MA SMART Part 2: Key Financial Implications for Hybrid Systems

Massachusetts continues to be a leader in state-level clean energy programs, and Camelot interacts with these programs daily through our work supporting developers and asset owners. Developers and other players take note: Through the Solar Massachusetts Renewable Target (SMART) Program and the Clean Peak Energy Standard, the state has introduced dynamic frameworks designed to accelerate renewable energy adoption while addressing grid reliability and peak demand challenges. We covered much of this in Part 1 of this series, in case you missed it. Here, in part 2 of the series on the Massachusetts programs, we dive more deeply into the key financial implications for hybrid systems.

Revenue Streams for Hybrid Systems (Solar + Storage)

Hybrid systems under the SMART Program can generate revenue through the following revenue streams:

1. SMART Revenues (Tariff-Based Compensation Including Adders, Subtractors, & Incentives)

   • Term: 20 Years (Solar Related)

   • Description: Direct incentives from the SMART Program, calculated based on the SMART rate, which depends on system size, location, and configuration.

2. Clean Peak Energy Certificates (CPECs) Revenues

• Term: Up to 2050

• Description: Revenue from CPECs, which are earned by charging storage systems with renewable energy and discharging that energy during peak demand periods and can be sold at market-determined prices.

3. Capacity Revenues

• Term: Project Life (Solar & BESS Related)

• Description: Capacity Market Payments for providing reliable power capacity to the grid, to be called upon by the ISO during potential scarcity events, ensuring the system's contribution to grid stability.

4. Frequency Regulation

• Term: Project Life (BESS Related)

• Description: Revenue from participating in frequency regulation markets, storage systems help maintain grid frequency by quickly responding to imbalances between electricity supply and demand.

These four revenue streams must all be considered when developing projects, especially when considering BESS system size (both max power and duration) and configuration (AC vs DC coupled).

Optimizing Project Returns for Hybrid Systems

When developing projects in Massachusetts, it is important to understand the complex and overlapping nature of the various revenue streams available to a potential project. To optimize returns, various PV and BESS system sizes must be considered.

Sizing the PV system:

The PV system size is first restricted by the available land or roof space but also can be limited by the point of interconnection (POI) AC limit, dictated by the interconnection application process and system impact study. If the POI AC limit falls well below the possible PV DC system size, the project can be configured as a DC coupled system to allow the BESS to capture potential inverter clipping caused by the high DC:AC ratio. If there are minimal expected clipping losses, AC coupled hybrid systems are often more attractive due to the simplified system design and configuration. Another main consideration for PV system size is to optimize the SMART base compensation rate that is designed with significant step decreases as system size increases. Note that, under the new SMART straw proposal, all projects over 1,000 kW AC will require a collocated BESS system.

Sizing the BESS System

While sizing the PV system size is fairly straightforward and easy to optimize, the BESS system can be more complex as revenues from the SMART storage adder, CleanPeak, Capacity market, Frequency Regulation are all dynamic and depend on both the BESS system ouput power (kW) and the capacity (kWh).

To illustrate how these revenue streams can range from project to project based on BESS system sizing, we modeled an example ground mounted, DC coupled project with a PV system size of 5.0 MW DC and a POI limit of 2.0 MW AC. We ran two scenarios with the first being a 1.0 MW / 2-hour BESS and the second with a 2.0 MW and / 4-hour BESS. The charts below compare the percentage of total project revenue over the first 20 years from each contributing factor, including SMART from PV, SMART from the storage adder, DC clip capture, CleanPeak and forward capacity. We have excluded the Frequency Regulation Revenue for these cases, as most Massachusetts projects we have modeled have had only minimal revenue contributions from providing these services. That said, we always recommend evaluating all of the possible revenue streams, as the final value stack can be quite location and system design specific.

The comparison of the two scenarios shows the impact that the BESS sizing can have on project economics and highlights the need for custom project level analysis needed to consider the impact and intersectionality of the different revenue streams. This, along with accurate CAPEX and OPEX assumptions, are critical to finding the optimal BESS size and configuration for your project.

As discussed in the first article, CPEC prices and certain components of the SMART compensation rate are expected to increased due to recent updates released by MA DOER as outlined in Part 1 of this series. Additionally, capacity revenues are expected to be higher for a 4-hour BESS compared to a 2-hour BESS, given the anticipated implementation of the Effective Load Carrying Capacity (ELCC) framework post-2030. With more aggressive thermal power plant retirements driving up capacity prices and increasing the demand for BESS deployments, longer-duration systems (4 hours or more) are expected to capture the majority of capacity value.

Post SMART Program Revenue Opportunities for Hybrid Systems

There are a couple of scenarios that developers consider when modeling the revenue opportunities post the SMART incentive period (i.e., after year 20) to maximize revenues from their assets:

1. Solar Only Assuming No BESS Augmentation: The BESS portion of hybrid projects will generally reach its end of life at approximately 20 years, assuming the BESS is not augmented or repowered, but the PV portion may remain operating for another 15-20 years. As solar projects transition beyond the SMART Program’s contract term of 20 years, revenue opportunities remain robust for solar as their life extends an additional 15 to 20 years.

   
   

2. Solar & BESS Assuming BESS Augmentation: As solar projects transition beyond the SMART Program’s incentives timeframe, revenue opportunities remain robust for hybrid projects as the solar system and BESS (via Augmentation) life extends to an additional 15 to 20 years.

Here’s a table delving into the revenue opportunities for the scenarios mentioned above:

Conclusions

Looking forward, Massachusetts aims to expand and refine the SMART & Clean Peak Program to adapt to emerging technologies and evolving market conditions. By integrating solar energy with battery storage and enhancing equitable access, the program continues to serve as a model for other states aiming to transition to a clean energy future. For those considering solar, standalone storage, and/or hybrid projects in the state, the program offers a valuable opportunity to contribute to sustainability while enjoying financial benefits.

If you're interested in assessing solar, energy storage, and/or hybrid projects in ISO-NE’s Programs, feel free to reach out to us at info@camelotenergygroup.com.

About

Camelot Energy Group is a technical and strategic advisor to owners and investors in clean energy and energy storage projects, programs, and infrastructure. Guided by our core values of courage, empathy, integrity, and service we seek to support the energy needs of a just, sustainable, and equitable future. Our team has experience in supporting 7+GW of solar PV and 10+ GWh of energy storage and offers expertise in technology, codes and standards, engineering, public programs, project finance, installation methods, quality assurance, safety, contract negotiation, and related topics. Our services are tailored to provide a different kind of consulting experience that emphasizes the humanity of our clients and team members, resulting in a high-quality bespoke service, delivered with focus, attention, and purpose. Key services include: -Technical due diligence of projects and technologies -Owner’s representative and engineer support -Strategic planning -Training and coaching -Codes and standards consulting -Contract negotiation and support.