|Does Maryland have a renewables mandate?||Yes||50 percent by 2030|
|Does Maryland have a state mandate or target for storage?||No|
|Does Maryland offer financial incentives for energy storage development?||Yes|
|Does Maryland have a policy for the strategic deployment of Non-Wires Alternatives or Distributed Energy Resources to defer, mitigate, or obviate need for certain T&D investments?||Pending|
|Does Maryland have a policy addressing multiple use applications for storage?||No|
|Does Maryland have a policy on utility ownership of storage assets?||No|
|Does Maryland allow or mandate the inclusion of energy storage in utility IRPs?||No|
|Has Maryland modified its permitting or interconnection requirements specific to energy storage?||Yes|
|Does Maryland allow customer-sited storage to be eligible for net metering compensation?||No|
|Has Maryland revised its rate structures to drive adoption of behind-the-meter storage?||No||Not at a statewide level; individual utilities in Maryland have adopted TOU rates.|
|Approximate development of storage capacity in Maryland.||To be confirmed.|
Maryland represents “a small, slow and steady”—but nevertheless very important—market for energy storage development as it emphasizes its “learning by doing” approach toward developing the regulatory structure for energy storage and incentivizing market growth through state subsidies. Regulators in the state claim that ultimately Maryland will prove to be “one of the states in the union that is most advanced in its efforts to move utility treatment of solar energy, electric vehicles, and other distributed energy resources toward a customer-centric universe.”
Maryland began its grid modernization proceeding in October 2016. Early reports indicate that the Maryland Public Service Commission (Maryland PSC) “appears focused on more specific technologies and issues” rather than comprehensive reform of its market structure. The Maryland PSC regulates electric, gas, and combination utilities through the setting of rates, the promulgation of new rules and regulations, and the approval of applications to modify the type or scope of utility service. The primary investor-owned utilities in Maryland are subsidiaries of Exelon Corporation: Baltimore Gas & Electric, Delmarva Power, and Pepco. In addition, Maryland’s significant presence in the PJM Interconnection market (the largest wholesale electricity market in the U.S.) provides unique challenges to the state’s reform process and will have many states watching closely as it charts its own path.
Unlike other states that have opted to mandate the procurement of energy storage, Maryland has a taken a different approach that is built around providing financial incentives to jumpstart storage development in the state, while simultaneously defining state policies to support the market in real time. With regard to energy storage specifically, Maryland is an important reference point due to the fact that it provides the best (and only) example at this time of a state that has developed a tax credit specifically designed for energy storage. Federal tax incentives are available for storage that is paired with a solar or other specified renewable resource under the federal Investment Tax Credit (ITC) with diminishing tax credits (30 percent if construction on the system begins in 2019; 22 percent if started in 2021; and 10 percent if started in 2022). Stand-alone energy storage systems are not eligible for the federal ITC. With the step-down of the federal ITC, it is expected that state-level incentives will play a more critical role in the growth of energy storage markets across the country.
While other states (California, New Jersey, and Nevada for example) have incentive programs that are available for energy storage system, Maryland is the only state that has an actual tax credit that is provided for developers of energy storage. Thus far, the tax credit has enabled a number of demonstration projects involving storage paired with renewable energy systems.
However, Maryland also provides an example of how state subsidies (or a tax credit, in this case), while an important mechanism to stimulate the development of energy storage, may not be the only mechanism needed to elevate a state-level market to the upper regions of energy storage development. Despite its status of being the first state to offer an energy storage tax credit, Maryland is also finding that financial subsidies alone may not be enough to jumpstart and energy storage marketplace or achieve its full potential. In other words, the experience in Maryland suggests that state-level subsidies alone, or even state-level subsidies combined with the federal ITC, may not be enough to incentivize energy storage development. Specifically, Maryland does not yet have a revised ratemaking approach that is specific to storage, and it is unclear the extent to which energy storage can participate in the state’s net metering, both of which would provide additional economic incentives for storage development.
Other inherent characteristics of Maryland’s larger energy market also make the state’s approach to storage unique. For instance, Maryland has not experienced constraints on other power sources or a rapid increase of resources stressing its transmission or distribution network. Much of the wind power that is used to meet the states’ renewable portfolio requirements originates from other states, thus minimizing the need to pursue storage technologies as a means to build out new solar and wind generation within the state. In addition, unlike other states that have pursued energy storage due to a primary need for economic alternatives to traditional forms of generation (e.g., Hawaii), average electricity rates in Maryland have not been significantly higher than the national average of $13.19/kWh.
Meanwhile, although solar has nearly tripled in Maryland since the mid 2010s and the state ranks in the top quartile for solar deployment, renewables development in the state currently comprises a very small portion of the total generation mix in the state. As we know, the expansion of renewables in a given state can usually be correlated with an increase in storage. Maryland’s storage market is unique in that it continues to take shape without having these conditions drive the market development.
Due to all of these factors, Maryland remains a comparatively small storage market. Until regulations and rate design are better defined in the state, which is a primary focus of the current regulatory proceedings, the growth of Maryland’s energy storage market may remain on a slow track. That does not diminish, however, the innovative policy work being presently conducted in the state that may end setting market precedents for energy storage in Northeastern U.S. states.
