhang says:

        Thanks, Christopher. My installer helped me to sign up with a company called Sol Systems, LLC. I would guess it’s very similar to the company handles your account. After receiving your email (by the way, it helps a lot), i had a little chat with a representative from Sol Systems. The SREC points would (have to, in order to get credit and be paid) sell to a utility company in MA. The guy told me that at each month i need to record how much electricity is generated.

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