Solar in MA: What, Why, and When

By Andrew Miller

So many questions, so let’s break it down to make sense of all the hubbub.

What: Solar Photovoltaic (PV) systems (aka solar farms; rooftop solar systems) have become increasingly prevalent as seen in various parts of the Commonwealth including along highways and the MassPike. The significant increase of these solar PV systems cannot help but provoke curiosity.

What key factor has fueled the growth of the industry? Answer: A solar PV system in MA benefits from two sources of revenues:

1. Proceeds from the sale of power, as would be expected; and

2. The sale of Solar Renewable Energy Certificates (SRECs) earned by virtue of the power produced (1 Megawatt-hour (MWhr) = 1 SREC)* by qualified solar PV systems.

The current (second) iteration of the SREC program SREC II has been lucrative, so much so that typically the revenue from SRECs is more than the revenue from the sale of power generated during a production year. The sale of power is either contracted via a power purchase agreement (PPA) or a net metering credit sales agreement (NMCSAs). Power produced by a solar PV system goes into the power grid and the entity that owns the solar PV system earns net metering credits. The net metering credits can then offset the electric bill. (Analogy: Think of getting, say, a $50 gift card. You can use to help pay for the dinner bill.)

Why: The cost of solar Photovoltaic (PV) systems has come down significantly in the last several years. As a result, the economics work in the current incentive environment (i.e., SREC II).

Investment in a solar system is usually recouped in 7-10 years and 10 years is the typical term of solar loans in MA. The life of solar systems is typically 30 years and often more.

Note: A study commissioned by the Commonwealth determined that solar system ownership is significantly more beneficial than simply buying the power while another/third party owns (TPO) the system. In such a case, the property owner enjoys some of the benefits, but most of the benefits go to the system owner.

Caution: Buying power from a solar PV system on your roof but owned by another party (TPO), has a hidden risk which can be significant. You may have trouble getting a mortgage since the TPO will have a lease on at least a portion of your roof.

Avidia Bank can provide high LTV solar financing and at competitive rates and terms.
Property owners can get a no obligation estimate of a solar system, cost, and feasibility.

When: The SREC II caps had recently been reached, but the state has essentially extended it until the end of 2016. Since many in the industry expect the next incarnation of the SREC program (likely to be dubbed SREC III) expect it to be less lucrative than SREC II, there is a narrow window of opportunity to take advantage of the SREC II extension. If this timing doesn’t work, SREC III is still anticipated to sustain the attractiveness of the solar industry to investors albeit to a lesser degree.

Next Steps: If there is interest, a seasoned and well-respected solar developer representative or team can host an information meeting to educate and address questions and concerns. Possible on the spot feasibility check. Once an estimate is determined and an initial financial model is developed, can explore financing with Avidia Bank.

Andrew Miller is Commercial Relationship Officer at Avidia Bank. He can be reached at (774) 760-1252 and a.miller@avidiabank.com