For many commercial and industrial property owners in Massachusetts, solar energy is gaining ground as a new frontier for independence—both financially and from the grid. Through powerful government incentives or lucrative leasing agreements, owners now have plenty of options to benefit from converting their unused roof space into solar plants that power their community.
Driving growth in the Bay State, the Solar Massachusetts Renewable Target (SMART) program is a golden opportunity to boost property value, reduce operating costs, and meet sustainability goals. A part of its broader solar initiatives, SMART is designed to drive the state towards its ambitious clean energy targets of having a 35% renewable energy mix by 2030 and using 100% carbon-free electricity by 2050.
These ambitious goals require serious incentives, and informed owners can reap the rewards if they’re prepared. Here’s how the Massachusetts SMART Program works for commercial and industrial properties—as well as how owners can easily access its financial benefits:
Introduction to the SMART Program
The SMART program, launched in 2018 by the Massachusetts Department of Energy Resources (DOER), is a financial incentive designed to promote solar development across the state.
Started as a replacement for the state’s SREC program, SMART encourages renewable energy adoption by paying panel owners a fixed rate-per-kilowatt-hour of energy produced by privately-owned solar panels. The state set a capacity of 3,200 megawatts, divided that amount amongst each of its three utilities, Eversource, National Grid, and Unitil, and they are taking applications on a first-come, first-served basis.
The utilities admit participants into the program in capacity blocks, or predetermined amounts of solar energy capacity eligible for a specific incentive rate. As blocks fill up, the base compensation rate decreases, making it valuable to be an early adopter. There are also adders, or bonus rates, available to projects that advance certain policy goals, like serving specific communities.
The program is open to both residential and commercial systems, although C&I development has easier access to SMART benefits. Their open roof space enables the creation of much larger installations, maximizing output, and returns, on their investment.
Proposed Changes for Fall 2024
The program is also undergoing revision proposals in 2024, hoping to stimulate development growth and increase access for low-income residents. If approved in the fall, these updates could potentially increase base rates and open up new avenues for financial benefit.
These updates, otherwise known as the Straw Proposal, suggest significant revisions to the SMART program that could reshape the landscape for commercial solar in Massachusetts, making it an even more attractive option for property owners.
Key aspects of the Straw Proposal include:
- A yearly rate-setting and capacity block adjustment based on an analysis of market conditions and progress toward the state’s solar targets
- Increased adders for projects based on the build type, like landfills, canopies, or building-mounted units
- Reduced rates for subprime greenfield sites for solar development
If approved by stakeholders, the proposal would create more off-takers for solar from the SMART program and greater opportunity and flexibility for commercial property owners. The state accepted feedback on the proposal until August 2, and is expected to file final draft regulations in the fall.
How the SMART Program Enhances Commercial Property Value
Even in its current form, the Massachusetts program offers plenty of incentives to commercial properties. In addition to increasing the viability of renewable energy for the state, the program can create new revenue streams and savings for owners.
The SMART program can increase commercial property value and profits with:
1. Fixed, Predictable Incentive Rates
The SMART program offers an incentive paid directly to solar electric system owners based on production. Because solar systems have forecastable capacity, owners can have predictable returns over time. This reliable income stream can be factored into long-term financial planning for the property.
For example, a large warehouse with ample roof space could generate substantial revenue through these fixed rates, turning unused space into a profitable asset. The certainty of these returns can make the property more attractive to potential buyers or investors down the line.
2. Reduced Electricity Costs
By generating solar power on-site, owners can significantly reduce electricity costs for tenants. The SMART program works in conjunction with net metering, allowing customers to receive credits on their utility bill for excess generation in any given month. These credits can be applied during times when the system is not generating electricity.
In a competitive commercial real estate market, offering lower operating costs can give properties a significant edge, potentially increasing occupancy rates and allowing for higher rents.
3. Increased Financial Stability
With both predictable cash flows from energy production and SMART program incentives, property owners can see long-term financial stability for their building. This steady income has the potential to improve property net operating income (NOI), a key metric in commercial real estate valuation.
