Massachusetts DPU Finds Certain Solar & Storage Net Metering Eligible in Tesla Action – Corman was Legal Consultant

September 18, 2017

Boston, MA – On September 12, 2017, the Massachusetts Department of Public Utilities (the “Department”) issued two Orders, both of which addressed energy storage and net metering. In so doing, the Department has again shown leadership by joining the handful of jurisdictions that are actively seeking to harness the enormous benefits that can inure to electricity customers, to the electricity distribution system, and to society at large from pairing renewable energy resources with advanced electricity storage technologies.

In D.P.U. 17-05, Petition of Tesla, Inc. for Emergency Declaratory Relief or an Advisory Ruling pursuant to G.L. c. 30A, § 8 and 220 CMR 2.02, the Department issued an Advisory Ruling finding that certain solar power generating facilities paired with battery storage facilities were eligible to net meter. In D.P.U. 16-116, Petition of Genbright LLC for a Declaratory Order concerning Net Metering Rules and Regulations, in lieu of ruling, the Department determined that it would commence an Inquiry into the eligibility of energy storage systems to net meter; and the applicability of the net metering rules to the participation of certain net metering facilities in the Forward Capacity Market (“FCM”) administered by ISO-New England, Inc.

On March 28, 2017, the Massachusetts Electric Company and Nantucket Electric Company, each d/b/a National Grid (“National Grid”), had issued a generic announcement stating that solar systems using battery storage would be ineligible for net metering.

On May 18, 2017, Tesla, Inc. (“Tesla”) filed a petition seeking a Declaratory Judgment or an Advisory Ruling that solar net metering facilities with a nameplate capacity of 60 kW or less alternating current (“AC”), when paired with battery storage facilities that charge only from the solar net metering facilities and are non-exporting (“Small Scale Solar & Battery Storage Facilities”), are eligible for net metering. Tesla argued that since the statutory definition of a “Solar Net Metering Facility” does not preclude the facility from containing a storage component, and since the battery storage compartment holds only energy generated by sunlight and does not itself export power, the paired system constitutes an eligible “Solar Net Metering Facility,” defined as “a facility for the production of electrical energy that uses sunlight to generate electricity and is interconnected to a distribution company.” Tesla further argued that the Legislature’s later addition of a statutory definition for an “Energy Storage System,” but its failure to specifically explain its interaction with a Solar Net Metering Facility, creates a statuary gap or ambiguity that the Department is authorized to reasonably interpret. Tesla also argued that the uncertainty as to whether Small Scale Solar & Battery Storage Projects will qualify for net metering was impeding the deployment of paired systems across the Commonwealth, and depriving the Commonwealth from benefiting from the projected $800 million in system benefits expected to be produced with the addition of advanced energy storage to the energy system.

After reviewing the input from stakeholders filed in the comments-only docket, the Department concluded there was “sufficient uncertainty in the net metering industry” to warrant “a departure from [its] customary reticence . . . to issue an advisory ruling.” Finding that it had authority to clarify the gap explicitly created by the Legislature’s codification of the terms “Solar Net Metering Facility”and “Energy Storage System,” but failure to address the interaction between the two terms; that the regulatory gap creates uncertainty for net metering stakeholders; and that “net metering has become increasingly important to the development of a robust and stable market for renewable energy projects in the private and public sectors,” the Department ruled that its interpretation of the gap in a manner that supports the eligibility of Small Scale Solar & Battery Storage Facilities for net metering services “is consistent with the larger legislative design to encourage the development of renewable and alternative energy throughout the Commonwealth, including the use of Energy Storage Systems.”

While the Department also agreed that paired systems pose a number of related issues that warrant its further consideration and additional public process (such as the impact of paired facilities on capacity rights and participation in the ISO-NE FCM), the Department also agreed that “these considerations are mostly mitigated if a solar net metering facility paired with battery storage complies with the limitations that were outlined in Tesla’s petition.”

By contrast, in Genbright, the Department found that the net metering eligibility of storage, and the impacts of paired facility participation in regional markets, as well as “several complex issues surrounding both matters,” requires additional stakeholder input and process, making it inefficient for the Department to resolve Genbright’s petition prior to completion of its inquiry.

Genbright asks whether battery storage facilities are subject to the Commonwealth’s net metering rules, and if so, whether the co-location of storage and solar facilities conveys title to the capacity generated by each to National Grid to bid into the FCM. The Department requires that electric distribution companies use any energy and/or capacity payments received to offset the total net metering recovery surcharge (“NMRS”) recovered from ratepayers. The companies must declare their intent to seek capacity payments when a Host Customer applies for net metering services, then must act in a commercially reasonable manner to obtain such capacity payments, to apply to offset any NMRS.

In July of 2016, Genbright sought a Declaratory Order that National Grid act in a commercially reasonable manner to obtain payments for the capacity products associated with net metered solar facilities to which National Grid had asserted title. During the proceeding, ISO-NE disqualified most of the solar facilities Genbright submitted to it on grounds that “Genbright could not prove it had title to capacity . . . Further, some of the facilities Genbright had attempted to qualify were battery storage facilities co-located with Solar Facilities.” In November, Genbright filed a second amended petition which, in addition to determinations regarding title, added a request for a determination that battery projects are not subject to net metering.

The Department’s September 12th Order in Genbright suspends review of Genbright’s Petition until completion of the Department’s Inquiry. The Department’s September 12th Order in Tesla

confirms that its Advisory Ruling that paired facilities are net-metering eligible “is generally applicable to all solar net metering facilities paired with battery storage that meet the criteria of Small Scale Solar & Battery Storage Facilities;” but “puts all net metering stakeholders on notice that information received through further investigation in the Department’s Inquiry [announced in Genbright] could alter or expand the Department’s opinion on this matter.”

Persons seeking to deploy Solar+Storage projects should be aware of these two Department Orders, as well as the Department’s forthcoming Inquiry into the impacts of Solar+Storage in the Commonwealth, and in the NE-ISO.

Rubin & Rudman attorney Bicky Corman served as a legal consultant to Tesla in D.P.U 17-105.