INTERVIEW: Standard Solar CEO says interconnection costs may result in ‘unviable’ Northeast

For years, Standard Solar has been a leader in community solar development, particularly in the Northeast where the market has thrived through a healthy environment for state incentives. The company now owns 223 operational projects with 60 projects finalized over the last year. But now, company CEO Scott Wiater says he fears the ballooning cost and delays for interconnection are threatening to make the Northeast “unviable” for future development.

Although Wiater says the COVID-19 pandemic is partially responsible for slowing down permitting and interconnection, he says he views utility management and unwieldly state subsidies as bigger issues. Wiater highlights the New York market as a specific example. Standard Solar has 69 MW of operational solar in New York, the majority of which were established in the early days of the state’s VDER incentive program. Since then, however, multiple changes to the incentive structure have resulted in challenges penciling projects going forward.

“Unfortunately, New York’s a mess,” Wiater said. “Every time the legislators try to make things better up there; they make it worse. It’s just a really complicated, not very functional system.”

As highlighted in the recent NPM Community Solar Report on New York, the New York incentive program has gone through a number of changes. The allocated capacity for the state's most recent incentive, the upfront community adder, has been completely filled and closed, leaving developers waiting for further tranches to open up to proceed with planned projects. Wiater says Standard Solar is among those with “several good projects parked” waiting for new incentives.

“We’ll move forward when it makes sense, but there’s a lot of stranded projects in New York right now,” Wiater said.

Wiater also highlights Maine as a growing problem area, because of an oversaturation of projects from eager community solar developers looking to capitalize on the state’s community solar program that was expanded to include projects up to 5 MW in 2019. Wiater says Maine has since received community solar applications with a combined capacity in excess of 1 GW. As a result, the state’s utilities began rejecting projects including one from Standard Solar.

“Like everything with solar, everyone rushes to where the new market is,” Wiater said. “There was a gold rush in Maine, but it was oversubscribed, and the utilities threw up a red flag. It was painful in the short-term but may be healthy for the market in the long run because the Maine market has a lot of community solar and not a lot of offtakers.”

Wiater says these issues are a microcosm of the larger ongoing issues across the Northeast for project development and interconnections. Wiater says interconnection costs and timelines across the region are “out of control” with “no checks and balances on cost.” In response, Standard Solar has filed multiple complaints with state PSCs seeking detailed information about why the cost of interconnection is so high in the region, but Wiater says this effort “hasn’t had great success.”

“I would love to see a forensic accounting activity mandated by the PSC to justify these costs because ultimately these utilities are passing the costs through us to the ratebase,” Wiater said. “I don’t think that’s right.”

NPM reached out to both the Maine and New York PSCs for comment on this issue, but they were not returned.

Ultimately, Wiater says developing in the Northeast at all is “certainly coming close” to being “unviable,” though he says the firm’s financial backing from sponsor, Montreal-based energy company Énergir, puts them in a better position than most to deal with the long delays and ballooning costs.

“You need a big balance sheet to be able to weather the long-term delays that are imposed by these utilities,” Wiater said. “We’re fortunate that we can wait out the storm, but it’s becoming very problematic and will come to a head at some point, especially if these states want to meet their carbon offset goals.”

For now, Wiater says Standard Solar is turning its attention to other states like Illinois, Oregon, and Minnesota. He is also looking at states like New Mexico and Pennsylvania which “seem like they have potential moving forward with new programs.”

“Most of the programs being launched all seem to be community solar-focused, so I think that is the future,” Wiater said. “The long-term single offtake PPAs are becoming scarcer.”

With a 100 MW pipeline in the works for next year, Wiater says Standard Solar is also continuing to examine the possibility of pairing storage with future projects. Approximately 20% of the firm’s current pipeline has a co-located storage component and the firm is considering retrofitting other existing projects with storage in the future. However, Wiater says he still has some reservations about the state of that sub-market.

“Everybody wants storage, but it still isn’t ready for primetime,” Wiater said. “All of the projects that we’ve done have incentives that make them feasible; they really aren’t commercially viable without some sort of grant or incentive.”

Even so, Wiater thinks that storage may be the key for the Northeast as it wrangles its interconnection and infrastructure challenges. Although he is hopeful for state incentives like the Massachusetts SMART program will crop up along with additional federal incentives.

“We’re not banking on anything coming through, but it would present a huge upside if legislators were able to get something through,” Wiater said.

Wiater says he is also taking a hard look at what a future with a Direct Pay alternative to tax equity would look like, which he predicts could lead to a major influx of new players getting into the market. This option was being included as part of the massive Build Back Better Act which won approval from the House of Representatives last week and is now being debated in the Senate.

“Direct Pay would create a huge influx of new players in the industry, but also a lot of confusion,” Wiater said. “The smaller developers who think they’ll be able to do it on their own will realize it’s much better to have a big partner because you’re still going to have to secure debt and debt providers are going to scrutinize projects as hard as a tax equity investor. It’s still going to be painful.”

In the meantime, with interconnection concerns, supply chain challenges, and an uncertain legislative future, Wiater says 2022 will be another unpredictable year for the industry.

“The uncertainties with tariffs, forced labor components and supply chain challengers are all very real,” Wiater said. “You pair that with the Build Back Better legislation that is hopefully going through and it should be a typical solar year which means everything will be constantly changing.”*

*This story was originally published exclusively for NPM subscribers earlier this month.