Alternative Energy Credits - need for legislation

At the February 10^th House Consumer Affairs Committee, Terry Fitzpatrick, President and CEO of the Energy Association of Pennsylvania (he represents distribution companies like PECO and Met-Ed), stated that the legislature “wisely” did not increase the solar mandates in the Alternative Energy Portfolio Standard last session. Unfortunately, Terry did not tell our legislatures what a true success story the solar industry has been in PA. While the solar industry is still in its infancy and requires government subsidies, the costs of installations continue to drop as the market for solar increases and new technologies are developed. Solar is rapidly moving to installation costs that can compete with traditional forms of electricity. Besides the obvious environmental benefits, solar also helps to lower peak energy demand by coming online during the hot sunny summer days when demand is the greatest, reducing the need for traditional very expensive on-demand generating capacity. A recent report by Penn Environment and its research partners shows that there were approximately 6,700 solar jobs in the state last year (California is the only state with more). This past year there were over 250 installation companies in the state and the more robust market has meant more competition and economies of scale, resulting in lower solar installation costs for consumers. Both HB 2405 and HB 1128 were tabled this past year, and it does not seem likely that we will see any legislation this year to increase the solar requirements for the Portfolio Standards and allow the solar industry to continue operating in PA without a serious effort by supporters of solar.

Why are the Alternative Energy Portfolio Standards so important for solar? The Alternative Energy Portfolio Standards (AEPS) Act of 2004 requires electric distribution companies and electric generation suppliers to supply 18 percent of our electricity using alternative energy resources by 2021. These requirements ramp up over time, with solar having its own “carve out” of one half of a percent by 2021. The distribution and generation companies meet their AEPS requirements by purchasing alternative energy credits (AECs) in amounts corresponding to the percentage of electricity that the AEPS standards require for that year. AECs are the tradable certificate that represents all the clean energy benefits of one mega watt hour of electricity generated with solar or other alternative energy sources (referred to as a REC outside of PA, PA includes waste coal which is not technically renewable). If the distribution and generation companies do not purchase the required amount of AECs they are subject to a fine.

Owners of solar systems create AECs as their systems make power. The value of these AECs for owners of solar systems are significant, often more than the savings generated from offset power costs. As a result, AECs are a big part of why solar makes financial sense for businesses and homeowners. The PV market continues to change rapidly with module costs falling dramatically and new technologies being developed. Because of the dropping costs and huge latent demand for solar in the state, the states rebate program for solar, PA Sunshine, was much more successful than anyone could have anticipated. Currently the amount of solar required for the utilities to be in compliance with the Alternative Energy Portfolio program is currently much lower than the over 50MW of PV currently installed and eligible to participate in the AEPS program. Because the supply is greater than the legislated demand for AECs, the price owners of solar systems will be able to sell their AECs this year is uncertain. The AECs are sold on the GATS (generation attributes tracking system) system where owners of AECs post prices they are willing to sell their credits and utilities can offer to purchase them. In theory, it is supposed to be a market based system, but this market collapses when the supply of credits rises above the set legislated demand for credits.

A collapse of the Alternative Energy Credit market will have a devastating impact on the solar industry in PA. The state issued a bond and used federal economic stimulus funds to spur the growth of the solar industry through the PA Sunshine Program. Everyone who participated in the program helped to implement the legislature’s goals of growing a solar industry in PA. Clearly we have been hugely successful in growing an industry, but the industry still needs the help of the legislature so that this growth can be sustained. Since Pennsylvania passed its AEPS in 2004, sixteen states plus the District of Columbia have also implemented solar requirements. In comparison, Delaware, Maryland and New Jersey have set their mandates at or above 2 percent while PA requires that only 1/2 of a percent of the state's energy come from solar. Contact your state representatives and let them know you support the solar industry and a clean energy future for PA. Lets not let PA fall behind in the growing green economy.