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Maryland governor signs bill raising utilities’ solar energy requirements

May 24, 2010


Maryland’s Gov. Martin O’Malley has signed into law a bill that raises the amount of solar electricity utilities must purchase within a certain time period to comply with legal requirements.
The legislation, which was previously approved by the state’s House of Delegates and Senate, sets the state’s renewable portfolio standard. As in other states, Maryland’s renewable portfolio standard requires that specific amounts of electricity from renewable energy sources, such as solar, wind, biomass and geothermal, be bought by utilities.
The Maryland standard requires that utilities generate at least 20 percent of their electricity from renewable sources by 2022, and that 2 percent of it be derived from solar energy. The new law increases the percentage requirements that must be purchased from solar energy sources each year between 2011 and 2016. The end goal of 2 percent remains the same, but some increments are accelerated.
If unable to generate the renewable energy themselves, the state’s utilities can meet these requirements by buying instruments called solar renewable-energy credits or certificates, or SRECs. These certificates give the utilities the “credit” for producing a certain amount of electricity from renewable sources.
But where do the SRECs come from?
Many of them come from individual solar and renewable energy system owners. When homeowners or businesses install solar, for instance, they can register to receive a SREC that will represent the “clean energy” attributes of the electricity generated by their solar installations. They still get to use the electricity, but the SREC has additional value in that it can be traded on a SREC market and sold to utilities seeking to meet the renewable portfolio standard.
A credit is granted for each megawatt-hour (1,000 kilowatt-hours) of solar electricity produced. A well-situated, unshaded 5-kilowatt residential system in Maryland might produce an average of five to six such credits annually.
In Maryland in 2009, the price fetched by the SRECs averaged about $320 per credit, according to a fiscal and policy note issued by the Department of Legislative Services on Senate Bill 277. That price offers significant value to the individual solar owner.
The bill signed Thursday raises the “alternative compliance payment” that utilities must provide in lieu of using SRECs, which may in the short term raise the value of SRECs but in the long term cap the price. More information about that mechanism is available from an earlier story.
For homeowners and businesses that find the SREC market difficult to navigate, qualified installers can explain how it works for a specific installation. And at least one installer offers up-front payments for SRECs, which may appeal to some by eliminating the risk of fluctuating SREC prices in exchange for a potentially less lucrative but immediate payment.
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