Looking Back and Looking Ahead: CPS in 2024 and What’s Next for 2025

/in /by

Late addition: the article below was drafted before President Trump’s return to office. Our preliminary review of the initial set of executive actions suggests that, to date, actions would have a limited direct impact on the Clean Peak Energy Standard market. We will continue to monitor both executive and legislative actions and reflect these actions in future updates to our subscribers and in our modeling.

As we close the books on 2024 and move bravely into 2025, it’s the perfect time to reflect on the whirlwind of changes to the Clean Peak Energy Standard (CPS) over the last year. The CPS regulations required the Massachusetts Department of Energy Resources (DOER) to conduct its initial quadrennial review of key components of CPS in 2024. For those hoping for a little excitement in CPS, the year did not disappoint! DOER was busy with emergency regulations making major changes to the policy. The Massachusetts legislature was no slouch either, with S. 2967 making major reforms to siting and permitting and introducing a new requirement to solicit 5 GW (that’s GW with a “G”) of energy storage.

Here’s a review of what’s changed, and a sneak peek at what might drive the market in 2025.

2024: The Year of (CPS) Change – DOER’s Emergency Rulemaking Extravaganza

The DOER kept us on our toes with three rounds of emergency regulations this year. With minimal pushback during public comment sessions, all three sets of emergency regulations were finalized without revision. Here are the changes:

  1. ACP Rate Overhaul

The Alternative Compliance Payment (ACP) rate will rise to $65/MWh for Compliance Years 2026–2032, then settle back to $45/MWh post-2033. This marks the end of the program’s declining ACP—a unique feature that previously had the rate dropping to $4.96 by 2050. DOER also eliminated the ACP ratchet, which would have the ACP fall faster in response to market surpluses, replacing this feature with a fixed ACP trajectory without built-in feedback mechanisms.

  1. Minimum Standard Adjustments

DOER lowered the Minimum Standard in the near-term, in an attempt to reduce ACP collections (and mitigate ratepayer impacts) during periods of large, sustained market deficits. By the end of the decade, however, the new Minimum Standard will exceed the one included in the original regulations, anticipating large volumes of supply coming online. Similar to the ACP ratchet, the DOER also eliminated the demand ratchet. As we’ve discussed in our CPMO briefings, this has implications for what will happen if the market finds itself in surplus multiple years in a row.

  1. CPEC Banking Period Changes

Load-serving entities can now bank CPECs for up to two years (down from three), bringing CPS into line with MA’s Renewable Portfolio Standard. All else being equal, this will make CPEC pricing more sensitive to surpluses.

  1. Summer Peak Period Shift

The Summer Seasonal Peak Period moved to 4:00–8:00 PM (from 3:00–7:00 PM) to better align with net peak demands which are shifting to later in the day.  The windows for other seasons remain unchanged.

  1. Near-Term Resource Multiplier

For you multiplier enthusiasts, we got an entirely new one! DOER introduced the Near-Term Resource Multiplier, which doubles CPEC production for the first 10 years of qualified resources. To be eligible for the NTRM, resources must:

  • Be a standalone, front-of-the-meter, Qualified Energy Storage System, connected to the distribution system. SMART storage need not apply!
  • Not have received a Statement of Qualification on or before 1/1/2025
  • Achieve commercial operation by the end of 2026
  • Not also receive the Distribution Circuit Multiplier

DOER created a limit of 50 MW of total resources that can qualify for the NTRM, and specified that no more than half of that capacity can go to resources associated with a given entity.

  1. CPEC Procurement Tweaks
    2.

The original requirement for EDCs to initially procure 30% of market demand for CPECs and guidance on how to adjust subsequent target volumes was removed. This change was driven, at least in part, by anticipation of mandated storage procurements from the legislature. And that, friends, is how you set up the perfect segue…

The Energy Omnibus Bill: A Needed Boost for Storage

November brought the enactment of S. 2967, the Massachusetts energy omnibus bill, which, in addition to other provisions relating to building decarbonization, electric vehicle charging infrastructure, and decarbonization of the gas distribution system, includes transformative provisions for storage siting and procurement. Here are some of the key provisions related to energy storage and CPS:

  1. Permitting and Siting Reforms

The legislation allows the Energy Facilities Siting Board (EFSB) to streamline permitting for storage projects over 100 MWh (yes, MWh, not MW) by granting Certificates of Environmental Impact and Public Interest. The EFSB have previously found that it did not have authority over energy storage, complicating the permitting process for larger-scale storage.

  1. Storage Solicitations

The bill requires the procurement of 5,000 MW of storage by 2030, with carve-outs for:

  • 3,500 MW of mid-duration storage (4–10 hours)
  • 750 MW of long-duration storage (10–24 hours)
  • 750 MW of multi-day storage (24+ hours)

It also includes interim targets to ensure rapid progress, with environmental attributes (i.e., CPECs) to be solicited from 1,500 MW of mid-duration storage by July 31, 2025 (a target date DOER will struggle to meet). For resources struggling to finance their projects on a merchant basis, these mandated solicitations offer an opportunity to firm up CPEC pricing. Still, key details related to the solicitations won’t be defined until later in 2025. Bringing us to another seamless transition…

Looking Ahead: Key Drivers of CPS and Storage in 2025

1. Long-Term Storage Contracts

DOER’s forthcoming solicitation designs will be critical. Questions around eligibility, contract duration (6 years vs. up to 30 years), and auction structures (pay-as-bid vs. clearing-price) will shape clearing prices, the volume of resources that are eligible, and, ultimately, how much of an impact on overall supply the solicitations have. We discussed some of these key design questions in this post. As DOER files a proposed approach with the Department of Public Utilities and, ultimately, initiates the solicitation, we’ll use the additional information to refine our solicitation analysis, helping developers refine both their development portfolio and their bid strategies.

2. New Administration – Tariffs, ITC reform, and…?

The Republican sweep in national elections created a new set of uncertainties for storage (and renewable) developers. Top of mind will be what action the new administration takes on storage import tariffs and whether Congress sunsets the ITC or amends the eligibility of storage for the credit. While we may learn more about the administration’s intent for energy storage component import tariffs soon (which would help alleviate uncertainty, even if the news is not great), the slim Republican majority in the House and some signs of support for renewables amongst a limited set of Republican Senators suggests that changes to the ITC, if any, may not materialize soon. Other changes (e.g., obstruction of offshore wind projects) would also affect CPS.

