Renewable Energy Portfolio Standard
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NOTE: On February 2017, Maryland lawmakers voted to override Governor Hogan's previous veto, thereby enacting H.B. 1106 which increases the state's renewable portfolio standard from previous 20% by 2022 to 25% by 2020. The bill also reduces the alternative compliance payments (ACPs) for nonsolar and solar tiers.
Maryland's Renewable Energy Portfolio Standard (RPS), enacted in May 2004 and revised numerous times since, requires electricity suppliers (all utilities and competitive retail suppliers) in the state to procure a minimum portion of their electric retail sales by eligible renewable energy sources. Most recently, on February 2017, the Maryland lawmakers voted to override veto by Governor Hogan, thus enacting H.B. 1106 which increases the state's renewable portfolio standard from previous 20% to 25% by 2020.
The renewable portfolio standard is divided into two tiers based on the electricity generation resource. Tier 1 renewables include solar, wind, biomass, anaerobic decomposition, geothermal, ocean, fuel cells powered through renewables, small hydro, poultry-litter incineration facilities, waste-to-energy facilities. Tier 2 renewables include hydroelectric power other than pump-storage generation.
Beginning in 2006, electricity suppliers were required to provide 1% of retail electricity sales in the state from Tier 1 renewables and 2.5% from Tier 2 renewables. The renewables requirement increases gradually, ultimately reaching a level of 20% from Tier 1 resources in 2022 and beyond, and 2.5% from Tier 2 resources from 2006 through 2018. The Tier 2 requirement eventually sunsets, dropping to 0% in 2019 and beyond.
Solar: A solar carve-out was established in 2007, and currently requires that a total of 2.5% of retail electricity sales come from solar resources by 2020.
Wind: In April 2013 Maryland enacted legislation (H.B. 226) creating a resource carve-out for offshore wind facilities. The carve-out is stated as a maximum percentage of 2.5% of retail electricity sales in 2017 and beyond, with the actual requirements to be determined by the Maryland Public Service Commission (PSC) subject to the 2.5% limitation. The definition of a qualifying offshore wind facility is limited to facilities located on the outer continental shelf between 10 and 30 miles off the coast of Maryland in a U.S. Department of Interior designated leasing zone. Facilities must connect to PJM Interconnection at a point on the Delmarva Peninsula and are subject to PSC approval.
Both the solar carve-out and the offshore wind carve-out are part of the overall Tier 1 requirement, thus they have the effect of reducing the requirements for other Tier 1 resources.
Electricity suppliers demonstrate compliance with the standard by accumulating renewable energy credits (RECs) equivalent to the required percentages outlined below:
|Year||Solar (Tier I)||Other Tier I||Tier I (Total)||Tier II|
A REC has a three-year life during which it may be transferred, sold, or otherwise redeemed. In other words, a REC may be used for compliance during the year of generation and the following two calendar years. Formerly, RECs generated within the PJM region, in states adjacent to the PJM, or delivered into the PJM were eligible to be counted towards RPS compliance. However, this provision was amended in 2008 by H.B. 375 to remove PJM-adjacent states from the geographic eligibility list, effective beginning in 2011.
Each electricity supplier must submit a report to the Public Service Commission annually that demonstrates compliance with the RPS. An electricity supplier that fails to meet the standard must pay into the Maryland Strategic Energy Investment Fund (SEIF). The alternative compliance fee schedule, as amended by H.B. 1106 in February 2017, is as follows:
- 4.0¢/kWh for non-solar Tier 1 shortfalls until 2016, and 3.75 c/kWh in 2017 and later;
- 1.5¢/kWh for Tier 2 shortfalls;
- 45¢/kWh for solar shortfalls in 2008, 40¢/kWh in 2009 through 2014, 35¢/kWh in 2015 and 2016, 19.5 ¢/kWh in 2017 and 2018, 15 c/kWh in 2019, 12.5 c/kwh in 2020, 10 c/kwh in 2021, 7.5 c/kwh in 2022, 6 c/kwh in 2023 and 5 c/kwh in 2024 and later.
