Massachusetts Putting Its Net Metering Queue in Order

All renewable energy project developers, from first-time rooftop solar customers to seasoned municipal wind developers, must ask themselves: “how much does each kilowatt-hour (kWh) have to be worth for this investment to pay off? Can $0.15/kWh support a 2 megawatt (MW) photovoltaic array? Can $0.05/kWh? And what if there’s no assurance which rate the project will receive until its completion?” Many prospective renewables developers are currently grappling with this last question in Massachusetts, and the state’s Department of Public Utilities (DPU) holds the key to its resolution.

Current federal law, under the Public Utility Regulatory Policy Act of 1978 (PURPA), requires distribution companies to accept electricity from certain distributed generation sources, called “qualifying facilities,” and to pay for that electricity at “avoided cost” (a wholesale electricity rate set by each state equal to the marginal cost of new generation). In Massachusetts, however, the state’s “net metering” policy allows retail customers who own certain distributed generation facilities to receive retail rates for the electricity they produce in the form of credits against their electric bills. Because cost recovery through net metering is structured as a credit, its value is highly dependent on the use case. Customers with high on-site demand whose electricity requirements do not fully consume their generation stand to gain the most from net metering. Net metered facilities often use renewable energy but have historically included small, gas-fired combined heat and power projects as well. Massachusetts is not the only state to offer net metering, but while the Federal Energy Policy Act of 2005 strongly recommends that states mandate net metering as an option to utility customers, there is no federal requirement to do so. So far, over 40 states have acted on this recommendation, though the exact parameters of each state’s net metering laws and regulation vary widely.