Pa. closes borders to out-of-state solar credits
Pennsylvania electric utilities will soon have to buy home-grown solar power to satisfy a state mandate that they get a sliver of their power from solar generators.
The bill passed by the General Assembly last week will change a 13-year-old law so that power companies can no longer use renewable energy credits from out-ofstate projects to fulfill requirements that they get a portion of the energy they sell from solar sources.
Gov. Tom Wolf's spokesman said the governor plans to sign the bill, known as the Administrative Code, which includes dozens of
other, unrelated provisions.
Solar advocates say the change will help stop a glut of credits from solar farms in other states from swamping the Pennsylvania market, one of the few in the region that remained open to out-ofstate sources.
The oversupply of solar projects that registered to satisfy Pennsylvania utilities’ modest demand contributed to a decline in the value of the credits from a peak of more than $300 in 2010 to about $4 now.
Solar energy systems earn a credit for every megawatt-hour of power they generate.
The problem, said Edward Johnstonbaugh, a Penn State Extension educator who specializes in renewable energy, was that when Pennsylvania created its Alternative Energy Portfolio Standards law in 2004 it allowed any state within the regional, 13-state electrical grid to participate in its credit market.
The expectation was that those states, too, would create reciprocal markets. That didn’t happen. Some states — like Illinois, Virginia and North Carolina — created incentives for utility-scale solar development but not equivalent home markets for their credits, he said, which led large developers to register credits in whatever market would welcome them, even if they could only fetch a few dollars per credit.
“They are coming to Pennsylvania and flooding the market for these very low prices as a result of the fact that it’s better than nothing,” Mr.Johnstonbaugh said.
Pennsylvania’s Alternative Energy Portfolio law calls for a small but growing share of the electricity generated in the state to come from solar, with an ultimate target of half a percent by 2021.
“We have enough credits to meet that already because we have so many from out of state,” said Sharon Pillar, president of the Solar Unified Network of Western Pennsylvania.
About 80 percent of the solar generating capacity registered in the market is from projects built outside of Pennsylvania, she said. Absent those projects, the demand — and price — for credits is expected to rise and more solar will likely have to be built to meet the law’s growing targets.
That doesn’t necessarily mean utilities will be scrambling to secure credits in the meantime.
Ron Celentano, president of the Pennsylvania Solar Energy Industries Association, said there is “an enormous amount” of banked solar credits “that people never sold because the price was so low. They are just sitting therewaiting, dormant.”
Because of that, industry observers expect prices to rise gradually, without ever reaching the heights of a decade ago.
“It might take a couple of years for it to even get up to $20, $30 or whatever it might be,” Mr. Celentano said.
It is also not entirely clear how long it will take to transition to an entirely Pennsylvania-sourced solar market. Current contracts are grandfathered, and the length of those contracts is not publicly known.
But credits expire between two and three years after they are generated, and only Pennsylvania solar projects will be able to register in the market once the bill becomes law.
No one expects that closing the borders for solar credits alone will spur a build-up of solar in the state. Yet advocates say it is an important step to ensure that future policies to encourage more installations on rooftops and in fields will provide the most value.
Without it, if Pennsylvania were ever to ratchet up its requirements for how much power should come from solar, the benefits would have just leaked out to other states, said Rob Altenburg, the director of PennFuture’s Energy Center, which is part of a statewide project to strategize how Pennsylvania can generate 10 percent of its electricity sales from solar by 2030.
“If we want to really encourage generation, we need closing the [solar renewable energy credit] borders,” he said, “and then we need additional policy work to drive that generation.”