3. Interconnection (yes, we would probably say this every year)

Still, 2025, in particular, should be an interesting one for interconnection. On the transmission side, we’ll be on the lookout for a FERC response to ISO-NE’s FERC 2023 compliance filing, implementing a cluster study process. The lack of a FERC ruling on ISO-NE’s compliance filing led ISO-NE to rescind on September 4 its plans to implement its Transitional Cluster Study Process. On the state-jurisdictional front, we’ll be looking for evidentiary hearings and, ultimately, an order in the dockets (Eversource, National Grid, Unitil) in which storage operational tariffs are being considered. While most of the changes that could come from the conclusion of this proceeding are marginal, any improvement to the process for interconnection storage is welcome and has the potential to move the needle.

Your Partner in Navigating Change

2024 has been a transformational year for CPS. As we look ahead to 2025, the Massachusetts storage market is poised for growth—but also uncertainty. Through CPMO, we’ll continue to help our subscribers manage uncertainty and position themselves to benefit from the new opportunities created by recent changes.

If you’re interested in gaining access to CPMO’s market intelligence to guide your decision-making during a critical phase of the CPS market or in learning more about our service please contact the CPMO team.

Peak Potential: Unpacking Recent CPS Developments

/in /by

This is the tenth blog in our “2024 Clean Peak Standard” blog series. Read the first nine blogs here.

This month’s sweeping regulatory and legislative developments have unlocked new opportunities and raised critical questions for Clean Peak Standard (CPS) stakeholders. On November 8, DOER released the Guideline for the Near-Term Resource Multiplier introduced through emergency regulations. Later, on November 12, the Massachusetts Department of Energy Resources (DOER) announced the schedule for procurements of Clean Peak Energy Certificates (CPECs) within the CPS. Later that week, the MA House passed the energy omnibus bill, S. 2967 – An Act Promoting A Clean Energy Grid, Advancing Equity And Protecting Ratepayers; the legislation now heads to Governor Maura Healy, who has been a strong supporter of the bill. The CPMO team will be holding a Power Lunch on November 21 to discuss the above and more (register here).

Energy Omnibus Bill

As discussed in further detail in our most recent blog post, among other provisions, the energy omnibus bill would modify energy storage system (ESS) siting and permitting regulations and require the Commonwealth’s electric distribution companies (EDCs) and DOER to procure 5,000 MW of storage by 2030. The bill raises some questions, for example, whether existing pumped hydro capacity in the Commonwealth might count towards the 5 GW goal.

CPEC Procurement

It is our read that the legislation’s requirement for an initial procurement for environmental attributes only would be a procurement for CPECs. DOER indicated in its November 12 announcement that it plans to issue the initial CPEC RFP on July 31, 2025, and subsequent RFPs every two years thereafter, but reserves the right to alter the schedule to comply with changes in law, including S.2967. Our take: it likely will not be feasible for DOER to issue the initial RFP by July 31, 2025, given procedural requirements included in the legislation (e.g., review and approval of the bidding process by DPU, hiring an independent evaluator, etc.).

Permitting

The energy omnibus legislation may also ease some permitting barriers; of note, the legislation would allow the EFSB to grant Certificates of Environmental Impact and Public Interest to 100+ MWh storage resources to which DPU has granted comprehensive exemptions from local zoning by-laws, should the EFSB determine that a state or local body has “imposed a burdensome condition.”

Additionally, the legislation would extend the effectiveness, to August 1, 2029, of any “approval” granted to a proposed clean energy generation or storage project that was in effect from October 22, 2020, to August 1, 2024, inclusive. However, the legislation notes that an “approval” for the purpose of the section does not include any “permit, certificate, order, excluding enforcement orders, license, certification, determination, exemption, variance, waiver, building permit or other approval or determination of rights” under a number of statutes, or “any local by-law or ordinance.” This language effectively neuters the approval extension language, as now very few permits qualify as “approvals” under the law.

Near-Term Resource Multiplier

Additionally, on November 8, DOER issued a new Guideline for parties interested in applying for the Near-Term Resource Multiplier (NTRM) under CPS. The NTRM will provide a 2x multiplier on CPECs issued to up to 50 MW of qualified energy storage systems (QESS) for 10 years. A QESS is an energy storage system that began commercial operation after January 1, 2019, which operates primarily to store and discharge renewable energy. To qualify for NTRM eligibility, the QESS must:

  • Be a standalone, front-of-the-meter, QESS interconnected to the distribution system
  • Not have received a Statement of Qualification on or before January 1, 2025
  • Have a commercial operation date (COD) before January 1, 2027
  • Not receive the Distribution Credit Multiplier
  • Not be owned or controlled by an entity whose NTRM-qualified systems exceed 50% of program capacity (25 MW)

DOER plans to release an application on January 7, 2025, through which parties may apply to reserve NTRM capacity. DOER expects to review applications received by January 21, 2025, based on interconnection service agreement date; applications received after January 21 will be reviewed on a first-come, first-served, basis.

We’re Here to Help

All of the announced and potential changes to CPS create new opportunities for CPS-eligible resources, and a new set of questions for load-serving entities. Through CPMO, we consolidate the information, layer our informed expectations of potential future changes, and conduct robust modeling and analysis to provide our subscribers with the information they need to navigate the new opportunities that have arisen from the recent changes, and, critically, to effectively advocate for portions of the policy yet to be implemented (especially storage solicitations!).

CPMO’s next briefing, anticipated in December 2024, will explore recent and pending changes in detail. If you’re interested in gaining access to CPMO’s market intelligence to guide your decision-making during a critical phase of the CPS market or in learning more about our service please contact the CPMO team.

The CPS Excitement Continues: Legislature Makes Progress on Storage Solicitations

/in /by

This is the ninth blog in our “2024 Clean Peak Standard” blog series. Read the first eight blogs here.

