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Geothermal Now Eligible For Renewable Energy Credits in Maryland


Bill Signing with Governer O%27Malley 3 resized 600

On May 22, 2012, Governor Martin O'Malley signed a bill into law making Maryland the first state in the Nation to approve geothermal heating and cooling systems eligibility for Renewable Energy Credits (RECs).  RECs have been a proven commodity to make renewable energy projects economically viable, including solar (photovoltaic and solar thermal hot water), wind power and with and other enumerated renewables.

In March, Greenavise's CEO Scott Friedman testified before Maryland's State Senate Finance Committee in favor of the bill.  Lobbyist Jack Neil, of Jack Neil Associates LLC, was the principal driver of this legislation, which has now become law.  The forward-thinking cross-filed bills were sponsored and supported by Senator Thomas Middleton, Chairman of Senate Finance Committee, and House Delegate Sally Jameson of the House Economic Matters Committee.  

Melissa DeSomma from Greenavise spoke with Jack Neil for his insights on the new legislation:

Melissa:  Why are Renewable Energy Credits (RECs) so important for expanding the geothermal industry?

Jack:  To supplement existing government grant funding and tax credit incentives, RECs’ green value is commoditized in the free market and provides additional financial incentives, such as with solar systems.  The uncertainty of federal tax credit extensions and future funding levels for Maryland’s energy grant  programs, provided rationale in making geothermal systems statutorily eligible for RECs, as a Tier 1 renewable energy facility in Maryland’s Renewable Portfolio Standard. Geothermal RECs will enable the geothermal market to sustain existing and enhance future growth.  Coinciding with an organized industry-driven media and public outreach campaigns to explain the economic and environmental benefits of geothermal energy systems, it is anticipated the current rate of installations will continue, and for more significant growth beginning three years after the legislation’ enactment.

Melissa:  How will RECs be determined?

Jack:  RECs will be calculated by the Maryland Public Service Commission (PSC) which will convert the system’s BTUs to Kilowatts Hours. The legislation as originally introduced would of required the use of an on site meter, but the provision was removed after a series of discussions involving state and national industry interests, the Maryland Energy Administration (MEA) and PSC, for the administrative ease for the PSC in implementing the law.  Geothermal systems are designed for the space heating and cooling and water heating  requirements of residential and commercial buildings.  The owner of a geothermal system will provide on it’s REC application to the PSC, pertinent information and data of the geothermal system, the type of residential structure, and for commercial buildings, size, uses, and activities.  The PSC will then determine from the information provided by the REC applicant, the number of RECs to be awarded and after the BTU to KW conversion.

Melissa:  How can I claim RECs?

Jack:  There will be an application process with the PSC, the system owner provides the required information, then the PSC quantifies that information to determine the owners REC eligibility.

Melissa:  What is the timeline for geothermal RECs?

Jack:  The recently enacted legislation goes into effect on October 1, 2012, and an effective date of Janaury 1, 2013 for REC eligibility for geothermal heating and cooling systems.  This means only new geothermal heating and cooling systems commissioned on or after January 1, 2013 will be deemed eligible for the system owner to begin generating renewable energy credits.

During the summer and fall the industry working closely with the PSC on implementing regulations, which the agency will officially promulgate after October 1, 2012. Scott Friedman and I are also working on the formation and incorporating a 501(C)(6) trades association, the Mid-Atlantic Geothermal Energy Exchange, to begin educational and outreach programs for consumers and develop industry guidance documents.

Melissa:  Has any other state developed or looked into incorporating geothermal RECs into their Renewable Energy Portfolio Standard (RPS)?

Jack:  Maryland is the first state to adopt such a law.  As of now, no significant legislative geothermal REC activity is pending in other states, but there are national trade groups interested in this issue.  Maryland will serve as a leader and template for other states to adopt similar legislation.
Additionally, other states will realize as Maryland has, that geothermal has the potential with “greatest benefit” for demand taken off the grid; greatest reduction in amount of greenhouse gases; most energy efficient heating and cooling systems; highest energy cost savings for system owners; shortest payback period of any renewable energy system; and importantly,  local economic development benefits for the geothermal industry and trades.

Melissa:  What can we expect to see in the coming years regarding geothermal RECs for the Maryland RPS?

Jack:  Governor Martin O'Malley and Maryland’s legislature has laid a great foundation for renewable energy incentives and policies.  The coming years will show increasing and significant influence of geothermal in meeting Maryland’s RPS statutory requirements.  The Department of Energy and the Environmental Protection Agency found geothermal heat pump systems to be the most effective for space heating and cooling, and heating water.
Jack and Scott expect geothermal system installations will grow given the recent success of the lobbying campaign, and are forming a regional industry trade association for programming educational outreach to consumers. It is anticipated in the future that Maryland REC values will increase along with the future year RPS requirement of meeting 20% of renewable energy generated by the year 2020.

Jack points out that the lobbying campaign started in 2010. The 2010 strategic blue print proved successful during the 2012 legislative enactment for the geothermal measures: not one negative vote in committees of jurisdiction or chamber floors, and for the dozen related votes on Senate Bill 652 and House Bill 1186.

According to Jack, out of some 63 energy related bills introduced few passed, and the geothermal legislation was 1 of only 2 new renewables enacted.