A recent task force report in Massachusetts did not lead to the conclusion many expected – that net metering caps must be immediately increased. Instead, the report gave a mixed bag of recommendations without a definitive path forward. Then, a panel of stakeholders in a Statehouse meeting illustrated the contrarian views between certain developers and particular concerns in the local distribution business. Add to this a growing list of solar generation projects in queue and a new administration that has instituted a regulatory freeze and review, and we have replaced a once-robust market with one, yet again in search of answers, customers and financing.
The administration currently is against raising net metering caps, consistent with its not-picking-winners-and-losers policy. However, this is not the final word. Gov. Charlie Baker has always said that he will support and encourage the renewable energy market and will work to find ways to make it more affordable for all ratepayers.
The solar and renewable industries have been part of a boom-bust cycle for decades. Incentives to develop renewable energy seem to come and go, unlike any other industry incentives out there. This fiscal heartbeat makes it difficult, if not irrational, for customary banks and investors to finance small-scale projects without personal guarantees from land owners or developers. In turn, unless those land owners or developers can see an immediate return for their energy investment dollars and a stable government market to sustain those return, they too become disinterested.
Massachusetts is not alone in this renewable energy incentive churn. The federal government is the inventor of the solar and wind boom-bust cycle. Right now, the production tax credit has expired and the investor tax credit is soon scheduled to do the same or decrease, depending on the renewable resource. Other states are similarly situated. New Jersey, New York, Connecticut and California are going through or have gone through numerous policy considerations and are either looking to maintain the status quo or ignite the renewable sputter.
Like all industries, the renewable markets are being impacted by energy industry occurrences: the massive domestic production of natural gas, the leasing of offshore wind sites and geopolitical energy and national security events. Each gives investors and lenders the Herculean task of sifting through every single aspect to make strong business decisions shored up by strict legal documents. In such an environment, the large scale utility projects look the best. A current trend is smaller financial interests forming business combinations with others or finding a carve-out for themselves in smarter deals. That is a favorable outcome of the slowdown in government incentives. More sophisticated investors means more sophisticated projects. And larger projects mean – for those concerned about the environment – less emissions, a presumptively good objective.