On October 21, 2024, the Massachusetts General Court Conference Committee negotiating the energy omnibus legislation released a compromise bill, S. 2967 – An Act Promoting A Clean Energy Grid, Advancing Equity And Protecting Ratepayers. The Senate passed the legislation days later; the bill then moved to the House and was raised for adoption in an informal session, though a quorum was not present. Among other provisions, the legislation would, if enacted, modify energy storage system (ESS) siting and permitting regulations and require the Commonwealth’s electric distribution companies (EDCs) and the Massachusetts Department of Energy Resources (DOER) to procure 5,000 MW of storage by 2030. The legislation would also define “environmental attributes”, however, uncertainty lingers regarding the treatment of storage resources that are ineligible for CPS. While we’ve been tracking legislation on storage solicitations for a long time (see, for example, H. 4503 from April 2024) the S. 2967 language appears likely to pass, giving us more specific language to evaluate.

Permitting

The statute may also ease some permitting barriers. Of note, the legislation would allow the EFSB to grant Certificates of Environmental Impact and Public Interest to 100+ MWh storage resources to which DPU has granted comprehensive exemptions from local zoning by-laws, should the EFSB determine that a state or local body has “imposed a burdensome condition.” Furthermore, approvals (e.g., permits) for proposed storage projects that were in effect from October 22, 2020 – August 1, 2024 would be extended through August 1, 2029. 

Energy Storage Solicitation

The legislation directs the Commonwealth’s EDCs, in coordination with DOER, to conduct one or more competitive solicitations for 5,000 MW of energy storage by July 31, 2030; with the exception of a 1,500 MW carve-out, contracts can be for any combination of environmental attributes and energy service. Of this capacity, 3,500 MW must be mid-duration (i.e., 4-10 hours), 750 MW long-duration (i.e., 10-24 hours), and 750 MW multi-day (i.e., 24+ hours). The legislation also sets interim targets for mid-duration storage, specifically, the EDCs must procure 1,500 MW by July 31, 2025 (for environmental attributes only), an additional 1,000 MW by July 31, 2026, an additional 1,000 MW by July 31, 2027, and the remaining 1,500 MW by July 31, 2030.

The “environmental attributes” procured from storage through these solicitations will almost certainly be Clean Peak Energy Certificates (CPECs). The enabling statute for the Clean Peak Standard gave DOER the authority to design and implement, through the EDCs, solicitations of CPECs. However, apart from a provision in the October 11, 2024 emergency regulations providing more flexibility for the target volume for these solicitations, there has been effectively no public progress towards implementing these solicitations since a straw proposal DOER issued in January 2021. In effect, the S. 2967 language would require DOER to use its authority to implement solicitations for CPECs included in the original CPS statute, while adding a number of specific volume and process requirements. DOER retains the authority granted in the original CPS statute to promulgate regulations implementing CPEC solicitations, but, in practice, this authority is only likely to become relevant again after DOER has overseen solicitations in compliance with S. 2967, as DOER could continue to solicit CPECs under its original authority. While “environmental attributes” are broadly defined in the legislation, the1,500 MW environmental attribute-only solicitation appears aimed at CPS.

While the statue specifies that “existing energy storage systems shall be eligible to participate in any procurement issued under this section,” which would include existing pumped hydro resources Bear Swamp and Northfield Mountain, it stops short of changing CPS resource eligibility criteria to make the full output of these resources eligible for CPS. As a result, these resources would likely not be able to contract for their environmental attributes through the storage solicitations. It is possible, however, that Bear Swamp and Northfield Mountain could participate in solicitations by only offering energy services. For other potentially eligible resources, the explicit inclusion of existing resources ensures that resources do not delay development out of fear that surpassing certain development milestones could render them ineligible to participate in the solicitations.

Key Questions on Solicitations

While the S. 2967 language provides significantly more specificity on storage solicitations than the current CPS statute, a number of critical questions remain. We discuss a few (not a comprehensive list – we save that for our subscribers in our next briefing) below:

  • Eligibility.  DOER’s original straw proposal limited eligibility to distribution-connected resources, likely for a mix of policy and practical reasons. Given the need to procure 5 GW of resources and the lack of language in the bill that limits eligibility to distribution-connected resources, DOER will almost certainly have to make transmission-connected resources eligible. Another key question would be whether resources would need to be located in MA. While the proposed language does not specify this directly, if “environmental attributes” are interpreted to be CPECs, the CPS requirement for systems to be connected to the MA electric power system could apply.
  • Contract duration. DOER’s original solicitations proposed a 6 year tariff term. The proposed Section 83E specifies that contracts can be up to 30 years.
  • Structure of solicitations. Assuming that both transmission and distribution-connected resources are ultimately eligible, DOER could choose to hold a single solicitation for all resources, or to hold different solicitations with different target volumes and clearing prices for different types of resources.
  • Bid price cap. SEA models a price cap based on approaches used in other MA solicitations. While it seems likely that DOER would adopt a similar approach for these solicitations, it’s also possible DOER could use other approaches to setting bid caps. If DOER holds different solicitations for different project types, the price cap could vary for each project type.
  • Uniform clearing-price vs. pay-as-bid. In its straw proposal, DOER proposed using a uniform clearing-price (UCP) auction design, where all resources are paid the marginal (clearing) price. This approach is most common in wholesale electricity markets. Other renewable procurements, however, such as various Section 83 solicitations use a pay-as-bid approach. This choice will have implications for bidding strategies and resulting policy costs.
  • Evaluation methodology. In addition to determining whether solicitations will be on a UCP or pay-as-bid basis, DOER will need to decide how to compare resources bidding only energy services, only environmental attributes, or both. This methodology will influence whether Bear Swamp and Northfield Mountain, which could not bid CPECs, could participate competitively.

The legislation specifies that the timetable and solicitation method would be subject to approval by the Department of Public Utilities, so the DPU would rule on DOER’s solicitation proposal.

Discussion

You don’t need to hire us, the CPS experts, to tell you that this is a big deal (or, will be if, as we expect, the language is ultimately passed). It is likely to flip the CPEC market from one in which the minority of supply flowed through DOER-orchestrated solicitations into one where a majority of supply flows through these solicitations. For those developing or operating projects, the specific design of the solicitations will determine if and how your project can benefit from a long-term contract. For others more generally interested in spot-market prices, having such a large portion of market supply tied up in contracts (which will likely include requirements for delivered volumes of CPECs), the market could become more volatile, as fewer resources may be responsive to changes in spot market CPEC prices.

