Maryland
Incentives/Policies for Renewables & Efficiency
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Last DSIRE Review: 05/22/2009
| Incentive Type: |
Renewables Portfolio Standard |
| State: |
Maryland |
| Eligible Renewable/Other Technologies: |
Solar Thermal Electric,
Photovoltaics,
Landfill Gas,
Wind,
Biomass,
Hydroelectric,
Geothermal Electric,
Municipal Solid Waste,
Anaerobic Digestion,
Tidal Energy,
Wave Energy,
Ocean Thermal,
Fuel Cells using Renewable Fuels
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| Applicable Sectors: |
Municipal Utility,
Investor-Owned Utility,
Rural Electric Cooperative,
Retail Supplier,
Retail Electricity Suppliers
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| Standard: | 20% by 2022 |
| Technology Minimum: | Solar-Electric: 2% by 2022 |
| Credit Trading: | Yes |
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Web Site: |
http://webapp.psc.state.md.us/
intranet/ElectricInfo/home_new.cfm
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Authority 1:
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Md. Public Utility Companies Code § 7-701 et seq.
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| Date Enacted: | 5/26/2004 (subsequently amended) |
| Date Effective: | 01/01/2004 |
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Authority 2:
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COMAR 20.61.01 et seq.
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| Date Effective: | 08/10/2009 (most recent revision) |
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Summary:
Maryland's Renewable Energy Portfolio Standard, enacted in May 2004 and revised in 2007 and 2008, 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 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 (SB 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 begins 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 roughly 1,500 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. Percentage Renewables Required by Year
Year Solar Other Tier 1 Tier 2
2006 0 1.0 2.5
2007 0 1.0 2.5
2008 0.005 2.0 2.5
2009 0.01 2.0 2.5
2010 0.025 3.0 2.5
2011 0.04 4.96 2.5
2012 0.06 6.44 2.5
2013 0.1 8.1 2.5
2014 0.15 10.15 2.5
2015 0.25 10.25 2.5
2016 0.35 12.35 2.5
2017 0.55 12.55 2.5
2018 0.9 14.9 2.5
2019 1.2 16.2 0
2020 1.5 16.5 0
2021 1.85 16.85 0
2022+ 2.0 18.0 0
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. Initially, 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. This provision was changed in 2008 by H.B. 375 (effective 2011) to remove PJM-adjacent states from the geographic eligibility list.
Initially, the RPS included credit multipliers for wind, solar, and methane. Although the multiplier for solar was replaced by the 2% solar requirement in 2007, the following multipliers for wind and methane are still in effect for facilities placed in service on or after January 1, 2004:- A supplier receives 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 is in effect.
- A supplier receives 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 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 projection of the systems for 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 Renewable Energy Fund at a rate of: - 4.0¢/kWh for non-solar Tier 1 shortfalls (raised from 2.0¢/kWh by H.B. 375, effective 2011);
- 1.5¢/kWh for Tier 2 shortfalls;
- 45¢/kWh for solar shortfalls in 2008, 40¢/kWh in 2009, 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 Maryland Strategic Energy Investment Fund, 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 Strategic Energy Investment Fund replaces the Maryland Renewable Energy Fund, which was repealed by H.B. 368 in 2008. The PSC is required to submit annual reports (2009 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.
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Contact:
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RPS Program
Maryland Public Service Commission
6 St. Paul Street
17th Floor
Baltimore, MD 21202
Phone: (410) 767-8059
Fax: (410) 333-6495
E-Mail: RPSProgram@psc.state.md.us
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