Washington, DC, solar bill poised for updates

Spanish Market: Electricity, Emissions
30/09/22

A proposal to support the District of Columbia's solar renewable energy certificate (SREC) market will begin its journey through the legislative gauntlet next week, with changes likely as local leaders try to address concerns about the cost and feasibility of setting more aggressive targets.

The District Council's Committee on Transportation and the Environment on 3 October will hold a hearing on the legislation that would raise the capital's solar carve-out to 15pc by 2041, up from 10pc at present. Supporters see it as starting point rather than a polished update to the capital's solar policy.

Council member Mary Cheh (D) in July proposed the bill, known as the Local Solar Expansion Amendment Act of 2022, in a bid to support new project development and help the District reach net-zero emissions by 2045.

The new requirements would begin next year, with utilities expected to use photovoltaic resources to cover 3pc of their Tier I obligations under the city's renewable portfolio standard (RPS), up from 2.85pc as scheduled. The solar mandate would increase by 0.65-0.7pc/yr after 2023 until reaching the overall target of 15pc in 2041.

In addition, the bill would set the solar alternative compliance payment (ACP) at $500/MWh indefinitely. The District Public Service Commission (PSC) warned Cheh's staff that scheduled declines to the ACP would dampen solar development in coming years. But the $500/MWh level is a placeholder, with future revisions likely to re-establish a phase down schedule for the fee.

The ACP serves as a de facto market ceiling on the SREC market, a fee levied against electricity suppliers for each megawatt-hour by which they fall short of their annual obligations under the RPS. If the cost of SRECs exceeds the ACP level, it becomes more cost-effective for utilities to pay the penalty fee than procure credits, undercutting a major incentive for developers to build new capacity.

The ACP is $500/MWh through 2023, after which it is slated to fall to $400/MWh for 2024-28 and $300/MWh for 2029-2041. After 2041, the ACP plateaus at $100/MWh.

Cheh is also concerned about falling prices for the District's SRECs, saying the ACP changes would help foster a stable market.

Vintage 2022 District SRECs slipped as low as $300/MWh in late July, after Argus first assessed them at $417.50/MWh in early April. The proposal so far has helped spur a rally, with 2022 SRECs at $375/MWh yesterday.

At the same time, questions remain about the proposal.

Consumer advocates have flagged the potential cost to ratepayers, and lawmakers are still working to balance the inherent benefits of additional solar, such as decreased strain on the grid and improved resiliency, against the hit to utility customers.

The Office of the People's Counsel, the District's consumer advocate agency, is concerned the bill could "impose significant additional costs without sufficient related benefits in advancing clean energy."

The agency said it "cautions against unnecessarily increasing energy costs at a time of already-high energy prices and when consumers are still struggling from the effects of the Covid-19 pandemic, if other, more cost-effective and more beneficial vehicles are available."

And policymakers have yet to broach the updates with the District's sole electricity distributor, Pepco. The utility, a subsidiary of Chicago-based Exelon, said it is "aware" of the legislation and looks forward to those conversations.

"We support the District's leading climate goals and are working to advance clean energy solutions to combat climate change as fast as possible across the areas we serve," Pepco said.

Follow the sun

The District historically has had trouble keeping pace with its solar mandate, with last year being the first in which city's installed capacity rose above the minimum needed. That achievement may have been helped by lower electricity demand stemming from the Covid-19 pandemic, as the District has one of the highest percentages of remote workers in the US.

Lawmakers are aware that an increased load could again cause the District to lag behind the minimum capacity market over the next several years, particularly with the current pace of solar development.

The District needs about 665MW of solar to meet the 10pc by 2041 requirement, according to a report from the Office of the People's Counsel.

The PSC said it has not prepared a comprehensive assessment of how the bill would affect that forecast. The capital has qualified about 216MW for its program as of 1 September, with 176MW residing in the District.

Ongoing supply chain woes nationally could also slow growth, although solar industry officials have yet to express concerns that such issues will disrupt the District's ability to meet more aggressive targets. But policymakers are prepared to modify the proposal to accommodate those factors, should they arise.

Support for the bill is unclear at this early stage. Cheh is stepping down at the end of the year, but the council could revive the bill in 2023 if it fails to pass before the session ends.

By Patrick Zemanek

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05/05/25

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02/05/25

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