But, as ever, the devil is in the details. The specific implementation of solicitations for storage (either through the pending legislation or DOER’s existing CPEC procurement authority) will have critical implications both for those trying to participate in the auctions and those entities trying to understand where market prices are headed. Language in DOER’s October emergency CPS regulations suggests that we’ll learn more about their intended procurement schedule in the coming months. And, given the legislation’s July 2025 target (which, frankly, is all but impossible for DOER to achieve), progress towards finalizing the design of the solicitations will need to proceed rapidly.

We’re Here to Help

All of the announced and potential changes to CPS create new opportunities for CPS-eligible resources, and a new set of questions for load-serving entities. Through CPMO, we consolidate the information, layer our informed expectations of potential future changes, and conduct robust modeling and analysis to provide our subscribers with the information they need to navigate the new opportunities that have arisen from the recent changes, and, critically, to effectively advocate for portions of the policy yet to be implemented (especially storage solicitations!).

CPMO’s next briefing, anticipated in December 2024, will explore recent and pending changes in detail. If you’re interested in gaining access to CPMO’s market intelligence to guide your decision-making during a critical phase of the CPS market or in learning more about our service please contact the CPMO team.

Third Round of CPS Emergency Regulations Increases and Fixes ACP Rate

/in /by

This is the eighth blog in our “2024 Clean Peak Standard” blog series. Read the first seven blogs here.

On October 11, 2024, the Massachusetts Department of Energy Resources (DOER) announced several important updates to the Clean Peak Energy Standard (CPS). These changes build on the emergency rules issued back in July; most importantly, the new regulations increase the ACP to $65 for Compliance Years 2026-2032, after which the ACP will remain fixed at $45 for the remainder of the policy period. While stakeholder comments and changes made through previous emergency regulations suggested DOER may have been contemplating a change to the ACP, eliminating a central feature of CPS, the declining ACP, is remarkable. Here’s a quick rundown of the changes.

July 19 Emergency Rulemaking is Now Permanent

DOER announced that the emergency rulemaking that DOER filed on July 19, 2024 has officially been made permanent, with no further adjustments. Central to the changes made in July was an adjustment to the Minimum Standard, lowering it relative to the original regulations in the near-term and increasing it relative to the original regs starting in the late 2020s. The changes to the Minimum Standard also eliminated the demand ratchet, which would have led to an increase in the rate of change to the Minimum Standard following periods of market surplus. As briefly mentioned in our last blog post and discussed in detail in our September briefings, the elimination of the demand ratchet without also addressing the ACP ratchet (which would have decreased the ACP faster following periods of surplus) would have yielded significant market volatility.

New Emergency Rulemaking (Effective Immediately)

DOER also introduced a new set of emergency regulations that are effective right away; together, these changes represent a marked shift from the original regulations.

Changes to the ACP Rate

The most significant update is to the ACP rate. The rate will stay at $45/MWh through Compliance Year 2025, but starting in Compliance Year 2026, it will jump to $65/MWh and stay there until 2032. After 2032, the ACP will drop back down to $45/MWh where it will remain through 2050.

This is a major shift from the original regulations, which had the ACP decreasing from $45 starting in 2025, falling to $4.96 by the end of the policy period. The declining ACP was a unique element of CPS that also gave rise to unique concerns from those looking to build CPS-eligible resources. While, all else being equal, the increase in the ACP would increase market prices, potential future surpluses that near or exceed the banking limits of load-serving entities will still lead prices to drop steeply.

CPEC Procurement Adjustments

The potential for prices dropping substantially below the ACP is a natural segue to the next set of changes, namely, those related to Clean Peak Energy Credit (CPEC) procurements. The original regulations contemplated the electric distribution companies (EDCs) procuring 30% (adjusted over time) of the market’s demand for CPECs. That target and related verbiage laying out how DOER would adjust the target in subsequent solicitations have been removed from the regulations. Given stakeholder feedback and other changes DOER has made to date, our expectation is that DOER is considering a CPEC procurement target volume of above 30%. DOER also announced that it will release a staggered procurement schedule “at a later date.”

CPEC Banking Period Shortened

The CPEC banking period has also been shortened from three years to two years. This change brings CPS in line with other clean energy policies in Massachusetts that have a two year banking limit.

Summer Peak Period Shifted

DOER shifted the Summer Seasonal Peak Period to later in the day. It now runs from 4:00 to 8:00 PM, instead of the previous 3:00 to 7:00 PM window. This change reflects how the highest demand and prices have been shifting to later in the afternoon and evening during the summer months. It also confirms DOER’s intent to adjust CPS windows to align with periods of high demand and price, which has the additional benefit of reducing the potential for conflict between CPEC production and maximizing energy arbitrage earnings.

Final Near-Term Resource Multiplier Guideline Coming Soon

Lastly, DOER has reviewed stakeholder feedback on the Draft Near-Term Resource Multiplier Guideline and has announced that a final version will be posted soon. We expect clarifications, if not significant changes.

Discussion

DOER’s changes to the ACP represent a significant shift in the design of CPS, especially when considered in conjunction with its July changes to the Minimum Standard. While changes to the Minimum Standard appeared to balance a concern with ratepayer cost (thus, reducing Minimum Standard in the near term) with a desire to have sufficient market demand to support robust CPS-eligible resource buildout (thus, the increase in Minimum Standard in the long term), the increases to the ACP are clearly intended as a signal to boost development efforts.

Of course, there is no guarantee that market prices will remain at the ACP. Robust interconnection pipelines for both the distribution and transmission systems indicate significant interest and development activity. If higher ACP prices drive a larger share of these projects to achieve commercial operation, the CPS market could easily become oversupplied, depressing prices. Subscribers to CPMO receive our view on the probability of this happening, across a range of possible future scenarios.

