Checking In on the Maryland Renewable Standard

Some of us fought tooth and nail for several years to get Maryland to adopt a Renewable Portfolio Standard (RPS) in 2004. It wasn't easy. We had a reluctant legislature, a Governor opposed to us, and a large contingent of the business community expressing concerns about costs. There was a lot said in 2004 about the bill and its impact. So now that we are in 2009, it's worth checking the latest compliance reports to see what is actually happening. The results are very surprising. So far, it turns out, none of us were right.



First, a very brief background. The RPS requires any entity that sells electricity in Maryland (a "Load Serving Entity" or "LSE") to get a percentage of its power from clean, renewable sources. The percentage starts low (it is currently below 5%) and rises over time. The way electricity companies comply with the law is to submit Renewable Energy Credits (RECs) from qualified sources, to the Maryland Public Service Commission. If an LSE fails to meet the requirement, it must pay an "Alternative Compliance Payment" or "ACP" to the PSC. The ACP is meant to put a ceiling on how much an RPS would cost ratepayers, while also acting as a market setter for the cost of RECs. One of the biggest battles in the RPS war, besides the level of the ACP, was over the definition of clean, renewable energy. Solar, wind and sustainable biomass were all obvious choices to include, but industry and some politicians wanted us to include their favored sources, such as Municipal Solid Waste Incineration (MSW), or what I like to call, "burning garbage" and "black liquor," which is not moonshine, but actually a by product of making paper that can be burned to make electricity.



In the end, we compromised by making two tiers for the RPS, a Tier 1 and a Tier 2. The Tier 1 renewables are solar, wind, sustainable biomass... plus, "small" hydro, which is a hydro plant under 30 megawatts, wood chips used for co-firing with coal, captured methane from landfills (technically not renewable, but at least helping the climate by keeping methane out of the air), and yes, black liquor. This last item was inserted at the very last minute by Bill Pitcher, who was then the lobbyist for MeadWestvaco, a paper mill in western Maryland. At the time, he claimed, and the Senate Democratic leadership agreed, that including black liquor would only help MeadWestvaco meet the RPS without any hardship on them, thus avoiding the plant closing or leaving Maryland. Small hydro was including over our objections. It is clean and renewable, but there already exists many small hydro plants in the area and thus there is no need to incentivize them to get built.


Tier 2 includes burning garbage and large hydro. The good news is that Tier 2 ends in 2019.



So, now that you have the background, here is the update on what is actually happening.

In 2008, Tier 1 was met by the following sources

Black Liquor 37%

Waste Wood 30%

Small Hydro 17%

Landfill Gas 15%

Wind 1/2 of 1%

Solar too small to even count!!!

Sustainable Biomass None!



Tier 2 was met by:

Large Hydro 85%

Burning Garbage 15%





As you can see, it is not a very pretty picture.



Now let's examine claims that both sides made in 2004 and see who is right or wrong so far.



The Green Side

1. RPS will lead to development of wind power in the region.



WRONG. So far, it has done a lot for black liquor and wood waste but nothing for wind. Allowing black liquor and wood waste into the RPS has seriously crowded out wind power.



2. RPS will lead to clean energy development in Maryland.



WRONG. So far, litigation and the economy has prevented wind farm construction in Maryland. Also, allowing LSE's to meet their RPS obligation with RECs from all over the PJM electric grid and beyond has meant there was no incentive to build right here in Maryland.



3. RPS will not have a huge cost on ratepayers.



RIGHT. So far, the RECS used for compliance are so cheap to be almost worthless.



The Other Side



1. Black liquor will only be used to help MeadWestvaco.



WRONG. As we see, black liquor DOMINATES the RPS. It is a huge loophole in the law that allows ratepayer support for a source of energy that is not clean and not renewable and in no need of additional support.



2. The RPS will add 2 cents/KWh to everybody's electric bills.



DEAD WRONG. The RPS RECs in Tier 1 currently seem to go for about 4/100's of 1 cent. That is 40 times less than the opponents said it would cost.



3. The RPS will cause economic hardship for Maryland businesses.



WRONG. There has not been a single case of a Maryland business applying for an economic hardship waiver in the RPS. The costs are negligible.





CONCLUSION



Obviously, we need to do some things to fix the RPS. It was not meant to be a black liquor/waste wood incentive bill, but that's what it is right now.



Stay tuned for the next blog, exploring how the various LSE's responded to the RPS, to see how things are going in the Solar Carve-Out, and to see what we can do to fix things.