PROVIDENCE – A proposed price cut to what National Grid Rhode Island will pay for energy produced by commercial solar projects has drawn ire from some developers who say reduced financial incentives make it impossible to justify the higher costs incurred by renewable energy projects.
National Grid, through its annual Renewable Energy Growth Program, aims to incentivize green energy by offering long-term, fixed-price contracts to buy excess energy from homeowners, businesses and developers that build wind, solar and other renewable energy projects. The 2021 program, slated to be voted on by the R.I. Public Utilities Commission on Thursday, includes significant decreases in the maximum prices paid in several classes of energy projects, including commercial-scale solar projects. Exactly how much less the project would receive in long-term tariffs depends on the size and type of project.
For example, a 5-megawatt commercial solar project could, in 2020, receive $887,250 in annual, fixed-price compensation, based on the 13.65 cents-per-kilowatt-hour ceiling price. The same project, under proposed 2021 ceiling prices, could get a maximum of $737,750 – $149,500 less. Multiplied by the 15-year duration of the tariff, that’s a $2.2 million loss, though the per-year payment may be slightly more or less based upon fluctuations in project’s energy generation.
Jim Kennerly, a senior consultant for Sustainable Energy Advantage LLC, the Massachusetts-based firm hired to develop recommended ceiling prices, explained the lowered prices as a reflection, in part, of extensions and changes to federal tax credits included in the Consolidated Appropriations Act of 2021. The prices also reflect feedback from developers, and are intended to strike the balance between encouraging market development of green energy projects without unnecessarily raising prices for ratepayers, according to Kennerly.
But some developers disagree.
Green Development LLC, a prolific developer of large-scale solar and onshore wind projects across the state, through its attorney, attempted to contest the prices through a formal motion to intervene during hearings on the program. The motion was denied, but in follow-up, written testimony, attorney Seth Handy reiterated the company’s concerns with the lower ceiling prices.
“The failure to properly account for National Grid’s assessment of transmission system improvement costs and the operating and maintenance cost of those improvements, and to hold the proper process to accurately account for changes in value of the federal tax incentive undermines the purpose of our REG program,” Handy wrote.
He also wrote that the declining participation by developers in the program suggests the company is not alone in its feeling “that frustrated investment in this process was just not worth it.”
A spokesperson for Green Development did not respond to multiple inquiries for additional comment.
Andrew Bernstein, managing partner for Boston-based Kearsage Energy, put it more bluntly. He was not aware of the proposed decreases in ceiling prices before being contacted by PBN, but said if approved, the cut to tariffs would “be a disaster” and “basically shut down the whole program.”
Kearsage has developed more than 50 megawatts of solar projects in Rhode Island, all through the Community Solar Distributed Generation program, which allows users to access energy from projects build elsewhere. Bernstein said lower prices would force the company to “walk away” from planned and future projects in the state, noting that other states in which it works such as Massachusetts have not implemented similar rate cuts.
Bernstein also disputed the rationale that tax credit changes lowered the need for state tariffs, saying the extension of federal credits is merely enough to allow projects to survive, and that the depreciation caused lower tax rates mean the projects are worth “significantly less.”
Asked if he thought the slash to prices undermined the goal of the program, which intends to incentivize renewable energy development, with the goal of generating just under 57 megawatts of energy in 2021, Bernstein said yes.
The program’s payments for small-scale-residential solar, while not subject to the same price cuts, have also failed to attract participants when compared with other available incentives, according to Doug Sabetti, owner of Newport Solar. A majority of the homeowners the North Kingstown-based developer serves with rooftop solar panels have in recent years opted for a separate grant program through R.I. Commerce Corp. rather than the tariff through the REG program because the reimbursement is better, Sabetti said.
While neither choice affects his bottom line, it does mean decreased participation in the National Grid program, potentially jeopardizing the ability to hit that 57-megawatt target, he said.
Ted Kresse, a spokesman for National Grid, refuted developers’ claims.
In an email, Kresse pointed to the state’s “tremendous” success and growth in solar development, with 350 megawatts connected to the grid, as evidence that the program is working.
Christopher Kearns, policy and legislative liaison for the R.I. Office of Energy Resources, also noted the program has hit – or nearly hit – its annual megawatt goal for several years, including in 2020.
“We do believe the incentives put out to market will enable development,” he said.
The proposed REG program also includes extra financial incentives for developers that build ground-mounted canopies on parking lots – continuing a pilot program that launched in 2020- and for community remote solar projects in which at least 20% of users subscribed to receive energy from the project meet low-income requirements.
Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.