DOER’s changes to the target volume for CPEC procurements, of course, could provide a pathway for more resources to achieve CPEC price certainty. Project eligibility criteria will also be critical. DOER’s 2021 straw proposal for CPEC procurements limited eligibility to distribution-connected resources. A lot has changed since then, and one might expect that an increase in the target volume could be accompanied by making more resource types eligible.

Don’t Just React – Respond and Anticipate with CPMO

All of the 2024 changes to CPS create new opportunities for CPS-eligible resources, and a new set of questions for load-serving entities. Through CPMO, we consolidate the information, layer our informed expectation of potential future changes, and conduct robust modeling and analysis to provide our subscribers with the information they need to navigate the new opportunities that have arisen from the recent changes.

CPMO’s next briefing, anticipated in December 2024, will explore the recent changes in detail. If you’re interested in gaining access to CPMO’s market intelligence to guide your decision-making during a critical phase of the CPS market or in learning more about our service please contact the CPMO team.

Register below to make sure you get the latest blog posts and news as soon as they are released!

CPMO Blog Sign-Up

Name(Required)
Email(Required)
How'd you hear of us?(Required)

Understanding and Navigating Uncertainty in CPS

/in /by

The Clean Peak Market Outlook (CPMO) team (Sustainable Energy Advantage and Customized Energy Solutions) delivered our most recent Massachusetts Clean Peak Standard (CPS) Market Fundamentals analysis briefing in early September, providing our most recent take on the impacts of the Department of Energy Resource’s (DOER’s) July 19 emergency regulations on the future of the CPS market. While DOER’s announcement reduced some uncertainties, it opened up new ones, such as if and how DOER might react to future market surpluses in the absence of a demand ratchet. (As our subscribers have seen demonstrated in our modeling, the elimination of the demand ratchet makes the market much more susceptible to sustained price crashes that might disincentivize investment). We also considered key inflection points such as whether the Massachusetts legislature might push through an energy bill that includes required storage solicitations, and what those solicitations might look like.

The result is a wide range of possible future prices, illustrated below, associated with different assumptions, related to policy choices, market changes, project economics, and other relevant factors.

We observed substantial changes in our projections relative to our first briefings in 2024. While some of the results were expected, others were slightly counterintuitive, revealed by our rigorous modeling. For those not conducting this type of modeling, it begs the question: are you making decisions based on an outdated view of the market or unreliable heuristics?  


So, how does someone trying to make decisions affected by CPEC prices make decisions in the face of uncertainty? First, the CPMO Team always provides a scenario that represents our best guess. Unfortunately, that’s where competitor’s or in-house analysis may end: a single price future without helpful context on what led to that set of projections and indications of what may lead to meaningful deviations from those projections.

We better arm you to establish an actionable and a well-founded market view. In each of our briefings, the CPMO Team considers, models, and presents the results of numerous scenarios and sensitivities. We include a sample of those from our most recent round of briefings below.


We believe that presenting scenarios and key underlying assumptions and key sensitivities is critical. Each of our scenarios represents a plausible future, consisting of a coherent set of internally consistent assumptions. Much of this is based on considering policy changes that make sense within the context of other chosen assumptions (e.g., high storage CapEx costs). This enables our subscribers to get a sense of potential future outcomes around our best guess.


We also include sensitivities in which we alter a single input. This enables subscribers to better understand the import of individual assumptions (e.g., policy changes) so that they can anticipate or influence key inflection points, and ignore policy elements or other drivers with minimal impact on the CPEC market overall.

We’re coming up on three months after the emergency regulations were filed, the time at which the emergency regulations will become permanent. It could be that DOER resumes its focus on the 2024 Program Review at that milestone, possibly leading to more changes to the policy, while also providing a unique opportunity to try to influence the policy. Our September briefings were recorded and are available now to help you effectively advocate for and anticipate CPS changes.

To purchase the most recent briefings or learn more about CPMO, please contact the CPMO team.

Massachusetts DOER Releases Draft Guidelines for New Near-Term Resource Multiplier for Clean Peak Energy Standard, Comments Due by September 13th

/in /by

This is the seventh blog in our “2024 Clean Peak Standard” blog series. Read the first six blogs here.

On August 23, 2024, the Department of Energy Resources (DOER) published a draft of the Near-Term Resource Multiplier Guideline. As covered in our prior Blog Post of the emergency regulations, eligible resources will receive a multiplier value of 2, applicable for 10 years from the effective date of their Clean Peak Resource qualification. This multiplier is limited to 50 MW of total capacity, though the regulations note that “after notice and opportunity for public comment, [DOER] may increase this cap in the future.” During the Public Hearing held in August 26th stakeholders encouraged DOER to expand the capacity limit and open or create a similar multiplier to Front of the Meter (FTM) projects.

Below we summarize the guideline presented by DOER:

Eligibility Criteria

To qualify for the Near-Term Resource Multiplier, a Clean Peak Resource must meet the following criteria:

  • It must be connected to the distribution system.
  • It must be a standalone, front-of-the-meter Qualified Energy Storage System (QESS), not co-located with a Qualified RPS Resource OR a Demand Response Resource.
  • The resource must not have received a Statement of Qualification on or before January 1, 2025, and must commence commercial operation before January 1, 2027.
  • The resource cannot also receive the Distribution Circuit Multiplier.
  • The cumulative capacity qualifying under this program for any single entity cannot exceed 50% of the total capacity designated by DOER, initially set at 50 MW.

Application Process

  • Applicants must submit a reservation application with specific details such as ownership information, an executed Interconnection Service Agreement (ISA), and other required permits.
  • A Statement of Qualification Application (SQA) is not initially required but must be submitted within 18 months of reservation approval or by January 31, 2027, whichever comes first.
  • DOER will sequence initial reservations based on the ISA execution date and subsequently approve them on a first-come, first-served basis.

Implications

While 50 MW seems like a very limited amount of capacity (and, it is), for reasons discussed in our September 9, 2024 Market Module briefing, even small amounts of additional supply can have significant impacts on CPEC pricing. Furthermore, as discussed above, the regulations leave open the potential for an increase in the 50 MW cap. Our analysis of the EDCs’ storage interconnection data shows that there certainly is enough pending projects to fill the 50 MW many times over, though the time to complete interconnection (studies and associated upgrades) as well as the charging limitations being applied to many distribution-connected storage projects create significant challenges to projects that may wish to take advantage of the new multiplier. To learn more about the Clean Peak Market Outlook service, and to access our more detailed analysis of this multiplier and its impacts on the overall market, please reach out to the Clean Peak Market Outlook team.

Next Steps

We don’t expect DOER to make any major changes soon to the regulations posted, they are seeking comments from stakeholders.

Stakeholders that couldn’t provide feedback on this guideline at the Clean Peak Energy Standard Emergency Rulemaking Public Hearing held on August 26  may provide written comments to DOER and those should be sent to [email protected] by Friday, September 13, 2024 at 5:00 P.M. EDT.

DOER still plans to conduct a comprehensive review of the CPS, where more changes might be introduced. More information on the Program review may be found on the 2024 CPS Programmatic Review website.

Massachusetts DOER schedules August 26 public hearing on CPS emergency rulemaking

/in /by

This is the sixth blog in our “2024 Clean Peak Standard” blog series. Read the first five blogs here.

Last week, DOER announced that it will be holding a public hearing on August 26, 2024 to receive comments on its recent emergency Clean Peak Energy Standard (CPS) regulations, which we discussed in our previous post. A quick recap – the emergency regulations:

  1. Adjust the Minimum Standard for CPS compliance from 2025 through 2050 (lower at first, then accelerating and eventually exceeding the original Minimum Standard by the end of the decade)
  2. Remove the minimum obligation ratchet mechanism
  3. Introduce a 2x multiplier for 50 MW of resources connect to the distribution system by the end of 2026 and that are either (1) Qualified Energy Storage Systems that are not co-located with a Qualified RPS Resource or (2) Demand Response Resources but are interconnected to the distribution system.

While emergency regulations can go into effect immediately and stay in effect for up to three months, if an agency intends for them to become permanent at the end of that three-month period, the agency is required to hold a public hearing. (Yes, we read the Commonwealth’s regulations manual. No, this has not helped make friends at parties).

What meaning can we derive from this? First – the public hearing doesn’t suggest anything about DOER’s intent to make any changes to the emergency regulations filed, as the public hearing is required. Issuing emergency regulations requires jumping through extra hoops, particularly establishing that the changes justify the emergency rulemaking process. Given this, and the rationale DOER has provided for the emergency regulations, our take is that the emergency regulations will likely go into effect as filed.

Still, DOER previously indicated that the emergency regulations will not supplant the 2024 Program Review (required by the CPS regulations). DOER already accepted a round of comments in response to a set of questions it issued; while there may be additional opportunities for input (e.g. in a comment period following issuance of draft regulations), DOER has not specified any. It’s possible that stakeholders may try to use the emergency regulations hearing as an opportunity to comment on CPS more generally.

The hearing is scheduled for August 26 from 1:00 – 4:00 pm and will be held virtually (register here). According to DOER’s announcement, stakeholder may also submit written comments through August 26 at 5:00 pm; DOER requests that PDFs be emailed to [email protected] with “2024 CPS EMERGENCY RULEMAKING COMMENTS” in the subject line. 

As always, the CPMO team will continue to follow every twist and turn in the market and incorporate it all into the policy insights and market projections our subscribers count on. To learn more about the service, please reach out to the Clean Peak Market Outlook team.

DOER issues (another) set of emergency CPS regulations

/in /by

This is the fifth blog in our “2024 Clean Peak Standard” blog series. Read the first four blogs here.

For the Clean Peak Energy Standard (CPS) enthusiast, it has been an exciting week!

On July 19, 2024, the Massachusetts Department of Energy Resources (DOER) filed new emergency regulations amending the Clean Peak Energy Standard (CPS) under 225 CMR 21.00. It informed stakeholders of the new emergency regulations by email. These changes supersede the previous emergency rulemaking from July 12, 2024, which we discussed in our post last week.

Changes in the Emergency Regulations

The new emergency regulations, which went into effect immediately, incorporate the following changes:

  • Minimum Standard Adjustments (2025-2050): The Minimum Standard for CPS compliance is adjusted from 2025 through 2050. Initially, the Minimum Standard is reduced for the years 2024-2028, relative to the original CPS regulations, to alleviate ratepayer costs due to high Alternative Compliance Payment (ACP) collections that DOER expected would occur during this period. After 2028, the Minimum Standard is increased relative to the original regulations to reflect DOER’s anticipated growth in Clean Peak Resources. The updated obligations are represented in the graph below. After 2034, the Minimum Obligation will increase by 1.5% per year.
  • Removal of Minimum Obligation Ratchet: The original regulations included a minimum obligation ratchet mechanism, by which the Minimum Obligation would be increased by more than the default 1.5% in the compliance year following a year in which market supply exceeds demand. The emergency regulations remove this minimum obligation ratchet, although, we note, it does not remove a complementary portion of the regulations that accelerates the reduction in the ACP rate following market surpluses.
  • Near-Term Resource Multiplier: The emergency regulations introduce a 2x multiplier for resources connected to the distribution system and that are either 1) Qualified Energy Storage Systems that are not co-located with a Qualified RPS Resource or 2) Demand Response Resource but are interconnected to the distribution system. Resources that have not received a Statement of Qualification before January 1, 2025 and must have a commercial operation date before January 1, 2027. The 2x multiplier applies to the first 10 years following the effective date on the resources Statement of Qualification. DOER announced that it “may” publish a guideline with further details. This multiplier is limited to 50 MW of capacity, though the regulations note that “after notice and opportunity for public comment, [DOER] may increase this cap in the future.”

Rationale for the Changes

In its email announcement, DOER cited several factors in explaining its use of an emergency rulemaking process:

  • The July 12, 2024 emergency rulemaking aimed to implement the 2024 Minimum Standard change before the commencement of the CPEC trading year on July 15, 2024, to realize significant ratepayer savings, estimated by DOER to be between $22 million and $73 million.
  • The decreased Minimum Standard for 2024-2028 is similarly intended to reduce ACP collections during market deficits DOER anticipates during this time period.
  • DOER anticipates that increasing the Minimum Standard post-2028 will help to maintain supply demand balance as a substantial volume of CPS-eligible resources that are currently under development reach commercial operation.
  • In discussing the Near-Term Resource Multiplier, DOER cites challenges faced by developers of these resources, including interconnection challenges and uncertainties related to state-jurisdictional Operational Parameters tariffs and wholesale distribution tariffs to be filed with FERC. DOER notes that many potentially eligible projects will need to make decisions on whether to make 25% interconnection payments in the near future.

Implications

The most immediate impact of the changes will be to, through 2028, reduce the cost of CPS to ratepayers. The Near-Term Resource Multiplier is a significant boost to projects that are able to secure this multiplier, but the 50 MW cap will limit its impact on the overall market (though, as the regulations notes, DOER may revisit this cap in the future).

The longer-term implications are more complex. The original regulations used complementary mechanisms, the minimum obligation and ACP ratchets, to help the market self-correct during surpluses, by increasing demand while simultaneously reducing the ACP rate. Now, should the market enter a period of surplus, a reduction in the ACP will tend to suppress prices, without the counterbalancing effect of an increase in demand. The new Minimum Obligation includes an aggressive increase starting in 2028 – this may mean that the issue of market surplus simply does not arise. If, however, it does, the impact on CPEC prices would be more prolonged than it would have been had the minimum standard ratchet not been eliminated. This could increase the likelihood that DOER would need to make additional adjustments to the minimum standard in the future.

DOER’s email also reiterates that it intends to conduct the full 2024 review of CPS. While this may lead to changes to updates made through emergency regulations, the fairly extensive nature of the changes included in the emergency regulations and a desire to signal some level of policy stability may lead to a reluctance to make further changes to the Minimum Standard.

Taken together, the changes suggest that DOER sees substantial challenges for storage in the near-term, but optimism that large volumes of CPS resources will start operating by the end of the decade. Given DOER’s latitude to make changes to CPS (demonstrated by these changes) and to implement other policy mechanisms (such as storage procurements), these views matter.

The CPMO Team will conduct modeling evaluating the impact of the proposed changes on the CPS market, including an initial analysis that we’ll share with our subscribers by the end of July, followed by a full set of briefings in late August.

Next Steps

DOER will publish guidance on applying for the Near-Term Resource Multiplier shortly. Additionally, the DOER will hold a public hearing and comment period to solicit stakeholder feedback on the new regulations. These events will be announced via email and posted on DOER’s website. For detailed information on the specific regulatory changes, stakeholders are encouraged to review the clean and redline documents available on the DOER website.

As noted above, DOER still plans to conduct a comprehensive review of the CPS. More information on the Program review may be found on the 2024 CPS Programmatic Review website. For questions regarding the CPS emergency rulemaking, stakeholders can contact DOER at [email protected].

For questions on the impact of these emergency regulations and what my follow through the CPS 2024 Program Review process, reach out to the Clean Peak Market Outlook team.

CPS Emergency Rulemaking – the What, the Why, and the What Comes Next

/in /by

This is the fourth blog in our “2024 Clean Peak Standard” blog series. Read the first three blogs here.

On late Friday afternoon (7/12), the MA Department of Energy Resources (DOER) sent an email notice announcing that it had filed emergency regulations making changes to the Clean Peak Energy Standard (CPS), effective immediately. The emergency regulations made two related changes:

  1. Adjusted the Minimum Standard (the percent of retail load that load serving entities must meet with Clean Peak Energy Certificates) for compliance year 2024 from 7.5% to 4% (lower than 2022’s value of 4.5%).
  2. Deleted language specifying that the Minimum Standard will increase by 1.5% each year, instead referencing the updated table (see below, directly from the redlined regulations). Here’s the language itself: “(a) The CPS Minimum Standard shall increase by 1.5% each year be set to the percentage identified in 21.07 (1)(a) [the section that contains this language and the table], and subject to the conditions described in 21.07 (1)(b).” Section 21.07 (1)(b) of the regulations lay out the dynamic mechanism for the Minimum Standard, whereby the compliance obligation increases by 3% or 4.5% when market surpluses meet specified thresholds.
Compliance yearCumulative Minimum percentage
20190%
20201.5%
20213.0%
20224.5%
20236.0%
20247.5%  4%
20259.0%
202610.5%
202712.0%
202813.5%
202915.0%
203016.5%
203118.0%
203219.5%
203321.0%
203422.5%
203524.0%
203625.5%
203727.0%
203828.5%
203930.0%
204031.5%
204133.0%
204234.5%
204336.0%
204437.5%
204539.0%
204640.5%
204742.0%
204843.5%
204945.0%
205046.5%

Breaking Down the Immediate Impact

In short, for folks on the supply side of the market, there is effectively no immediate impact. While you’ll need to become a subscriber to get more detail, we can share (and, you can figure out with some rough math and reasonable assumptions), that, even with the reduction in the 2024 Minimum Standard, there is likely to be a deficit in 2024. So, the primary impact would be to reduce cost of the CPS obligation to suppliers (though, we note that, depending on change of law provisions, the timing and duration of the contract, etc., it’s possible that end-use customers may not see the full benefit). Folks selling 2024 Clean Peak Energy Certificates (CPECs) should still expect prices to be close to the Alternative Compliance Payment (ACP).

It’s worth noting this change is also not all that surprising. As we discussed in a previous blog post, DOER was likely considering options for reducing ACP collections, as large, persistent ACP collections can invite criticism of a portfolio standard. There is, as described in that post, precedent for using changes in the Minimum Standard to achieve reduced ACP collections.

A Small Point of Potential Confusion

Outside of the reduction in ACP collections (and, hopefully, reduction in customer bills), the impact of this change is limited. Still, it raises questions about what may come next.

First, the edit creates some confusion about how, in the absence of additional changes to the regulations, the Minimum Standard may be set in the future. The regulations, before the emergency rulemaking, laid out how the Minimum Standard would change each year. Specifically, any time Market Supply (CPECs generated within a given year divided by total obligations within the same year) is 100% or less, the Minimum Standard would increase by 1.5% in the subsequent year, greater than 100% to 120% would trigger a 3% increase, and any Market Supply greater than 120% would lead to a 4.5% increase in the subsequent year. While the table included in the regulations did not directly account for the potential for 3% and 4.5% increases, it was implicit that the overall trajectory would diverge from the one indicated in the table should such larger increases be triggered. And, the language explicitly defined that the default increase would be 1.5%.

