Day of reckoning looms for state’s clean-energy agency amid funding shortfall

A day of reckoning is coming for the Massachusetts Clean Energy Center.

The quasi-public agency, funded largely by a surcharge on electric bills, has helped fuel the rise of the state’s clean-tech economy during the past decade, providing grants and other financial help for everything from internships to solar panels to high-tech batteries. But the agency has done this by spending millions more every year than it collects in revenue, covering shortfalls by dipping into a renewable energy fund. Everyone knows that kind of party isn’t meant to last.

So the Baker administration is forcing a tough discussion: how to focus the MassCEC’s mission and make it more self-sustaining. The MassCEC board, chaired by Governor Charlie Baker’s energy and environmental affairs secretary, is expected to discuss the issue at its next monthly meeting, on Jan. 23.

State officials had already put feelers out to the clean-energy industry about the quandary. Needless to say, alarm bells are ringing among those who want Massachusetts to remain a clean-energy leader. They say a weaker MassCEC would put us at risk of falling behind rival states. Many of the clean-tech advocates support asking the Legislature for more money, by increasing the charge on electric bills or by extending it to natural gas bills, as well.

The administration has known this day was coming for a while. But a big legal setback accelerated things: A Suffolk Superior Court jury ruled in June that the agency owed at least $20 million to contractors for work on a terminal in New Bedford to serve the still-nascent offshore wind industry. A spokesman said the agency hasn’t paid any of that money yet, as it continues to weigh its options for an appeal.

But the impact could be considerable should the agency cough up the money, which represents roughly half of its annual budget. The agency plans to collect $22 million from the electric bill surcharge (nearly $4 for an average home) out of $30.5 million in revenue in this fiscal year. Meanwhile, the MassCEC expects to dole out $30 million in grants and other awards — down from $46.5 million last year — while also paying for its $12 million operating budget.

How to make up the difference? The agency will again dip into its renewable energy trust fund, using money ratepayers had paid years earlier.

When that trust fund was transferred to the then-young MassCEC a decade ago, the stockpile totaled some $120 million. But by drawing on it over the years, the MassCEC had cut the balance roughly in half as of June 30. The fund won’t be empty anytime soon, at least not for another three years. But the Baker administration is acutely aware that it can’t last forever at this rate, either.

State officials and clean-energy advocates say spending down the fund was an intentional strategy to help jump-start the industry. The sector employed more than 110,000 people at last count, nearly double the number of clean-energy workers here in 2010.

Katie Theoharides, Baker’s energy secretary, said the administration recognizes the MassCEC’s importance. She said it’s time to make sure its awards budget can be sustained, with a cost-effective approach to investments in clean energy and climate change. (One question the board will face: whether to invest a larger portion in climate-change readiness projects.)

The looming shortfall has people at the Greentown Labs incubator in Somerville worried: Of the 230 companies Greentown has supported since 2011, at least 175 of them have received some form of MassCEC help.

Elizabeth Turnbull Henry, president of the Environmental League of Massachusetts, fears the state will fall short of its potential if more funding can’t be found. It’s time, she said, to “shoot for the moon on clean energy.”

The Northeast Clean Energy Council, which receives about $200,000 from MassCEC, has made legislation to help MassCEC a top priority for its Beacon Hill agenda in 2020. President Peter Rothstein said the trade group is still talking with legislative leaders about the best approach.

Even Bob Rio, the energy guru at Associated Industries of Massachusetts, is concerned. Rio has pushed back over the years against proposals that would drive up the state’s already high electricity costs. However, AIM has taken a keen interest in the clean-tech industry as of late, and counts a number of the sector’s key players as members.

Like his counterparts in the environmental community, Rio wants more revenue for the MassCEC. But he prefers drawing from the hundreds of millions in existing ratepayer subsidies for energy-efficiency work, over a change that would raise utility bills.

The drawdown of the renewable energy trust fund poses a financial dilemma for the Baker administration.

But it also represents an opportunity: to ensure the state’s Clean Energy Center can continue to thrive for many years to come.