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Incentives/Policies for Renewables & Efficiency

Printable Version
Alternative Energy Portfolio Standard   

Last DSIRE Review: 09/04/2014
Program Overview:
State: Pennsylvania
Incentive Type: Renewables Portfolio Standard
Eligible Efficiency Technologies: Clothes Washers, Dishwasher, Refrigerators, Dehumidifiers, Ceiling Fan, Lighting, Lighting Controls/Sensors, Chillers , Heat pumps, Central Air conditioners, Programmable Thermostats, Duct/Air sealing, Building Insulation, Windows, Motor VFDs, Custom/Others pending approval
Eligible Renewable/Other Technologies: Solar Water Heat, Solar Space Heat, Solar Thermal Electric, Solar Thermal Process Heat, Photovoltaics, Landfill Gas, Wind, Biomass, Hydroelectric, Geothermal Electric, Fuel Cells, Geothermal Heat Pumps, Municipal Solid Waste, CHP/Cogeneration, Waste Coal, Coal Mine Methane, Coal Gasification, Anaerobic Digestion, Fuel Cells using Renewable Fuels, Other Distributed Generation Technologies
Applicable Sectors: Investor-Owned Utility, Retail Supplier
Standard:~18% alternative energy resources by compliance year 2020-2021
Technology Minimum:Tier I: ~8% by compliance year 2020-2021 (includes PV minimum)
Tier II: 10% by compliance year 2020-2021
PV: 0.5% by compliance year 2020-2021
Credit Trading:Yes (PJM-GATS)
Credit Transfers Accepted To:PJM-GATS into MIRECS
(Refers to tracking system compatibility only, not RPS eligibility. Please see statutes and regulations for information on facility eligibility)
Web Site:
Authority 1:
Date Enacted:
Date Effective:
73 P.S. § 1648.1 et seq.
11/30/2004 (subsequently amended)
Authority 2:
Date Enacted:
Date Effective:
66 Pa.C.S. § 2814
Authority 3:
Date Enacted:
Date Effective:
PUC Rulemaking Order Docket No. L-00060180
Authority 4:
Date Enacted:
Date Effective:
PUC Order Docket No. M-2009-2093383
Authority 5:
Date Enacted:
PUC Order Docket No. M-00051865

Pennsylvania's Alternative Energy Portfolio Standard (AEPS), created by S.B. 1030 on November 30, 2004, requires each electric distribution company (EDC) and electric generation supplier (EGS) to retail electric customers in Pennsylvania to supply 18% of its electricity using alternative-energy resources by 2020.*

Eligible technologies

There are two categories of energy sources under the law, termed "Tiers". The standard calls for utilities to generate 8% of their electricity by using "Tier I" energy sources and 10% using "Tier II" sources by May 31, 2021. Generally, eligible resources must originate within Pennsylvania or within the PJM regional transmission organization (RTO) in order to be counted for compliance. However, out-of-state resources located in the MISO (which also serves a portion of Pennsylvania) may be used in areas served by the MISO. This effectively limits the use of out-of-state MISO based resources to the Pennsylvania Power Co. or EGSs operating within its service territory.

Tier I sources include new and existing facilities which produce electricity using the following sources/technologies: photovoltaic energy, solar-thermal energy, wind, low-impact hydro, geothermal, biomass, biologically-derived methane gas, coal-mine methane and fuel cells. 

Tier II sources include (new and existing) waste coal, distributed generation (DG) systems, demand-side management, large-scale hydro, municipal solid waste, wood pulping and manufacturing byproducts, and integrated gasification combined cycle (IGCC) coal technology. (See 73 P.S. § 1648.2 for detailed definitions of eligible alternative-energy sources.) The Technical Reference Manual, first adopted in May 2009 but revised annually, contains a detailed description of how demand-side management will be addressed under the standard. The eligible energy efficiency technologies listed at the top of this page are a selection of specific measured identified in the Technical Reference Manual. Solar thermal technologies that do not produce electricity (e.g., domestic solar water heaters) are considered Tier II demand-side management resources.

Pennsylvania's standard provides for a solar set-aside, mandating a certain percentage of electricity generated by photovoltaics (PV). Pennsylvania's AEPS also includes demand-side management, waste coal, coal-mine methane and coal gasification as eligible technologies. 