For instance, a manufacturing facility participating in the SMART program could see a substantial increase in its NOI over the program’s duration, potentially boosting its market value by millions of dollars. If their program is structured as a lease, they could also see an increased rent roll based on square footage used by the system.
Together, these NOI and rent roll increases create proportionally equivalent growth in the property value. On paper, this opens up new possibilities to leverage property equity and create new returns.
Added Multi-Tenant and Industrial Solar Opportunities Under the SMART Program
There’s no one-size-fits-all approach to benefiting from the SMART program with solar. The program’s flexibility allows for various scenarios that can be tailored to any specific property and business needs.
By designing a robust incentive program, Massachusetts aims to increase solar adoption by improving accessibility. Property owners will have options to unlock the financial benefits, and plenty of opportunity to gain more overall.
Large Roof, Larger Output
Multi-tenant properties and large commercial or industrial spaces are particularly well-positioned to take full advantage of the SMART program. With expansive roof areas or unused land, these properties can install larger solar arrays, maximizing energy production and incentive payments.
For example, a sprawling industrial park or shopping mall could install a large solar array, not only powering its own operations but also generating excess energy to sell back to the grid. This scenario creates multiple revenue streams: savings on energy costs, SMART program incentives, and income from selling excess power.
Additional Incentives and “Adders”
The program also includes additional incentives, or “adders,” for certain project characteristics. Under the program, energy storage systems like batteries can qualify for an adder that increases the overall incentive rate. This increases the resilience of Massachusetts’ energy grid, while also enabling property owners to save renewable energy for periods of peak demand.
The adders may also incentivize owners looking to use alternatives to the traditional roof system, like carport solar and canopy solar. These arrays maximize space and empower properties with limited space to still contribute and benefit.
Meeting ESG Reporting & Sustainability Goals with Solar
Environmental, Social, and Governance (ESG) factors are also becoming increasingly important to investors, tenants, and customers. Leveraging solar energy through the SMART program can help property owners meet corporate sustainability goals and improve their ESG metrics.
Solar energy plays a crucial role in reducing carbon emissions, a key environmental factor in ESG reporting. By generating clean, renewable energy on-site, your property can significantly decrease its carbon footprint. This reduction can be quantified and reported, demonstrating your commitment to environmental stewardship.
Through usage monitoring and reporting, many solar programs also empower owners to report on hard-to-quantify environmental metrics like scope 3 emissions. With reports on tenant energy usage and solar generation, owners can easily see and understand the impact of their investment—as well as communicate it to a larger investment group.
Finding a Partner for Commercial Solar in Massachusetts
While the SMART program offers significant benefits, navigating the application process and managing ongoing requirements can be challenging. That’s where partnering with a reputable solar installer becomes crucial.
When considering a solar installation, keep in mind that Massachusetts solar applications and admissions to the SMART program can be complex. In fact, the entire process—from system design and contracting to permitting, installation, and utility interconnection—typically takes three to six months or more. This timeline can vary based on factors such as property size, system complexity, and local permitting requirements.
For those who prefer not to manage the solar system directly or invest significant capital in an array, a solar lease with a partner like King Energy can be an attractive alternative. This approach allows owners to reap the benefits of solar without the complexities of program management, providing a steady, predictable income stream without a large expense.
Unlike other financing agreements, a solar lease enables property owners to benefit from solar without any investment or complicated relationship. The solar partner installs an array on a commercial roof at no cost to ownership, handling all aspects of the solar installation and maintenance. They pay monthly rent for roof space, and in turn sell discounted energy to tenants. This can be an excellent option for property owners who want to benefit from solar without the responsibilities of system ownership.
The Massachusetts SMART program represents a significant opportunity for commercial and industrial property owners to increase their property value, reduce operating costs, and meet sustainability goals. With the right agreement and partner, owners can benefit from solar for decades to come, turning unused space into profits for their building and positives for their state.
Discover how SMART and solar can benefit your property: