Note: This summary reflects changes to the annual solar energy requirements and the solar alternative compliance schedule made by S.B. 277 enacted May 20, 2010. However, the new law will not officially take effect until 2011 and none of the changes affect requirements prior to 2011.
Maryland's Renewable Energy Portfolio Standard, enacted in May 2004 and revised in 2007, 2008, and 2010 requires electricity suppliers (all utilities and competitive retail suppliers) to use renewable energy sources to generate a minimum portion of their retail sales. Beginning in 2006, electricity suppliers are 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 sunsets, dropping to 0% in 2019 and beyond.
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 2022. The set-aside is projected to result in the development of more than 1,250 MW of solar capacity by 2022. 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. Compliance requirements by year are as follows:
| Year | Solar | Other Tier I | Tier II |
|---|
| 2006 | 0.00% | 1.00% | 2.50% |
| 2007 | 0.00% | 1.00% | 2.50% |
| 2008 | 0.005% | 2.00% | 2.50% |
| 2009 | 0.01% | 2.00% | 2.50% |
| 2010 | 0.025% | 3.00% | 2.50% |
| 2011 | 0.05% | 4.95% | 2.50% |
| 2012 | 0.10% | 6.40% | 2.50% |
| 2013 | 0.20% | 8.00% | 2.50% |
| 2014 | 0.30% | 10.00% | 2.50% |
| 2015 | 0.40% | 10.10% | 2.50% |
| 2016 | 0.50% | 12.20% | 2.50% |
| 2017 | 0.55% | 12.55% | 2.50% |
| 2018 | 0.90% | 14.90% | 2.50% |
| 2019 | 1.20% | 16.20% | 0.00% |
| 2020 | 1.50% | 16.50% | 0.00% |
| 2021 | 1.85% | 16.85% | 0.00% |
| 2022+ | 2.00% | 18.00% | 0.00% |
Electricity suppliers demonstrate compliance with the standard by accumulating renewable energy credits (RECs) equivalent to the required percentages outlined above. A REC has a three-year life during which it may be transferred, sold, or otherwise redeemed. Currently, RECs generated within the PJM region, in states adjacent to the PJM, or delivered into the PJM are eligible to be counted towards RPS compliance. This provision was amended in 2008 by H.B. 375 to remove PJM-adjacent states from the geographic eligibility list, but the changes will not take effect until 2011.
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:
- A supplier received 120% credit toward meeting its Tier 1 obligations through RECs associated with wind energy through December 31, 2005. Beginning in 2006 and through 2008, a 110% credit was in effect.
- A supplier received 110% credit toward meeting its Tier 1 obligations through RECs associated with energy derived from methane through 2008.
Energy from Tier 1 resources is eligible for RPS compliance regardless of when the system or facility was placed in service and may be applied to either Tier 1 or Tier 2 obligations. However, electricity suppliers may only begin to receive or accumulate RECs on or after January 1, 2004. Special conditions apply for Tier 1 hydroelectric resources and Tier 2 resources regarding dates of eligibility.
Solar resources must be connected with the distribution grid serving Maryland, except that on or before December 31, 2011, solar resources not connected to the Maryland grid are eligible only if offers for solar RECs from Maryland grid sources are not made to an electricity supplier that would satisfy the RPS.
Provisions specific to the solar set-aside include the following:
- If the owner of a solar generating system chooses to sell RECs, the owner must first offer the RECs for sale to an electricity supplier for RPS compliance. Although not specified in the statute, the administrative regulations require the offer to be posted for a minimum of 10 days on the PSC's website, after which time the system owner may sell their RECs to any willing buyer;
- Electricity suppliers purchasing RECs directly from a solar energy system owner must enter into a contract for at least 15 years;
- The parties are free to negotiate a price for solar RECs that varies over time; and
- Electricity suppliers purchasing RECs from solar systems with a capacity of 10 kW or less must purchase the RECs with a single upfront payment representing the full estimated production of the system over the life of the contract. The administrative regulations explain how this payment is calculated.
Maryland’s Public Service Commission was charged with developing a method for estimating annual production, determining the REC payment amount, and designating an individual to develop the solar program requirements and outreach activities. The program website contains information on the PSC's activities in this area.
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 S.B. 277 in May 2010, is as follows:
- 2.0¢/kWh for non-solar Tier 1 shortfalls (increasing to 4.0¢/kWh in 2011 per H.B. 375 of 2008);
- 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, 20¢/kWh in 2017 and 2018 and continuing to decline by 5¢ bi-annually until it reaches 5¢/kWh in 2023 and beyond; and
- 0.8¢/kWh for Tier 1 shortfalls for industrial process load 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
2010 RPS Report) to the state legislature detailing utility compliance with the standard.
Electricity suppliers may recover costs incurred to comply with the standard in the form of a generation surcharge on all customers. However, the RPS law provides compliance cost caps and provisions for delaying compliance with the solar set-aside and non-solar Tier 1 requirements. If the actual or projected dollar-for-dollar cost for purchasing solar RECs in any one year is greater than or equal to 1% of the electric supplier’s total annual electricity sales revenues in Maryland, the electricity supplier may request that the PSC to delay by 1 year each of the scheduled percentages for solar and allow the solar percentage required for that year to continue to apply to the electricity supplier for the following year. The delay will continue each year until the actual or anticipated cost is less than 1% of the supplier’s annual sales revenue in Maryland, at which time the supplier will be subject to the next scheduled percentage increase. The procedure and rules are identical for non-solar Tier 1 requirements except the trigger level is the greater of 10% of an electricity supplier's total annual retail sales or the applicable Tier 1 percentage requirement for that year. The Tier 1 off-ramp was added in 2008 when the compliance requirements were increased.
* Tier 1 resources include solar, wind, qualifying biomass (excluding sawdust), methane from the anaerobic decomposition of organic materials in a landfill or a waste water treatment plant, geothermal, ocean (including energy from waves, tides, currents and thermal differences), fuel cells powered by methane or biomass, and small hydroelectric plants (systems less than 30 megawatts in capacity and in operation as of January 1, 2004). As a result of S.B. 348 of 2008, poultry-litter incineration facilities connected to the Maryland distribution grid now qualify as a Tier 1 resource.
** Tier 2 sources include hydroelectric power other than pump-storage generation, and waste-to-energy facilities.
