A little-known solar financing plan not available in many states will allow Massachusetts low income housing tenants to save state taxpayers $60 million over the 2 decades.
Solar arrays funded, built, operated, and maintained by SunEdison, will deliver their 39.5 megawatts of nameplate capacity from 10 locations across Massachusetts to the state’s grid. The net metering credits they earn, as mandated by Massachusetts’ virtual net metering (VNM) law, will be credited to the electricity bills of 16 housing authorities (HAs).
Because of the VNM law, the HAs will be able purchase the credits from SunEdison at negotiated power purchase agreement (PPA) prices some 15% to 25% below the retail rate they would otherwise pay for electricity, according to SunEdison Managing Director for Sales Steve Raeder.
SunEdison was also able to provide each HA a contract and price molded to its needs and electricity use. The end result is a cumulative $60 million or more in savings for the HAs over the 20 year terms of the contracts.
Housing authorities in New Bedford, Brockton, Somerville, Barnstable, Fairhaven, Fall River, Gardner, Leominster, Northampton, Plymouth, Somerset, and Winchendon are participating.
“There are over 100 housing authorities in Massachusetts,” added SunEdison Director of New England Sales Jarryd Commerford. “This is a ‘set it and forget it’ deal for them that allows them to save up to hundreds of thousands of dollars per year in electricity.”
Those savings come from often limited, taxpayer-funded budgets, he added. “The savings free up funding. The housing authorities can spend their money on other types of programs and that indirectly benefits people who live in public housing.”
One of the key factors in the savings calculation, Raeder said, was the conservative assumption of a 1.5% to 2% yearly retail electricity rate increase. “We think it will go up more and as it goes up, the housing authorities will save more money because they are locked into fixed contracts.”
SunEdison and its financial partners provided all funding. By leveraging the other typical opportunities available to solar developers like the 30% federal Investment Tax Credit and the solar renewable energy credits, Raeder explained, SunEdison was able to retain a competitive rate of return.
There is further leverage in its ability to roll the solar assets into its TerraForm Power YieldCo, through which new revenue can be generated from them. More cost-offsetting remuneration is possible in the arrays being operated and maintained by the SunEdison Renewable Operations Center (ROC), an around the clock facility with global reach based in California, Raeder noted.
The Massachusetts angle
In most states, such a deal could not happen because there is no virtual net metering.
Massachusetts utilities are bound by the VNM law, Commerford explained, “to provide credits to the customer of record for the amount of electricity on the meter at the generation site.”
“The Massachusetts law is much different than in any other state because you just allocate credits to whomever and however you want,” explained EQ Research Policy Analyst Chelsea Barnes. “Other state laws provide a range of possible allocations but in Massachusetts it almost resembles selling electricity.”
SunEdison’s application of VNM in this case “definitely is the purpose,” Barnes added. “The idea is to expand opportunities for people who don’t have a good site for solar or other renewables.”
“The housing authorities are physically constrained. We can build larger systems remotely and sell credits,” Raeder agreed. “This enables folks in denser urban environments to benefit from remotely sited ground mounted systems much bigger than we could ever put on a roof or parking lot canopy.”
The VNM law will also allow other public entities (as defined by the Department of Public Utilities) to similarly cut their expenses with solar, Commerford said. That means municipalities who don’t want to put the roofs of historic government buildings at risk and educational institutions who want to preserve their own land for their students’ use.
This shows “the success of Massachusetts’ solar programs,” noted New England Clean Energy Council VP Janet Gail Besser: And it also shows, she added "that the benefits of solar are not limited to those with large bank accounts.”
“There are things about the Massachusetts market that allow these deals to pencil,” Raeder said. “But our cost of goods continues to drop across the supply chain. Solar is the cheapest resource in some markets today, unsubsidized. Over the next decade, solar will be the cheapest form of electricity, unsubsidized, in most markets.”