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How Massachusetts is Encouraging Renewable Energy

By Edited Mar 20, 2014 1 0

How Massachusetts is Encouraging Renewable Energy

The U.S. is the leading energy consumer in the world. The universally accepted unit of measurement in energy is British Thermal Units (BTU). One BTU is equivalent to the energy produced by burning a kitchen match. One BTU is required to boil a pound of water.

The amount of energy the US consumes usually measure in quadrillion BTUs. In 2009, the US consumed one quadrillion BTUs. Nearly 88 percent of this requirement is supplied by oil, coal and natural gas (Walsh 32). None of the three is renewable and they also pose great dangers to the environment (Hargreaves).

Although there is no fixed computation, different sources estimate another 50-120 years of supply of these sources of energy (McLamb). These could go shorter if the dependence accelerates. This is the primary reason that makes it critical for everyone to develop renewable sources of energy. Just like any revolutionary idea, renewable sources of energy are getting their fair share of criticism such as the high cost of initial installation.

In the United States, Massachusetts is one of the States that are vigilant in pushing the growth of renewable energy sources. Solar panels, wind turbines and geothermal energy are the top three sources that are being developed. Below is critical examination of the current state of renewable sources of energy, legislations that are helping push it forward and the costs and savings that each source requires.

 

Solar Panels

Traditional energy sources are slowly dwindling away, which one of the main reasons for sky rocketing energy bills experienced by most resident in Massachusetts. As a way to overcome this financial debacle and also to safe guard the energy needs of the nation, the government has look for ways to establish more cost efficient and renewable energy sources for the residents of Massachusetts. One of the best solutions offered as a viable, renewable energy source is solar energy. Solar energy can be tapped through solar panels. The only problem is the high cost associated with the installation of solar panels.

The solution has come in the form of solar rebates, energy credits and tax incentive programs, which should empower the residents of Massachusetts to make full use of solar power.

Current State of Solar Energy

Solar power installation figures in Massachusetts are around 2,000 solar panels, which generate around 22 megawatts of electricity. Those figures are impressive but not big enough compared to the target the government has set for itself according to its energy portfolio standard. An energy portfolio standard is a regulation which seeks to increase the production of energy from renewable energy sources like solar, wind, geothermal, etc.

The Massachusetts renewable energy portfolio standard (RPS) was created to legislate the restructuring of the electric utility industry. In the year 2003, the RPS required that 1% of electricity in Massachusetts should be generated from renewable energy sources. Thereafter, the percentage should increase by 0.5% every year up to 2009. After that, the annual percentage increase should be 1%, until suspended by the Massachusetts Division of Energy Resources (DOER). With those types of targets in mind, the government would like to increase from the current production of 22 Mw to 400MW by the year 2020.

This is quite a tall order to meet, and one the solution that Massachusetts has been able to use, is the establishment of the Common Wealth Solar Rebate Program. This program provides rebates through a non-competitive application process for the installation of solar (photovoltaic) panels, done by professional, licensed contractors at public, commercial, institutional and industrial facilities. Eligibility is limited to host customers and project sites, located in Massachusetts and be a customer of either a municipal lighting plant or a Massachusetts electric distribution utility.

Under this program, there are several rebate systems that encourage both utility providers and users to use solar panels in Massachusetts.

 

Legislations and Taxes

State Renewable Energy Credits (SREC)

This is a tradable, non-tangible energy commodity in the USA, which act as evidence that 1 Megawatt-hour of electricity was generated from a renewable energy source, solar to be exact. The one drawback that SREC is the minimum solar energy target it requires from utility companies. If targets of solar energy production targets per year are not met, they have to pay a fee of $600 per SCREC. A cheaper alternative, for utility companies, is to buy SCREC from the open market, which are normally priced cheaper than the fee. It was $550 by February of this year (MDOER).  

A typical 5kw sized solar power installation, on a house roof, should be able to generate around 5 SREC’s a year. Home owners can then work out a deal with utility companies for their SCREC’s for a certain number of years. For example, if home solar panels are able to generate 5 SCREC’s a year, priced at $400 you should be able to make $2000 a year for 10 years, which comes to $20,000. To protect solar panels users from unfair trading practices, DOER has established a floor price of $285, for SREC’s. This price includes a 5% handling fee.

Net Metering

This is an electricity policy for consumers who use renewable energy sources, like solar power, with the aim of deducting any energy outflows from metered energy inflows. Since solar energy is only available during the day time, users of solar panels have to depend on normal energy grids during the night. Net metering allows users to bank excess energy production into future credits. This then reduces the financial burden of using standard electricity, from your utility company (MDOER).

The credits accorded by utility companies will vary, according to the way they rate your credits. For example, some will credit 1kWh for each 1kWh the installation is able to produce, whereas other maybe less generous, and only accord 0.9kWh for 1kWh.

One major issue faced by net metering, is the limit of 1% set for utility companies. Current figures indicate that capacity has not yet been exceeded but as the uptake of solar panels increases, some people may be locked if this “cap” is not lifted.

Massachusetts Solar Tax Incentives and Rebates

There are a number of state funded tax incentive and rebate programs available to solar panel users in Massachusetts. These programs are applicable to both residential and corporate installations. The following list, applies to residential solar panel installations in Massachusetts (Norris):

  1. Personal Tax Credit
    Massachusetts has a 15% tax credit, which offsets the states income tax towards the cost of installing solar panels, up to a maximum of $1000.
  2. Property Tax Exemption
    This program exempts users of solar panels, in Massachusetts, from paying property taxes for periods of up to 20 years.
  3. Sales Tax Exemption
    This program removes taxes on any equipment directly related to solar panels, fitted to residential houses.

 

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