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Where did all the changes in MD energy come from? And why?
In 2007 a report was prepared for Governor O’Malley called “Maryland’s Energy Future” – major findings were bleak.
Maryland was not well prepared to face future energy challenges. The report stated:
- Electricity consumption increased 15.7% between 1999 and 2005 while generation increased 1.9%
- US Department of Energy noted that Maryland’s transmission grid operated at a “critical” level of congestion and estimated that capacity limits were costing Maryland as much as $500 million a year in higher electricity costs.
- Jobs, local expenditures and tax revenue were being exported as far away as Indiana.
- And these are just a few items in the report…
O’Malley was advised that immediate steps should be taken to prepare Maryland for it’s energy future. We’ve listed highlights here:
- Develop a comprehensive strategic energy plan
- Engage in a proactive government to identify and solve energy problems
- Investigate economic development opportunities in the areas of new energy technologies
- Increase consumer awareness
And from all of that…came this (a piece of the overall plan):
Maryland’s Renewable Energy Portfolio requires electricity distributors to procure 20% of their energy from renewable sources by 2022, which they have met through a combination of in-state generation, purchasing renewable energy credits from the PJM region (Pennsylvania, New Jersey, Maryland), and paying the alternative compliance payment.
Energy distributors are penalized by the state if they do not meet the set goals.
There are specific goals set forth in Governor O’Malley’s plan. They are:
- Grow in-state solar capacity to meet the 2% solar carve out.
- Utilize Maryland’s existing biomass feedstock resources (such as forestry waste, agricultural crops, municipal waste, etc.).
- Support the development of onshore wind projects.
- Aggressively support and pursue the development of large offshore wind farms.
If the electricity distributors do not meet the solar carve out goal, they are also penalized. The penalty is called the Alternative Compliance Penalty (ACP). This is what has created the Solar Renewable Energy Credit (SREC) market. Typically the penalty is slightly higher than the SREC value. This value can fluctuate like the stock market and is dependent on supply and demand.
About the Alternative Compliance Penalty (ACP)
In 2011, the utility companies pay a fine of $400 for each SREC that they are missing from their required portfolio at the end of the year. The ACP will decline over time because of the amount defined in the Maryland’s Renewable Portfolio decreases over time.
In our next post, we’ll talk about how solar can relieve an aging energy grid.
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