- 0.8¢/kWh for Tier 1 shortfalls for industrial process load (IPL) in 2006-2008, declining incrementally to 0.2¢/kWh in 2017 and later; no fee for Tier 2 shortfalls for industrial process load.
Compliance fees paid into the SEIF, which is administered by the Maryland Energy Administration, will be used to fund grant and loan programs for Tier 1 renewable energy resources. Compliance fees for the solar obligation may only be used to support new solar resources in the state. The SEIF replaces the Maryland Renewable Energy Fund, which was repealed by H.B. 368 in 2008. The PSC is required to submit annual reports (see RPS Report) to the General Assembly detailing utility compliance with the standard. In 2018, S.B. 433 moved the report deadline from February 1 to December 1 of each year.
The electric supplier can request the Maryland PSC to delay its portion of annual increase of Tier I RPS requirements if actual or projected cost incurred by the electricity supplier for the purchase of Tier I SRECs is greater than 2.5% of the electricity supplier's total annual electricity sales revenue in Maryland.
Initially, the RPS included credit multipliers for wind, solar, and methane. The multiplier for solar was replaced by the 2% solar requirement in 2007. Multipliers for wind and methane remained for facilities placed in service on or after January 1, 2004, although both have subsequently expired.
Maryland's RPS was originally enacted in 2004, but has been revised on numerous occasions since that time. The 2004 enactment established a standard of 7.5% Tier 1 renewables by 2019 and 2.5% Tier 2 renewables by 2018 (sunsetting in 2019). Legislation enacted in April 2007 (S.B. 595) added a provision requiring electricity suppliers to derive 2% of electricity sales from solar energy in addition to the 7.5% renewables derived from other Tier 1 resources as outlined in the initial RPS law. The solar set-aside began at 0.005% of retail sales in 2008 and increases incrementally each year to reach 2% by 2020. The set-aside is projected to result in the development of more than 1,250 MW of solar capacity by 2020. In April 2008 H.B. 375 more than doubled the overall Tier 1 requirement and accelerated the compliance schedule. The Tier 2 and solar requirements were left unchanged at this time, but in May 2010 S.B. 277 accelerated the solar compliance schedule and increased solar alternative compliance payment levels for 2011 through 2016. Finally, Maryland enacted S.B. 717 allowing solar water heating systems commissioned on or after June 1, 2011 to qualify as eligible resources for the solar carve-out, effective January 1, 2012. In order to qualify for the standard solar water heating systems must: be commissioned on or after June 1, 2011; not be used soley to heat a pool or a hot tub; and use SRCC OG-100 certified equipment.
Also in May 2011, Maryland enacted S.B. 690 reclassifying waste-to-energy facilities connected to the Maryland distribution grid as Tier 1 resources. Formerly, all waste-to-energy facilities were considered Tier 2 facilities. The legislation also classifies facilities connected to the Maryland distribution grid that use refuse-derived fuel (formerly not specifically addressed) as Tier 1 resources, effective October 1, 2011.In May 2012 Maryland enacted a suite of bills affecting the RPS. The most significant bill, S.B. 791/H.B. 1187, accelerates the solar carve-out compliance requirements by varying degrees beginning in 2013; pushes up the date for the ultimate 2% target from 2022 to 2020; and allows solar water heating energy production measurements for some systems to be estimated under a certification system other than SRCC OG-300 (subject to Public Service Commission approval). The changes also have the effect of reducing the minimum Tier I resource requirements from 2013 - 2021.
Apart from solar-related changes, in 2012 Maryland also enacted S.B. 652/H.B. 1186 allowing geothermal heating and cooling systems commissioned on or after January 1, 2013 that meet certain standards to qualify as a Tier I resource. Finally, in May 2012 the legislature also enacted S.B. 1004/H.B. 1339 allowing thermal energy associated with biomass systems that primarily use animal waste (possibly supplemented by other biomass resources) to qualify as Tier I resources, effective January 1, 2013.