On October 29th, a panel of experts gathered in Bangor to participate in MEREDA’s Morning Menu Breakfast event titled, “What You Need to Know about Investing in Solar in Maine”. Panelist Vaughan Woodruff of Insource Renewables provides us with this overview of what may lie ahead for solar in Maine.
By: Vaughan Woodruff, CEO | Founder, Insource Renewables
As a result of the 2019 legislative session, Maine now has perhaps the hottest solar market in the country. Dozens of developers have converged on Maine to expand a market that is expected to attract more than one billion dollars of direct investment over the next 5 years. Commercial and residential real estate brokers, farmers, large institutions, and other landowners across Maine have become acutely aware that something has shifted in Maine, as many have been inundated with calls from solar developers seeking sites for prospective solar projects.
There is an imperative for developers to secure land as quickly as possible – application queues are beginning to form at Central Maine Power and Emera Maine for projects that might not be built for years. The goal for solar developers is to be as close to the head of the line as possible to avoid incurring additional costs associated with significant electrical grid upgrades. Having control of a viable site, typically secured through a lease option from the landowner, gives a developer the permission needed to begin qualifying a project with the utility.
The most sought-after parcel is roughly 25-35 acres in size, relatively level, accessible to three-phase service, and within reasonable vicinity of a utility substation. These characteristics are likely to minimize the costs needed to connect a five megawatt (AC) solar facility to the grid. Why is five megawatts significant? It represents the largest electrical generation facility that can provide bill credits to customers, which is the highest value that can be generated from a solar facility. Anything larger requires the owner to sell into the wholesale electricity market and deal with a more complex regulatory framework.
Once the first of these projects are constructed in late 2020 or early 2021, Maine electrical ratepayers for whom solar is not a good fit at their home or business will have another avenue to access some of the benefits of solar energy. Renters and homeowners and businesses with a shaded site or limited tax credit appetite will be able to subscribe to these shared solar projects to reduce their electricity costs.
While much of the activity in Maine’s solar market right now is focused on these speculative projects, there were a number of other significant changes related to solar energy development that will reduce barriers to solar energy for Maine businesses.
Tax certainty. Prior to this legislative session, there was uncertainty regarding the eligibility of solar investments for Maine’s Business Equipment Tax Exemption (BETE) program. To clarify the tax treatment of solar investments, the legislature passed LD 1430 – An Act To Create Tax Equity Among Renewable Energy Investments. As a result, businesses (and residents) utilizing solar to offset their electricity bills will not be required to pay property taxes on solar equipment that could undercut the economics of their investment.
Credit certainty. Historically, Maine utilized a simple practice called net energy billing that has been used by a large majority of states across the country. In 2017, the Maine Public Utilities Commission enacted a change that required Maine ratepayers to pay for additional meters to reduce the credits to solar facilities. The program would prove to be a bad deal for ratepayers. This year, the Maine legislature corrected the problem by reinstating net energy billing. Businesses considering solar are now assured they will receive a full credit for the energy they generate.
Rate certainty. Medium or large electricity consumers are required to pay a demand charge as part of the utility rate structure. Demand charges are measured in kilowatts and represents the peak power demand in a month. Net energy billing provides energy credits in kilowatt-hours, which represents the volume of energy used in a month. Demand charges typically represent at least 40% of the electricity costs for these businesses. Since energy credits can’t be applied towards demand charges, many commercial solar investments have not been cost effective and Maine businesses have been at a disadvantage with competitors in other states that have figured out how to effectively compensate commercial solar investments. In 2019, the legislature developed a method to compensate businesses with monetary credits rather than energy credits. The monetary credits can be applied to all electricity costs, include demand charges.
With the federal investment tax credit for solar slated to stepdown from 30% in 2019 to 26% in 2020 and 22% in 2021, these changes are happening just in time for Maine businesses to leverage the maximum tax credit benefit for their solar investment. By committing to a solar investment before the end of 2019, Maine businesses can safe harbor the full 30% tax credit for projects built in 2020 and beyond.