RPS Class I and II
The Massachusetts Renewable Energy Portfolio Standard (RPS) requires retail electricity suppliers (both regulated distribution utilities and competitive suppliers) obtain a percentage of the electricity they serve to their customers from qualifying renewable energy facilities. The RPS began with a compliance obligation of one percent in 2003, and increased by one-half percent annually until it reached four percent in 2009. In 2009, as a part of the Green Communities Act of 2008, the RPS Class I annual obligation was set to increase by 1% annually and a new RPS Class II was created for existing renewable energy facilities. Each Class has different annual compliance requirements as well as different eligibility criteria for qualifying facilities .
Suppliers meet their annual RPS obligations by acquiring a sufficient quantity of RPS-qualified renewable energy certificates (RECs) that are created, traded, and tracked 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 renewable energy certificates or RECs.
What are RECs?
Electricity produced by new renewable energy generators qualified for the RPS is generally broken into two products:
1) The electricity production that is consumed on-site or delivered to the grid
2) The positive environmental attributes associated with then energy production.
RECs represent the second product. One REC is created each time a qualified facility generates 1 megawatt hour (MWh) of electricity. In order for retail electricity suppliers to meet their annual compliance obligations established by the RPS, they must purchase a number of RECs equal to the percentage for that particular compliance year. For example, in 2020 all Suppliers will be required to purchase an amount of RECs equal to 15% of the total electricity they serve in Massachusetts.
Before a facility can generate RECs at NEPOOL GIS, the facility must first apply to DOER and receive a Statement of Qualification certifying its eligibility.
While REC values are generally determined by market supply and demand in a given compliance year, DOER plays a role in establishing a parameter on market prices by setting an Alternative Compliance Payment (ACP) Rate. This serves as a ceiling price and allows suppliers to meet their annual obligations by making payments at this rate in lieu of purchasing RECs. For every MWh a supplier is short of meeting its compliance obligation, it must make an ACP to DOER. The ACP Rate therefore incentivizes retail electricity suppliers to purchase RECs from qualified facilities at an amount lower than the ACP Rate in order to meet their compliance obligations. Revenue collected from ACPs is used by DOER to support new renewable energy, energy efficiency, and other clean energy projects throughout the Commonwealth.
RPS Class I
The RPS Class I requirement increases by one percent annually with no established end date. It is met through electricity production from qualified new renewable energy facilities. New renewable energy facilities are those that began commercial operation after 1997, generate electricity using any of the following technologies, and meet all other program eligibility criteria:
- Solar photovoltaic
- Solar thermal electric
- Wind energy
- Small hydropower
- Landfill methane and anaerobic digester gas
- Marine or hydrokinetic energy
- Geothermal energy
- Eligible biomass fuel
RPS Solar Carve-Out
On January 1, 2010, new regulations were filed that established a requirement for a portion of the RPS Class I renewable energy requirement to come from solar photovoltaic (PV) energy. This carve-out supported over 650 megawatts of new distributed solar PV energy facilities across the Commonwealth and stopped accepting new applications with the launch of the RPS Solar Carve-Out II Program in April 2014. Eligible facilities generate solar renewable energy certificates (SRECs) and will continue to do so until 2023, after which the facilities will generate Class I RECs.
RPS Solar Carve-Out II
The second phase of the Solar Carve-Out Program began with the promulgation of changes to the RPS Class I Regulation on April 25, 2014. The program was originally designed to continue supporting new solar photovoltaic (PV) installations until 1,600 MW of capacity was installed across the entire Commonwealth, but was extended in February 2016 and March 2017 as DOER was in the midst of developing a successor incentive program. The program is actively accepting applications for new PV facilities and will continue to remain active until the launch of the new Solar Massachusetts Renewable Target (SMART) Program sometime in 2018. Eligible facilities generate SREC IIs for a 40-quarter period from the time they are qualified, after which they generate Class I RECs.
RPS Class II Renewables
Similar to RPS Class I, this class pertains to generation units that use eligible renewable resources, but have an operation date prior to January 1,1998. Therefore, RPS Class II provides financial incentives for the continued operation of qualified pre-1998 renewable generation units. Eligible facilities generate Class II RECs and the annual percentage requirement varies from year to year per a formula in regulation.
RPS Class II Waste Energy
This class includes generation units that are classified as Waste Energy Generation Units and are located in Massachusetts. Typically these units burn solid waste at extremely high temperatures to generate electricity or steam power, in addition to providing funding to support recycling programs in Massachusetts. Eligible facilities generated Class II Waste Energy Certificates (WECs) and the annual percentage requirement is fixed at 3.5% per year.
The Alternative Energy Portfolio Standard (APS) was established as of January 1, 2009, under the Green Communities Act of 2008. The APS offers a new opportunity for Massachusetts businesses, institutions, and governments to receive an incentive for installing eligible alternative energy systems, which are not necessarily renewable, but contribute to the Commonwealth's clean energy goals by increasing energy efficiency and reducing the need for conventional fossil fuel-based power generation. 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, and efficient steam technologies. Eligible facilities generate Alternative Energy Certificates (AECs) and the annual percentage requirement increases by 0.25% per year indefinitely.