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A Cape Cod energy organization is appealing the state’s rejection of a proposal to provide a package of heat pumps, solar power, and battery storage to low-income customers.
The Massachusetts Department of Public Utilities ruled in early November that the plan would violate state laws regarding the use of energy efficiency funding by supporting technologies that do not improve efficiency. The department also argued the plan would have uncertain financial impacts. Supporters of the plan, however, argue that the state has fundamentally misunderstood both the law and the proposal.
The Cape Light Compact, the organization behind the proposal, has filed an appeal arguing that the decision “is based upon error of law, is unsupported by substantial evidence and unwarranted based on facts found in the record.”
“We were given express legal authority to submit an energy plan that does more than the utilities and more than the state,” said Maggie Downey, administrator of the Cape Light Compact. “We believe that everything we’re doing is consistent with that legislation.”
While Massachusetts is generally considered a leader in both energy efficiency programs and solar incentives, lower-income households adopt these technologies at much lower rates than more affluent residents. A 2020 report by the state’s utilities found that residents of primarily White and higher-income areas took advantage of efficiency services at significantly higher rates than those in marginalized communities. And less than 1% of the solar projects that have received state incentives since 2018 are designated for low-income consumers.
Seeking a creative solution
The Cape Light Compact is a unique regional organization that aggregates power purchasing and administers energy efficiency programs for its 21 member towns. It was created in 1997 with the premise that it would be able to advocate for the needs of consumers in the region.
In 2018, the compact released its first version of the plan, called the Cape and Vineyard Electric Offering, when utilities and their advisors were putting together the state’s legally mandated three-year energy efficiency plan for 2019 to 2021. Though the compact is not a utility, it has been granted legal authority to oversee efficiency programming on Cape Cod and Martha’s Vineyard and participate in developing statewide efficiency plans.
While incentive programs exist to encourage all three technologies — heat pumps, solar panels, and battery storage — the compact’s plan is the first to combine them into a cohesive package.
Tying the technologies together should, according to proponents, have a positive financial impact, especially important for the low-income households the proposal intends to serve. Solar power would help offset the increased power bills that would come with an electric heat pump, for example, and adding storage to the solar array would increase the federal tax credits the installation is eligible for.
The package also stands to maximize the environmental benefits of the individual technologies: Using solar power to run electric heat pumps will result in far fewer greenhouse gas emissions than using either fossil fuel heat or electricity from the grid.
The state rejected that first proposal on the grounds that the compact had not engaged sufficiently with stakeholders before submitting the plan. Regulators also wanted the proposal to do more to tap into existing incentives and funding sources.
The compact went back to the drawing board and came up with the latest iteration of the plan. The current version reworks the funding of the planned program. As a public entity that does not pay taxes, the compact itself cannot take advantage of clean energy tax incentives, so the new version of the proposal creates a system in which a third party would own the solar and battery installations, keeping some of the financial benefits for themselves and passing others on to residents.
While the original plan would’ve included households with incomes up to 120% of the state median, the newest version includes only low-income and moderate-income households. The target number of participants has been scaled back from 700 to 250 to help keep the costs lower.
As it now stands, the program would provide households with a heat pump, solar panels, and a battery. Participants would be required to have all three technologies.
Heat pumps would be provided free of charge to all participants. Solar installations and battery storage equipment would be provided at no cost to low-income households, though moderate-income families would pay 25% of the upfront cost up to $5,000. In total, the compact proposes a budget of $10.4 million in ratepayer funds, a decrease of more than $17 million from the original version of the plan.
The plan would make a meaningful difference for low-income residents on Cape Cod and Martha’s Vineyard, said Christopher Flanagan, executive officer at the Home Builders and Remodelers Association of Cape Cod, who filed a letter of support for the plan.
“The incentives provided by the Cape Light Compact would actually make outfitting homes to be energy-efficient attainable,” he said. “Without these programs that help those in need financially, building or retrofitting a home [to be energy-efficient] is nearly impossible.”
A second rejection
The updated proposal was submitted to the state as an independent filing in May 2020, and was also included in the draft energy efficiency plan that was filed with the Department of Public Utilities in November of this year, with the full support of the advisory council that guides the development of the plans.
Just a few days after the energy efficiency plan was filed, the state ruled on the independent filing, saying it could not be approved and recommending the Cape Light Compact also remove it from the efficiency plan. The compact declined to do so and quickly appealed the ruling in the Supreme Judicial Court for Suffolk County.
“We said, ‘No, you’ll have to rule on it again,’” Downey said.
Supporters say the very elements the state objects to are what makes the compact’s plan so innovative and promising: It knits together existing programs into a package that could amplify their impact.
“It’s just the [Department of Public Utilities] not allowing any creativity,” said Amy Boyd, director of policy for climate and energy nonprofit the Acadia Center. “We’re not going to get to where we need to get in terms of addressing climate and addressing equity with a very strict reading of the statutes.”
Proponents also argue the state made several errors of fact. For example, the state’s order claims the compact did not take into account the way state solar benefits decline over time; Downey, however, said the compact’s calculations absolutely reflect that decrease. The state also argued that energy efficiency funding could not be used to support solar installations, an interpretation the compact says runs counter to legislation passed in 2018.
It may take a full year before the appeal makes it before a judge, Downey said. If it succeeds, then the compact will have to undertake a lengthy process of applying to have the program inserted into the efficiency plan in the middle of its run.
Supporters, however, say the fight is worth it. The creative change the compact is proposing provides a promising model for how policies can be shaped to both combat climate change and advance environmental justice, Boyd said.
“They’re taking programs that already exist and extending them a little bit further under the law,” she said. “This is not an issue where the Cape Light Compact is trying to flout the law or do something really outlandish.”