In 2008 Governor Martin O’Malley increased Maryland’s renewable portfolio standard (RPS), requiring state utilities to purchase 20 percent of their retail utility sales from renewable sources by 2022.
Qualifying sources are classified into two tiers. Tier I sources include: solar; wind; qualifying biomass; methane from the anaerobic decomposition of organic materials in a landfill or a waste water treatment plant; geothermal; ocean energy from waves; tides; currents; fuel cells powered by methane or biomass; and small hydroelectric plants in operation as of 2004, with less than 30 megawatts in capacity; and poultry-litter incineration facilities.
Tier II sources include hydroelectric power other than pump-storage generation, and waste-to-energy facilities.
Maryland’s RPS sets a graduated compliance schedule for both Tier I and Tier II sources. Beginning in 2006 electricity suppliers are required to provide 1 percent of retail electricity sales from Tier 1 sources and 2.5 percent from Tier II. The requirement increases to 20 percent from Tier I in 2022, and the Tier II requirement sunsets after 2019.
The mandate also includes a solar carve out mandate. By 2022 utilities must derive 2 percent of their sales from solar. The solar requirement is also set on a graduated schedule, starting at 0.05 percent and rising to 2 percent by 2022.
Maryland allows utilities to purchase and trade renewable energy credits (RECs) to meet the RPS requirement. RECs must be sold, traded, or redeemed within three years. After three years the REC is considered expired. RECs generated outside Maryland’s grid region are not applicable to the mandate. Solar resources must be connected to Maryland’s distribution grid. Beginning in 2012, however, solar resources not connected to the Maryland grid are eligible if offers for solar RECs from Maryland grid sources are not made to an electricity supplier that would satisfy the RPS.
Maryland has specific rules regarding the purchase of solar RECs to satisfy the requirement. Utilities purchasing solar RECs must enter into a one-year minimum contract with solar suppliers, and if the supplier generates less than 10 kilowatts the utility must pay for the REC in one upfront payment reflecting the entire generation of the term of the contract.
Utilities that fail to meet the requirement must pay penalties of $0.04 per kilowatt-hour (kWh) for non-solar Tier I shortfalls, and $0.015 per kWh for Tier II shortfalls. The penalty for solar shortfalls begins at $0.45 per kWh in 2008 and reduces gradually to $0.05 by 2023.
Source: Database for State Incentives for Renewables and Efficiency