RPS Class I and II
The Massachusetts Renewable Energy Portfolio Standard (RPS) is a statutory obligation that suppliers (both regulated distribution utilities and competitive suppliers) obtain a percentage of electricity from qualifying Units for their retail customers. The RPS began with an obligation of one percent in 2003, and then increased by one-half percent annually until it reached 4% in 2009. In 2009, as a part of the Green Communities Act of 2008, the RPS was broken into RPS Class I and RPS Class II and the annual obligation was set to increase by 1% annually. Each Class has different Supplier compliance percentages, as well as different qualifying generation units used to meet the compliance percentage.
Suppliers meet their annual RPS obligations by acquiring a sufficient quantity of RPS-qualified renewable energy certificates (RECs) that are created and recorded at the New England Power Pool (NEPOOL) Generation Information System (GIS).
The NEPOOL GIS tracks all electricity generated within the ISO New England (ISO-NE) control area and fed onto the New England grid, as well as electricity exchanged between ISO-NE and adjacent control areas. For each megawatt hour (MWh) of electricity, whether renewable or not, one serial-numbered, electronic certificate is created and added to the NEPOOL GIS account of the Unit that generated the MWh. Certificates that represent renewable generation are coded accordingly and known as RECs.
Suppliers purchase those RECs from the generators, who then transfer the RECs from their own GIS accounts to the Suppliers' accounts.
RPS Class I
Currently, the 2010 RPS Class I requirement is five percent, and is set to increase by one percent each year. It is met through electricity production from qualified New Renewable Generation Units. New Renewable Generation Units are facilities that began commercial operation after 1997 and generate electricity using any of the following technologies:
- Solar photovoltaic
- Solar thermal electric
- Wind energy
- Small hydropower
- Landfill methane and anaerobic digester gas
- Marine or hydrokinetic energy
- Geothermal energy
- Eligible biomass fuel
On January 1 st, 2010, new regulations were filed so that a specified and growing portion of the RPS Class I renewable energy requirement comes from solar photovoltaic (PV) energy. This carve-out supports distributed solar PV energy facilities including residential, commercial, public, and non-profit projects, and is designed to help the Commonwealth achieve the installation of 400 MW of solar PV across the state.
RPS Class II
RPS Class II mandates that a minimum percentage of electricity sales come from each of two sources, renewable energy and waste energy. The current RPS Class II Renewable Generation obligation is 3.6 percent, and the Waste Energy Generation obligation is 3.5 percent. The obligation does not increase annually. A Supplier must comply with both the minimum percentage of Renewable and Waste Energy obligations.
RPS Class II Renewables
Similar to RPS Class I, this class pertains to generation units that use eligible resources such as sunlight, wind, ocean, landfill methane gas, small hydropower, and geothermal, but have an operation date prior to January 1 st,1998. Therefore, RPS Class II provides financial incentives for the continued operation of qualified pre-1998 renewable generation units.
RPS Class II Waste Energy
This class includes generation units that are classified as Waste Energy Generation Units. Typically these units burn solid waste (mainly garbage) at extremely high temperatures to generate electricity or steam power, in addition to providing funding to support recycling programs in Massachusetts.
The Alternative Energy Portfolio Standard (APS) was established as of January 1 st 2009, under the Green Communities Act of 2008. APS offers a new opportunity for Massachusetts businesses, institutions, and governments to receive an incentive for installing eligible alternative energy systems, which are not renewable. Similar to the RPS, it requires a certain percentage of the state's electric load to be met by eligible technologies, which for APS include Combined Heat and Power (CHP), flywheel storage, coal gasification, and efficient steam technologies. These resources contribute to the Commonwealth's clean energy goals by increasing energy efficiency and reducing the need for conventional fossil fuel-based power generation. In 2009, the Suppliers obligation was 1%, and is set to increase 0.5% each following year until 2014, when the growth rate will be reduced to 0.25% per year.
Retail Electric Suppliers are required to document compliance with RPS and APS in annual filings submitted to DOER. Suppliers can meet their compliance obligations by purchasing Renewable Energy Certificates (RECs) from qualified generators and/or making Annual Compliance Payments (ACPs) to the Massachusetts Clean Energy Center. The revenue generated from ACPs is used to fund new renewable generation projects throughout the Commonwealth.
What are RECs?
Electricity produced by new renewable energy generators qualified for the RPS program is broken into two products:
1) The electricity production that is used on-site or delivered to the grid
2) The positive environmental attributes associated with this clean energy production.
RECs represent the second product. One REC is created each time a qualified system generates 1 megawatt hour (MWh) of electricity. In order for Suppliers to meet their compliance obligations as set by the RPS, they must purchase a number of RECs equal to the percentage for that particular compliance year. For example, in 2010 all Suppliers are required to purchase an amount of RECs equal to 5% of the total load they serve in Massachusetts in order to comply with the RPS Class I requirement.
RECs are created on the New England Power Pool Generation Information System (NEPOOL GIS). However, before a REC can be created on NEPOOL GIS, a generator must first apply to DOER and receive a Statement of Qualification to sell RECs.
In order to determine the prices for RECs, DOER sets an Alternative Compliance Payment (ACP) Rate. This rate serves as a ceiling price and exists as a penalty payment that Suppliers must pay if they do not meet their RPS compliance obligation in a given year. Essentially, for every MWh they are short of meeting their obligation, they must provide an alternative payment to the DOER. Thus, the incentive is for RES to purchase RECs from qualified projects for something less than the ACP in order to meet their compliance obligation and avoid ACP payments.
This information is provided by the Department of Energy Resources