In 2007 H.B. 1203 provided a more detailed solar schedule, clarified the force majeure clause, confirmed REC property rights for generators, added solar thermal to Tier I, clarified that AEPS credits (Alternative Energy Credits or AECs) cannot have been retired for other purposes, and expanded the definition of customer-generator. Revised rules addressing these changes and other necessary clarifications became effective in November 2008. 


The PUC has adopted the following 15-year compliance schedule to implement Pennsylvania's AEPS. The compliance year (CY) for the standard runs from June 1 to May 31 and is followed by a 3-month true-up period. The table below refers to each compliance year according to the year in which it ends (e.g., CY 2008 ran from June 1, 2007 to May 31, 2008). Due to supplier exemptions, CY 2007 did not begin until February 28, 2007. All other compliance years include a full year of time.

Compliance Year (CY)

Tier I (including Solar PV)**

Tier II

Solar PV

CY 2007




CY 2008




CY 2009




CY 2010




CY 2011




CY 2012




CY 2013




CY 2014




CY 2015




CY 2016




CY 2017




CY 2018




CY 2019




CY 2020




CY 2021




Compliance is based on alternative energy credits (AECs). An AEC is equal to a megawatt-hour of qualified generation, and credits are the property of the generator unless expressly transferred. Banking of excess credits is allowed for up to two years, thus an AEC's useful life is three years, the year it was produced and the two subsequent years for which it can be banked. AECs are tracked by the PJM GATS system. Notably, the 2008 rule amendments exempt PV systems of 15 kW or less from a requirement that AEC production be verified by metered data, instead allowing the AEC program administrator to verify system output through alternate means (i.e., an engineering estimate of annual production). All other systems must have AEC production verified by metered data, and the rule has been implemented to only allow such "alternate means" to be used in cases where the system is not equipped with a revenue-grade system production meter.

The law establishes an alternative compliance payment (ACP) of $45 per megawatt-hour for shortfalls in Tier I and Tier II resources. A separate ACP for solar PV is calculated as 200% times the sum of (1) the market value of solar AECs for the reporting period and (2) the levelized value of up-front rebates received by sellers of solar AECs. For the compliance year 2012/2013 ACP for solar PV amounted to $218.47. Monies received through the ACP will be transferred into Pennsylvania's Sustainable Energy Funds and used solely to support alternative-energy projects. 

Cost mitigation measures
The PUC has determined that electric distribution companies may fully recover "the reasonable and prudently incurred costs of complying" with the AEPS. These include the costs for purchases of alternative energy or alternative energy credits, payments to credit program administrators, and costs levied by RTOs to ensure that alternative resources are reliable. Recoverable costs generally do not include ACPs. The costs will be recovered through an automatic adjustment and are considered to be a cost of generation supply.

The AEPS contains a force majeure clause under which the PUC can make a determination as to whether there are sufficient alternative energy resources in the market for utilities to meet their targets. If the PUC determines that utilities are unable to comply with the standard despite good faith efforts, it may alter the obligation for a given year. The Commission may then require higher obligations in subsequent years to compensate for shortfalls.

Reports summarizing progress and compliance with the standard for 2007 -  2010 are available on the program website. 

*Pennsylvania's rural electric cooperatives must offer retail customers a voluntary program of energy efficiency and demand-side management programs to satisfy compliance with the AEPS.

**With the 2008 legislation designating additional Tier I resources and providing for equivalent increases to the Tier I compliance %, the values listed here no longer precisely reflect actual Tier I obligations. As the increases associated with this change will be based on actual generation from the newly designated Tier I resources, it cannot be known precisely in advance how much the values will change for future years. As noted above, the quarterly adjustments averaged 0.004% during CY 2012.



  Scott Gebhardt
Pennsylvania Public Utility Commission
P.O. Box 3265
Harrisburg, PA 17105-3265
Phone: (717) 425-7584
Fax: (717) 787-2545
Web Site:
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Disclaimer: The information presented on the DSIRE web site provides an unofficial overview of financial incentives and other policies. It does not constitute professional tax advice or other professional financial guidance, and it should not be used as the only source of information when making purchasing decisions, investment decisions or tax decisions, or when executing other binding agreements. Please refer to the individual contact provided below each summary to verify that a specific financial incentive or other policy applies to your project.

While the DSIRE staff strives to provide the best information possible, the DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. make no representations or warranties, either express or implied, concerning the accuracy, completeness, reliability or suitability of the information. The DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. disclaim all liability of any kind arising out of your use or misuse of the information contained or referenced on DSIRE Web pages.

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