Maryland Makes Strides Towards New Shared Solar Program

maryland-stampMaryland is one step closer to joining over a dozen other leading states in offering a new statewide shared solar program for the benefit of all customers. After nearly a year since the passage of House Bill 1087 which mandated the creation of a Community Solar Energy Generating System (CSEGS) program, draft rules were issued on Friday, April 29th.

The draft rules, which are open for public comment until May 30, largely comport with IREC’s Model Rules for Shared Renewable Energy Programs and envision a fairly balanced and widely available program. Importantly, the draft rules include low- to moderate-income (LMI) components that reflect the increasing focus by policymakers, regulators, and other stakeholders to more meaningfully bring solar opportunities to that largely untapped market segment. IREC’s recently issued Shared Renewable Energy for Low-to Moderate-Income Consumers: Policy Guidelines and Model Provisions responds to this same trend and offers a useful point of comparison by which to evaluate Maryland’s draft rules.

Over the past year, IREC actively engaged in a collaborative working group process, led by Maryland Public Service Commission staff, to develop proposed draft rules for Commission consideration. The draft rules issued Friday reflect that extensive, informal stakeholder input, as well as additional changes resulting from the formal comment and hearing process at the Commission. Highlights include:

  • Establishment of a 3-year pilot program open to any retail customer, with the door open to program continuation beyond the pilot timeframe.
  • Required minimum of at least two subscribers per CSEGS.
  • Required maximum subscription size of no more than 200 kilowatts (kW) per customer, plus subscribers are limited to 200% of their annual baseline energy usage and one subscriber cannot subscribe to more than 60% of a CSEGS.
  • CSEGS size limit of 2 MW. Overall program size cap of 1.5% of 2015 Maryland peak demand, with 0.6% allocated in each of the first two years, and 0.3% in the third year. Utilities may accept projects in excess of these caps, although Maryland’s overarching net metering cap of 1500 MW would still apply.
  • Annual capacity allocations within the above mentioned annual program size caps as follows:
    • “Small category:” 30% to small (< 500 kW) projects, projects on rooftops, roadways, or parking lots or structures, brownfield projects, and projects serving more than 51% LMI customers;
    • “LMI category:” 30% to projects serving more than 30% LMI customers, of which at least 10% is dedicated to low-income customers specifically; and,
    • “Open category:” 40% to all other projects.
  • Reliance on “virtual net energy metering” to credit a subscriber at his or her retail rate.

Reaching LMI Customers
With the passage of HB 1087, the Maryland Legislature made clear that the CSEGS program should promote participation by renters and LMI customers, and “give priority to subscribers who are most sensitive to market barriers.” The draft rules seek to accomplish this goal with a few different provisions, and IREC’s LMI Guidelines provide a good framework for understanding the opportunities and challenges associated with Maryland’s proposed approach.

Defining LMI customers
The draft rules define low-income customers as those whose annual household income is at or below 175% of the federal poverty level, or who are eligible for any federal, state, or local assistance program that limits participation at that same level. They define moderate income customers as those whose annual income is at or below 80% of the area median income (AMI) for Maryland.

These definitions are somewhat more conservative than those in IREC’s LMI Guidelines, which define low income as 80% of AMI and moderate income as 120% of AMI based on U.S. Department of Housing and Urban Development (HUD) standards. In other words, a more limited group of customers would be eligible for LMI treatment under Maryland’s draft rules. Even so, the draft rules are clear and transparent in their definitions, which is important, and they also rely on existing program certification, which could help to keep the program efficient and cost-effective.

Defining LMI facilities
The draft rules include two categories of LMI facilities: (1) projects serving more than 51% LMI customers; and (2) projects serving more than 30% LMI customers, of which 10% are low-income subscribers. The category into which an LMI facility falls would determine its treatment under the rules, as discussed below.

IREC’s LMI Guidelines set forth a more ambitious definition for LMI facilities—those that serve 60% or more LMI customers. As the LMI Guidelines recognize, however, achieving such a high proportion of LMI customer participation requires robust financial support through incentives or other financing tools and mechanisms. Given the current lack of such support in Maryland, the goals set in the draft rules are substantial, if not ambitious.

Encouraging LMI customer participation
The draft rules primarily encourage LMI customer participation via special capacity allocations for LMI facilities. The first category of LMI facilities would participate in the “small category,” along with projects 500 kW and smaller and those on brownfields; together these projects are annually allocated 30% of that year’s program capacity. The second category of LMI facilities would have their own 30% capacity allocation as the “LMI category.”

Projects from either category would be able to use remaining “open category” capacity if their capacity allocation is reached. In addition, if full program capacity is reached, a utility would be required to accept an additional 0.15% of 2015 peak demand from “LMI category” projects. On their websites, utilities are required to provide daily updated information about the current status of their program queues, including information about applications submitted and remaining capacity available by year in each program category.

While these clear targets are admirable, the lack of supporting financial tools leaves open the question of whether or not CSEGS providers will be able to meet them. As IREC emphasizes in its LMI Guidelines, overcoming financial barriers can be the most important and challenging component of designing shared renewables programs to reach LMI customers. Unfortunately, the Maryland pilot program currently lacks dedicated financial incentives or other financing-related tools, such as alternative underwriting criteria, on-bill repayment, a differentiated bill credit rate, or other mechanisms.

One provision does explicitly allow for subscriber organizations to use separate standards for creditworthiness for LMI customers; however specific criteria or programs for doing so are not identified. As Maryland tracks the progress of its CSEGS program and evaluates any potential changes, incorporating additional financial tools directed at LMI customers and facilities will be an important consideration to hold in mind, especially if meaningful LMI customer participation is not achieved.

Nonetheless, with its draft rules, Maryland has taken a critical step towards implementing a commendable shared solar program. Maryland’s particular focus on LMI customer participation aligns with a national trend that IREC expects only to grow in the coming months and years. IREC’s LMI Guidelines offer a complement to these state-specific models and a useful resource to inform discussions related to shared renewables program design across the United States.

With only a few additional steps to go, we look forward to seeing the final Maryland CSEGS program approved and the creation of new solar projects that will benefit all Marylanders.

 

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