Maryland lawmakers mull more SRECs for small projects

Maryland lawmakers may allow small photovoltaic projects to generate more solar renewable energy certificates (SRECs) in a bid to keep developers in the state as a soft price ceiling for the credits begins to decline.

Lawmakers could as much as double the number of SRECs that new solar projects up to 2MW could generate over the next three and a half years, according to legislation filed last week by Maryland state Senate Democrats.

The proposal represents six years of work with insights taken from the solar, environmental and labor group stakeholders, according to state senator Sarah Elfreth (D), the bill's primary sponsor. It aims to refine the "nuts and bolts" of Maryland's renewable portfolio standard (RPS), as the state is not on pace to meet its 2030 target.

"We are not on track to meet it for a couple of reasons — permitting and the grid is just not prepared for this quite yet," Elfreth told Argus. "Another reason is that we just do not have the proper incentives to incentivize solar generally but also to incentivize solar where it makes more sense and can be built faster."

Maryland's RPS requires utilities to use solar generation for 14.5pc of their retail sales by 2030. Industry groups have warned that the state is not building new systems fast enough to meet that target, with the looming decline of the alternative compliance payment (ACP) for SRECs representing another potential stumbling block.

The fee, which utilities have to pay for each megawatt-hour by which they fall short of their annual obligations, serves as a theoretical price ceiling for SRECs, meaning as it declines, the incentive available to project developers is likely to decline as well. Since 2022, the ACP for the solar carve-out has been $60/MWh, but it will fall in 2025 to $55/MWh and ratchet down to $22.50/MWh by 2030 and beyond. Beyond project financing, SREC values also figure into the tacit competition for developers' attention with neighboring states, where incentive levels are often higher. The lowest incentive level in New Jersey's SREC-II program, for example, is $85/MWh.

An attempt by lawmakers last year to address the issue by indefinitely maintaining the solar ACP at $60/MWh died in committee.

The new multipliers would tackle the problem from a different angle. The state Public Service Commission would establish a program for in-state solar projects up to 2MW that come on line from 1 July 2024 to 1 January 2028. Qualifying projects would receive 1.5 SRECs for each megawatt-hour of electricity generated, rather than one SREC. Qualifying systems on brownfields, parking canopies and rooftops would receive two SRECs for each megawatt-hour. In both cases, the multipliers would last for the system's entire lifecycle, and the SRECs generated would have a five-year eligibility toward compliance.

In essence, the changes would increase the value of generation from new, small projects — which have a shorter development cycle compared to utility-scale systems — without raising the price ceiling on the entire SREC market. The program would be capped at 330MW for systems smaller than 20kW and at 300MW for systems between 20kW and 2MW.

The bill would also set tax incentives for non-residential solar and update rules in the state's net metering program to make it "more efficient."

"Is it the long-term answer?" Elfreth said. "No. But it is a short-term answer until we figure out the longer-term issue with the RPS."

Those updates will require a "longer-term conversation," she said.

The Senate's Education, Energy, and the Environment Committee will take up the bill on 29 February, which could serve as a preview of the bill's prospects.

By Patrick Zemanek