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Renewable Energy Portfolio Standard

Eligibility 
Investor-Owned Utility
Municipal Utility
Retail Supplier
Rural Electric Cooperative
Savings Category 
Fuel Cells using Renewable Fuels
Photovoltaics
Solar Water Heat
Program Info
State 
Maryland
Program Type 
Renewables Portfolio Standard
Provider 
Maryland Public Service Commission

Note: 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 cost 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.

The PSC is not permitted to approve a project unless the project demonstrates positive net environmental, economic, and health benefits; the net rate impact for residential customers does not exceed $1.50 per month (based on consumption of 12,000 kWh annually); the rate impact for non-residential customers does not exceed 1.5% total annual electric bills over the duration of the project; and proposed offshore wind renewable energy credit (OREC) price schedule does not exceed $190 per megawatt-hour (MWh). The portion of the standard designated for offshore wind does not apply to retail sales in excess of 75 million kilowatt-hours (kWh) to industrial process customers in a given year, or monthly retail sales of more than 3,000 kWh to certain agricultural customers. For further information please see the full text of H.B. 226.

Maryland's Renewable Energy Portfolio Standard, enacted in May 2004 and revised in numerous times since, 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 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. A solar carve-out was established in 2007, and currently requires that a total of 2% of retail electricity sales come from solar resources by 2020. In 2013 the state established an offshore wind carve-out of up to 2.5% beginning in 2017, with the actual annual requirements to be established by the Maryland Public Service Commission (PSC) subject to the 2.5% limitation. 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.

Compliance requirements for each 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 0.25% 7.95% 2.50%
2014 0.35% 9.95% 2.50%
2015 0.50% 10.00% 2.50%
2016 0.70% 12.00% 2.50%
2017 0.95% 12.15% 2.50%
2018 1.40% 14.40% 2.50%
2019 1.75% 15.65% 0.00%
2020 2.00% 16.00% 0.00%
2021 2.00% 16.70% 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. In other words, a REC may be used for compliance during the year of generation and he 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.

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, except solar water heating systems, which must be commissioned on or after June 1, 2011 in order to qualify. Electricity suppliers were only permitted to begin to receive or accumulate RECs starting January 1, 2004. Energy associated with Tier 1 resources may be applied to either Tier 1 or Tier 2 obligations. Special conditions also apply for Tier 1 hydroelectric 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;
* Direct REC contracts between solar solar energy system owners and suppliers must have a term of at least 15 years. However, as a result of H.B. 258 of 2012, beginning October 1, 2012 the minimum contract length with not apply for systems of 10 kW or less;
* 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:
* 4.0¢/kWh for non-solar Tier 1 shortfalls (increased from to 2.0¢/kWh by H.B. 375 of 2008, effective beginning in 2011);
* 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 [http://webapp.psc.state.md.us/Intranet/Reports/2012%20Renewable%20Energy... 2011 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.

History

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.

* 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. Further, as a result of S.B. 690 enacted in May 2011 and effective October 1, 2011, waste-to-energy facilities and facilities that use refuse-derived fuel which are connected to the Maryland distribution grid also now qualify as Tier 1 resources. Prior to this, waste-to-energy facilities were only eligible as Tier 2 resources and facilities that use refuse-derived fuel were not specifically addressed. As a result of 2012 legislation, certain geothermal heating and cooling systems and biomass systems that generate thermal energy also qualify as Tier 1 resources.

** Tier 2 sources include hydroelectric power other than pump-storage generation, and waste-to-energy facilities through October 1, 2011 (see note above for further details).