On July 2, 2008, Massachusetts governor Deval Patrick signed “An Act Relative to Green Communities,” a comprehensive energy reform bill passed unanimously by both the Massachusetts House and Senate. The legislation, known as the Green Communities Act, is designed to promote energy efficiency and renewable and alternative energy generation with the potential to be a major driver for the clean energy industry in Massachusetts.
The Green Communities Act establishes the following energy efficiency and renewable and alternative energy goals for the Commonwealth:
- Meet at least 25 percent of the Commonwealth’s electric load with clean, demand side resources by 2020 with the goal of 80 percent annual efficiency for combined heat and power systems by 2020;
- Meet at least 20 percent of the Commonwealth’s electric load with new, renewable and alternative energy generation by 2020;
- Reduce fossil fuel usage in buildings by 10 percent (from 2007 levels) by 2020 through increased efficiency in equipment and structures; and
- Reduce total energy consumption in the Commonwealth by at least 10 percent by 2017 through the development and implementation of the Green Communities Program.
The Green Communities Act targets energy efficiency and the use and development of renewable and alternative energy as critical factors in reducing energy consumption and fossil fuel dependence in the Commonwealth.
The Green Communities Act includes a number of provisions designed to encourage and improve energy efficiency. In particular, the Act requires that:
- Not less than 50 percent of the motor vehicles owned and operating by the Commonwealth be hybrid or alternative fuel vehicles by 2018;
- If “economically feasible” new construction or renovation of properties owned or operated by the Commonwealth incorporate energy efficiency, water conservation or renewable energy technologies and any such technology will be considered “economically feasible” if the cost of installing and operating the alternative technology is lower than the cost of installing and operating the technology that would otherwise be installed as determined by a life cycle cost analysis;
- Consumers be charged 2.5 mills per kilowatt- hour ($0.0025) by the Department of Public Utilities (DPU) to fund energy efficiency programs, including demand side management programs;
- The DPU ensure that electric and natural gas resource needs are first met through all available energy efficiency and demand reduction resources that are cost effective or less expensive than supply, with the cost of supply determined by the DPU based on the average cost of generation to all customer classes over the previous 24 months;
- Electric and natural gas distribution companies prepare efficiency investment plans in coordination with the newly created Energy Efficiency Advisory Council; and
- The International Energy Conservation Code be adopted into the state building code.
The Green Communities Act also provides for the establishment of a number of programs aimed at increasing efficiency awareness and usage, including a pilot program to assist customers with the purchase of energy efficient items for residential home modifications and a mandate to develop regulations requiring that documents outlining the procedures and benefits of a home energy audit be provided to certain property buyers at closing. The DPU is also authorized to approve and fund gas energy efficiency programs proposed by gas distribution companies, including demand side management programs.
Renewable and Alternative Energy
The use and development of renewable and alternative energy are integral to the Green Communities Act, which requires that:
- Electric consumers be charged 0.5 mills per kilowatt-hour ($0.0005) by the DPU, which funds shall be deposited into the Massachusetts Renewable Energy Trust Fund and used to support the development and promotion of renewable energy projects;
- Retail electricity suppliers provide a minimum percentage of their sales from new Class I and pre-existing Class II renewable energy generating sources with the rate of increase in the renewable energy portfolio standard doubling from .5 percent per year to 1 percent per year with no cap;
- The Department of Energy Resources (DOER) establish an alternative energy portfolio standard and retail electricity suppliers to provide a minimum percentage of their sales from alternative energy generating sources as determined by the DOER;
- The DOER, in consultation with the Department of Environmental Protection (DEP), establish emission performance standards, permanent sequestration standards and fuel conversion efficiency standards for alternative energy technologies;
- Commencing on July 1, 2009, all electric distribution companies participate in a 5 year pilot program in which they must solicit at least 2 proposals from renewable energy developers and, provided reasonable proposals have been received, enter into cost-effective, 10 to 15 year power purchase contracts to facilitate the financing of renewable energy generation in the Commonwealth;
- An “energy pay and save” pilot program be established which allows electric utility customers to purchase and install energy efficient or renewable energy projects and pay any related costs over time through an additional charge to their electricity bill;
- DPU establish regulations to implement “net metering” to provide certain customers with credits for excess production of renewable energy;
- Utility companies are authorized to own solar installations for use on their customers’ roofs for up to 50 MW apiece after two years; and
- Municipalities are permitted to install and operate small renewable energy generating facilities and to finance such facilities issue by issuing bonds or notes payable for up to 25 years.
In addition to the governing board of the Massachusetts Renewable Energy Trust Fund, which is responsible for developing detailed 5 year strategic plans and annual operating plans for application of the fund in support of renewable energy programs, the Green Communities Act establishes a number of commissions to evaluate renewable and alternative energy solutions, including a special commission to investigate the burning of construction and demolition wastes as it relates to the renewable energy portfolio standard, a commission to study the siting of energy facilities in the Commonwealth and a green building plan commission.
Green Communities Program
The Green Communities Act provides for the expansion and elevation of the DOER into the Department of Energy and the establishment of three new divisions within the DOER: (1) a division of energy efficiency, which shall work with the DPU regarding energy efficiency programs; (2) a division of renewable and alternative energy development, which shall coordinate activities that seek to maximize the installation of renewable and alternative energy generating sources and administer the renewable and alternative energy portfolio standards; and (3) a division of green communities. The division of green communities is responsible for establishing a green communities program to provide technical and financial assistance to municipalities that qualify as green communities by making a commitment to energy efficiency and renewable energy. Loans and grants from the Green Communities Program will be used to finance the costs of implementing energy efficiency activities and the siting and construction of renewable and alternative energy projects on municipallyowned land.
Regional Greenhouse Gas Initiative
The Green Communities Act provides legislative approval for participation by the Commonwealth in the Regional Greenhouse Gas Initiative (RGGI), which is a carbon cap and trade program within the northeast region of the United States. The DEP, in consultation with the DOER, is to adopt rules and regulations establishing a carbon cap and trade program which shall comply with the RGGI and permit the holders of carbon allowances to trade them in a regional market to be established through the RGGI. All carbon allowances will be offered for sale by auction with the proceeds to be deposited into the newly created RGGI Auction Trust Fund and disbursed for various uses, including reimbursing municipalities for property tax losses as a result of the mandates of the RGGI, funding the Green Communities Program and promoting energy efficiency, conservation and demand response. Up to 1 percent of the Commonwealth’s annual allocation of allowances may be set aside to support the voluntary green power market which enables electricity consumers to support the development of renewable sources.
The Green Communities Act is a comprehensive energy reform bill which contains numerous other provisions which are not detailed above but are consistent with the stated goals of the Commonwealth’s energy policy. The Green Communities Act is progressive legislation which presents unique opportunities for a variety of stakeholders to capitalize on the growth and development of the clean energy industry in the Commonwealth. In particular, the law should provide a boost to entrepreneurial and emerging companies in the Commonwealth and elsewhere which are devoted to providing clean and renewable sources of energy.