Former Governor Ed Rendell signed Pennsylvania’s Alternative Energy Portfolio Standard (AEPS) into law in 2004. The AEPS requires all state utilities and electricity suppliers that sell to retail customers to derive 18 percent of their electricity from alternative sources by 2020. Pennsylvania’s AEPS is divided between Tier 1 and Tier 2 sources. Tier 1 sources include wind, solar, coalmine methane, small hydropower, geothermal, and biomass. Tier 2 sources include waste coal, demand side management, large hydropower, municipal solid waste, and coal integrated gasification.
Tier 1 sources must make up 8 percent of the total mandate, along with 10 percent for Tier 2 sources. The AEPS also creates a set aside mandate for solar energy requiring 0.5 percent of generation come from solar power.
The Pennsylvania legislature amended the AEPS twice, in 2007 and 2008, adding additional sources such as low-impact hydroelectric to the list of Tier 1 sources.
The law sets a 15-year graduated compliance schedule, and a market for buying and selling Alternative Energy Credits (AECs) to achieve compliance. Utilities and suppliers that do not meet compliance are charged a $45 per megawatt hour (MWh) alternative compliance payment (ACP). A separate ACP for solar is calculated as 200 percent times the sum of the market value of solar AECs for the reporting period, and the value of up-front rebates received by sellers of solar AECs.
Pennsylvania’s Public Utility Commission (PUC) has granted utilities the ability to fully recover all reasonably incurred compliance costs. As of January 1, 2011 all utilities operating under rate caps must comply with the standard. The PUC’s latest report on the AEPS estimates the state wide compliance cost for utilities and energy suppliers to be $30 million.
In 2010 a bill to increase the overall percentage to 28 percent by 2024, and massively increase the solar mandate by 1,700 percent, died in the General Assembly. The bill was estimated to add $8 billion-$9 billion to state utility bills, which equated to $1,600-$1,800 per Pennsylvania household.
Sources: Database for State Incentives for Renewables and Efficiency, Commonwealth Foundation, Pennsylvania Public Utility Commission 2008-2009 Annual Reports: Alternative Energy Portfolio Standards Act of 2004