Chesapeake PSR

Report details problems with Maryland's renewable energy law

Climate Change and EnergyTimothy WhitehouseComment

Chesapeake PSR released a report revealing significant failures in the way Maryland utilities have been allowed to meet the state’s Renewable Portfolio Standard (RPS). 

Although the RPS was intended to increase the amount of clean, renewable energy in Maryland’s electricity mix to 25% by 2020, Chesapeake PSR's report, Unbundled: How Renewable Energy Credits Undermine Maryland’s Transition to Clean, Renewable Energy, documents how utilities rely on “unbundled renewable energy credits” (unbundled RECs) to meet their RPS requirements.

"Unbundled RECs" are non-strings attached subsidies from Maryland ratepayers to energy producers, often in far away places. They do not involved the purchase of energy by Maryland utilities.

In reviewing data from Maryland’s Public Service Commission, the report finds that Maryland’s RPS does little to incentivize new clean, renewable energy production or provide economic benefits to Maryland. Specifically, the report identifies four key problems arising from Maryland’s use of unbundled RECs. 

• First, there is no available evidence that unbundled non-solar RECs purchased by Maryland utilities are used to finance new renewable energy. Unbundled RECs represent additional revenue for energy producers with no strings attached. 

• Second, there is no evidence that unbundled non-solar RECs bring significant economic development to the state. 

• Third, Maryland allows utilities to buy RECs from sources that are neither clean nor “green.” 

• Fourth, Maryland ratepayers are forced to pay extra money on their energy bills to cover the costs of unbundled REC purchases but get few of the promised environmental, health or economic benefits in return. 

The report finds that the RPS fails customers in many specific ways. For example: 

• The report estimates that Maryland ratepayers spent over $296 million for non-solar unbundled RECs between 2008-2016. About 86% of these subsidies went to out-of-state companies and communities, from as far away as North Dakota and Tennessee. This is wrong for all Maryland residents, but particularly for the many low-income residents who struggle to pay basic expenses and often must choose between rent, medical care, and energy bills. 

• Virginia and Illinois are the biggest beneficiaries of the non-solar portion of Maryland’s RPS. The report estimates that Maryland ratepayers have sent about $84 million in subsidies to Virginia energy producers and $46.5 million to Illinois producers, compared with about $43 million that was spent in-state. Fifteen other states have benefited from subsidies from Maryland ratepayers. 

• Many of these subsidies look more like corporate welfare, and less like renewable energy development. For example, Maryland residents are subsidizing biomass plants in Virginia that are owned by Dominion Energy Virginia and Northern Virginia Electric Cooperative. That is nice for Virginia customers, who already pay lower energy prices than Maryland residents, but it is hard to see where the benefit is for either Maryland or the environment.

• Maryland ratepayers are funding local development projects with significant financial returns for communities and companies in Ohio, Kentucky and elsewhere. These projects provide no benefits to Maryland ratepayers and siphon money away from potential development projects in Maryland.

• Every year, Maryland utilities have purchased increasing number of unbundled RECs from wind and hydro projects. Almost all of these purchases are from out-of-state facilities that have not established that they need Maryland subsidies to remain viable or to expand production, or that it is in Maryland’s interest to fund their operations.

• In 2016, almost half of the RECs used to satisfy Maryland’s RPS came from polluting energy sources such as black liquor and biomass, the great majority of which are located out of state. Stunningly, an evaluation by the Maryland Energy Administration of the RECs retired by Maryland utilities in 2015 showed that the Tier 1 RECs had higher carbon dioxide emissions than Maryland’s normal electricity supply, which is a mix of coal, natural gas, and nuclear fueled sources.

You can read the report here.