In 2004, Maryland lawmakers created a Renewable Portfolio Standard (RPS) with the goal of incentivizing new clean energy development. But a recent analysis of the program by Chesapeake Physicians for Social Responsibility and Food & Water Watch shows that instead of incentivizing new renewable energy development in the state, Maryland ratepayers sent over $254 million to energy sources in other states between 2008 and 2016 -- and most of that money actually went to dirty, combustion-based energy sources.
Under the current Maryland Renewable Portfolio Standard (RPS), utilities must derive 25 percent of their electricity from renewable sources by 2020, but the system only requires the utilities to purchase renewable energy credits to meet that goal. A renewable energy credit (REC) is a document that certifies one megawatt-hour of electricity was generated by a renewable energy resource as defined by Maryland law.
RECs were intended to incentivize new production of renewable energy in a way that benefits Maryland. However, apart from solar RECs, two serious flaws in the current system severely undermine that goal and cost Maryland ratepayers dearly.
Maryland Ratepayer Dollars Are Going Out of State
The analysis shows that Maryland ratepayers paid $254 million in non-solar RECs to out of state energy sources between 2008 and 2016, while only $42 million stayed in Maryland. The REC system is resulting in Maryland ratepayer dollars leaving the state to benefit the economies of other states as far away as North Dakota and Tennessee. The chart below includes a listing of the total dollars sent to others states.
Unbundled RECs Fail to Achieve Policy Goals
A second major flaw is the current RPS system allows the use of unbundled RECs. If the energy and RECs are “unbundled,” the developer can sell the electricity to one utility and the REC certificate to another. For example, a North Dakota wind developer would sell its electricity to a local utility in North Dakota, but sell the REC certificate to a utility in Maryland. The Maryland utility can then use the REC to count toward meeting Maryland’s Renewable Portfolio Standard requirements, even though the REC purchase failed to bring new renewable energy onto the grid. Maryland ratepayers pay for the cost of the REC, even though the energy has already been sold elsewhere. The unbundled non-solar REC is not necessarily incentivizing the development of new renewable energy; rather it is subsidizing existing energy sources, making it a waste of Maryland ratepayer money. This accounting gimmick makes it appear that Maryland is using much more renewable energy than it actually is.
Maryland ratepayers pay for the cost of the REC, even though the energy has already been sold elsewhere.
The exception to this practice of purchasing unbundled renewable energy credits is the in-state solar and offshore wind in the RPS. However, by 2020, under the current RPS, such renewables will be 5 percent or less of the Renewable Portfolio Standard. Under a new bill introduced to raise the RPS to 50 percent, the use of unbundled RECs in Maryland’s RPS will continue to grow at a rapid pace; the bill caps the state’s required renewables from in-state solar and offshore wind at 25 percent by 2030.
A recent news story from Oberlin, Ohio illustrates these two flaws in the REC system. A local utility in Oberlin received RECs when purchasing energy, primarily from landfill gas-to-energy sites. The utility used the energy and then sold the RECs as profit to utilities in Maryland and other states. The Oberlin utility then refunded its ratepayers the $2.2 million profit it made from selling these RECs to Maryland and other states. In other words, Maryland ratepayers’ money ended up in the pockets of ratepayers in Oberlin, Ohio through a system that did not actually encourage the development of more renewable energy.
This analysis makes it clear that Maryland policymakers must reform the REC system before expanding the RPS in a way that would also increase the unbundled RECs and send more Maryland dollars out of state.