After operating under an emergency regulation for nearly a year, the Massachusetts Department of Energy Resources (DOER) finalized the regulations pertaining to its Solar Carve-Out Program, which took effect on January 7, 2011. The Solar Carve-Out Program is part of the larger Massachusetts Renewable Portfolio Standard (RPS) that was established in regulations issued by the DOER in 2002, whereby each regulated electricity supplier/provider serving retail customers in the state must include a minimum percentage of qualifying renewable energy sources in the electricity it sells. The Solar Carve-Out Program requires that a specific portion of the RPS must come from solar resources.

The Solar Carve-Out Program is a market-based incentive program to support residential, commercial, public, and nonprofit entities in developing 400 MW of solar photovoltaic (PV) energy facilities across the Commonwealth of Massachusetts. Rather than providing subsidies based on the costs of solar energy facilities, the Solar Carve-Out Program creates a market through which solar energy generators receive solar renewable energy certificates (SREC) that may, in turn, be sold to the regulated electricity supplier/providers, either directly or through an aggregator.

In order to participate in the Solar Carve-Out Program, a solar energy system must (i) have a capacity of 6 MWs or less, (ii) be located in the Commonwealth of Massachusetts, (iii) use some of its generation on-site and be interconnected to the utility grid, and (iv) have a commercial operation date of January 1, 2008 or later.

With respect to SREC sales, the DOER sets an alternative compliance payment (ACP), which acts as a price ceiling for SRECs because utilities can choose either to purchase SRECs or to pay the ACP. In addition, the DOER has created a fixed-price auction clearinghouse, where SRECs may be sold for a fixed price of $300, which effectively acts as a price floor for SRECs.

On January 31, 2011, the DOER announced that it has reduced the ACP for compliance year 2011 by 8.3 percent, from $600 to $550. The DOER has the authority to reduce the ACP by up to 10 percent per year, and it justified its recent ACP adjustment decision by citing declining PV module costs, lower installed costs, and the desire to encourage solar energy development at the lowest cost to electric customers in Massachusetts.