The changes, however, create some challenges in interpreting the regulations. The emergency regulations eliminate the language indicating that the Minimum Standard would, by default, increase by 1.5% each year, although the table in the regulations demonstrate that a 1.5% annual increase appears to be the default. If a 3% or 4.5% change in the Minimum Standard is triggered in the future, which would lead to a trajectory that differs from what is captured in the table, there is no longer language that specifies what the Minimum Standard would be in the subsequent year (again, because the edits remove mention of a 1.5% increase). One would assume that the 1.5% increase would apply in this situation (Market Supply is 100% or less), but this is not explicit in the updated regulations. Perhaps there will be some clarification included in changes that flow from the 2024 Program Review process.

Looking Ahead – What Additional Changes Might This Portend?

A quick look at the new Minimum Standard chart leads to an obvious question: what is going to happen in 2025? While one can imagine (and we’ve modeled through our CPMO briefings) how a temporary pause or reduction in the Minimum Standard could allow time for supply to catch up with demand, there’s little information that suggests the market could supply the CPEC demand associated with a 9% Minimum Standard in 2025.

In a version of this post available to CPMO subscribers, we discuss what this likely means for future possible changes. Subscribers get critical information on how CPS policy might change, critical drivers of CPEC supply, and, where the CPS market (supply, demand, prices) is going, allowing them to make informed decisions now, provide informed feedback as policies change, and anticipate what is happening next. While the immediate impact may be fairly limited, the change reflected in the emergency rulemaking is likely a down payment on additional changes to the policy, and we’re here to help you stay informed as we progress through the 2024 Program Review. Get in touch with us to receive additional information about the service and pricing.

Reading the Tea Leaves and Cracking Open the Books: What DOER’s CPS questions and MA Class II suggest about the CPS Program Review

/in /by

This is the third blog in our “2024 Clean Peak Standard” blog series. Read the first blog here and the second blog here.

On March 25th, DOER kicked off the 2024 Clean Peak Energy Standard (CPS) program review by seeking stakeholder responses (by May 3rd!) a set of questions related to CPS. Given the magnitude of potential change, while risky, we can’t help but look for hints at what DOER may be considering. We’ll also take a brief trip down memory lane (MA Class II, specifically) to see what history might hint about actions DOER might be considering. 

DOER CPS questions 

The CPS regulations specify that, starting in 2024 (that’s this year!) and at least every four years thereafter, DOER must review and consider stakeholder input related to CPS multipliers, the minimum standard, and the ACP. This covers a lot of ground, but, it also defines the minimum of what DOER must consider. The enabling statute for CPS contains few policy details, leaving DOER (following appropriate rules for issuing and updating regulations) substantial authority to adjust the policy. 

So, what can we surmise from the comments? 

  • DOER is clearly taking a comprehensive view. The questions run the gamut, from seeking process improvements to an open-ended question about the value of CPS overall. It makes clear that DOER is not limiting its review to the ACP, the minimum standard, and the multipliers. 
  • DOER is looking to create alignment and consistency with other programs. Several questions are aimed at seeing how CPS can support the Commonwealth’s climate and energy goals, and work together with other related programs. One would expect that the role of storage in SMART will be top of mind for many respondents. 
  • DOER is seeking to characterize the CPS pipeline. DOER asks for stakeholders to provide details on CPS-eligible projects they’re working on. This data could be used to help estimate supply over the next four years, which could be particularly useful in making adjustments to the minimum standard. Note – Clean Peak Market Outlook (CPMO) subscribers benefit from our rigorous projections of supply. 
  • The last question raises, well, questions. DOER’s last question reads as follows: “Would any Clean Peak Resources or specific use cases for such Resources be better incentivized by a different program than CPS? If yes, please describe the proposed program and justify why the particular Clean Peak Resources and associated use cases would be better incentivized by such a program, with particular attention paid to added ratepayer benefits.” One could read this as a more targeted question, seeking ways to support, for instance, long-duration storage. One could also read it as seeking to understand the value of CPS overall. It’s hard to unring a bell like CPS (both because of the practicalities of winding down an active market and because elimination of the policy would require legislation). Still, implicit in the question is an acknowledgement that DOER is considering how other programs may at least complement CPS. 

A relevant anecdote: MA Class II 

DOER has, at multiple points, made adjustments to various components of the RPS. One that we find most relevant: the 2012-2014 adjustments to the Massachusetts Class II standard. As the graph below shows, in the initial years of the market, MA-II was heavily undersupplied, relying on primarily/almost exclusively on ACPs (sound familiar?). Following direction from the legislature to study the problem, DOER responded by slashing the minimum standard from 3.6% of load to 1.5% for the 2013 compliance year, and adopting a formulaically set minimum standard tied to market conditions that went into effect in 2016. 

There are important distinctions – MA-II is unique in that it targets existing resources and, in this instance, DOER was responding to direction from the legislature. Still, the similarities are compelling: an undersupplied market and concerns about overreliance on ACPs. The introduction to MA-II of a market-responsive minimum standard (the SREC 1 market also had a responsive minimum standard) is also mirrored in CPS’s market-responsive minimum standard.  

The implication? History confirms what is already intuitively clear: DOER is averse to large and persistent ACP collections. In the context of MA-II, this led to a reduction in the minimum standard, an attempt to reduce ACP collections without tanking the market. 

Learn more, get support, and stay in the loop. 

CPMO subscribers can access our detailed discussion of how the above may translate into changes to the CPS and what that implies for certificate pricing during our next briefing on April 30, 2024. To learn more about subscribing or if you’re interested in analytical support as you’re drafting your CPS questions, reach out to us at [email protected] 

For additional information about CPS, fill out the form below to receive our CPS 101 slide deck. You’ll also receive future posts in this series, including any updates on changes that occur through the 2024 Program Review.  

CPMO Blog Sign-Up

Name(Required)
Email(Required)
How'd you hear of us?(Required)