A renewable portfolio standard (RPS) is a law requring utilities and/or other energy suppliers to source a certain percentage of the electricity they generate or sell from renewable sources. This includes solar energy. The District has had an RPS since 2005. In 2016, the District passed an update to the law (B21-650), which expands D.C.’s renewable energy target to 50 percent by 2032. Included in this RPS is a 5% “carve-out” for locally-based solar. This carve-out if for enough solar to power 225,000 D.C. homes.
How does the RPS work?
Utilities and suppliers subject to the RPS can meet the standard in several ways. They can generate or buy the required renewable energy themselves. Or, they can purchase renewable energy credits (RECs) from renewable energy owners. This includes homeowners who have solar on their roofs.
The price of these RECs is determined two factors: the price of the Alternative Compliance Payment (ACP) and the supply of RECs on the market. The ACP is the penalty utilities and/or suppliers would pay for not meeting the RPS. These companies buy RECs on a market, similar to stocks. The price of a REC is determined by supply and demand. The more RECs available on the market, the lower their cost.
Additionally, the ACP sets a price ceiling. The price of a REC won’t go higher than the ACP because then the utility would find it cheaper to pay the ACP.
|Year||Under old RPS||Under new RPS|
The RPS expansion will create more renewable energy by maintaining the ACP at a higher level for a longer period of time. This encourages more renewable energy development because prospective renewable energy owners can add in the value of RECs when calculating the financial return on their system.
What does this mean for my solar system?
You earn RECs (also called SRECs to indicate they are from solar generation) based upon your system’s production. Your system will produce one SREC every time it produces a megawatt-hour (1,000 kWh) of electricity. You can estimate the number of SRECs your system will produce by multiplying the size of your system by 1.2. So, a 5-kilowatt system will produce approximately six SRECs each year. The extension of ACP means that we should expect to see higher SREC prices than we otherwise would, as the ACP price ceiling will be higher in the future.
What if I’m thinking about going solar?
The expanded RPS is great news for you as well. Now is a great time to go solar. It means that with the higher SREC pries your system will pay back sooner! And over the long run you will save even more money by going solar than before.
What if I can’t afford to go solar?
The new legislation also creates a “Solar for All” program that aims to cut the electric bills of 100,000 low-income District households in half by 2032 by connecting low-income residents to low-cost clean energy and money-saving energy efficiency upgrades.
D.C. also has an affordable solar program and more information can be found here: http://doee.dc.gov/service/affordable-solar-program.