Accordingly, Maryland continues to take the slow and steady approach toward the development of energy storage technologies and the luxury of time to develop proactive (as opposed to reactive) policies for the growing storage market. Perhaps the best example of this approach is that the Maryland PSC is in the midst of an 18-month investigation (Public Conference 44) to consider five grid modernization topics: competitive markets and customer choice; rate design; electric vehicles; interconnection processes; and energy storage. It is one of the most unique aspects about the state in that Maryland is developing energy storage policies even in the absence of traditional market drivers such as resource adequacy concerns, high demand charges, or required planning and review of generation and transmission proposals. The Maryland PSC is also enacting a storage pilot program as part of the broader Public Conference 44 proceedings.
Presently the largest energy storage unit in Maryland is a 10-MW lithium ion battery, which is owned by Fluence Energy and provides ancillary services to the PJM Interconnection (PJM), which administers the region’s wholesale bulk electricity system. There are approximately 12-15 other storage projects in the state, some subsidized by the state tax, which are being implemented to test the diversity of storage technologies and applications.
It is also important to note that the Maryland PSC is not working in a vacuum. Commissioners and staff from the mid-Atlantic region and the wider PJM region regularly meet to discuss initiatives and policies through the Mid-Atlantic Distributed Resources Initiative (MADRI). Each PSC also closely follows each other’s formal cases and initiatives. For example, Maryland is watching D.C.’s MEDSIS, D.C. is watching Maryland’s PC44, and everyone is watching New York’s Reforming the Energy Vision (REV) initiative. Although each faces its own unique challenges, there is much to be gained through collaboration and learning.
Steve Hogan (R) is the 62nd governor of Maryland, having assumed office on January 21, 2015. Hogan’s predecessor was Martin O’Malley (D), who served as governor from January 2007 to January 2015.
During his tenure as governor, O’Malley doubled the state’s renewable portfolio standard (RPS), setting a goal to increase in-state renewable generation to 20 percent by 2022 (this goal was subsequently increased through legislation that was passed under Hogan’s administration). Further, O’Malley established the Maryland Commission Change through an executive order in 2007 and tasked the Commission with developing a Climate Action Plan for the state. In 2009, O’Malley signed the Greenhouse Gas Reduction Act, which set a statewide goal of reducing greenhouse gas emissions to 25 percent below 2006 levels by 2020.
Gov. Hogan has continued to offer vocal support for clean-energy initiatives, which is a bit surprising due to the fact that Maryland is a Republican-led state attempting to enact aggressive renewables targets. Hogan has been a vocal critic of the Trump administration on issues pertaining to climate change and has stated that states can lead the way instead of the federal government.
In reality, though, the support provided by Gov. Hogan for clean energy initiatives has been rather mixed. While Gov. Hogan supported the passage of the tax credit program for energy storage in 2017, he did not support the Clean Energy Jobs Act bill which included increases to the state’s RPS. (The veto was subsequently overridden by the Maryland Legislature, and the override of the governor’s veto resulted in an increase of the state’s RPS to 25 percent.) The reason that Gov. Hogan vetoed the previous Clean Energy Jobs due to concerns about increased costs and the potential for Maryland to lose jobs to other states.
Hogan’s public position is that he actually wants Maryland to be more aggressive in establishing its renewables targets and has said he would support legislation that would commit Maryland to 100 percent clean energy within the next 20 years. However, Hogan also supports nuclear power and hydropower as clean energy sources, something that remains controversial—particularly nuclear—due to safety and environmental concerns.
Hogan did not take action on the Clean Energy Jobs Act, even though he has indicated that he endorses its larger goals. In Maryland, if the governor does not sign or veto a bill within a month of it passing the Maryland Legislature, it automatically becomes law.
Instead, Hogan is developing his own proposal that he plans to introduce on the first day of the 2020 legislative session. Hogan’s proposal, which he is calling the Clean and Renewable Energy Standard (CARES), will call for 100 percent clean energy by 2040. Additional goals of Gov. Hogan’s CARES program include:
· Increasing the strategic use of zero- and low-carbon clean and renewable energy sources;
· Recognizing the clean and safe aspects of nuclear energy;
· Supporting hydropower, coupled directly with maintaining environmental stewardship;
· Advancing emerging technology for carbon capture and storage; and
· Utilizing the role of energy-efficient combined heat and power.
In January 2019, Gov. Hogan signed Executive Order 01.01.2019.09, establishing the Governor’s Task Force on Renewable Energy Development and Siting, which will work to develop consensus-based recommendations on the siting of new solar and wind projects in the state. To jumpstart that process, the governor announced new initiatives aimed at advancing solar energy deployment and development on state-managed and -owned properties:
However, the executive order says little about how his administration would seek to revise provisions of the existing Maryland RPS, which currently incentivizes trash incineration, burning animal waste, and other dirty “renewables” as part of the program. Gov. Hogan also has not opted not to clarify whether or not his Clean and Renewable Energy Standard (CARES) bill will include nuclear energy as a “renewable.”
Key pieces of legislation in Maryland that have shaped the emerging energy storage market in the state include the following:
Energy Storage Pilot Project Act”) (2019)
The Maryland PSC is empowered to hear and decide matters relating to: (1) rate adjustments; (2) applications to exercise or abandon franchises; (3) applications to modify the type or scope of service; (4) approval of issuance of securities; (5) promulgation of new rules and regulations; and (6) quality of utility and common carrier service.
The Maryland PSC has established six working groups to investigate DERs issues. One of these groups is the Energy Storage Working Group, which has been established to “adopt a learning-by-doing approach, whereby utilities [under the PSC’s jurisdiction] will solicit four commercial and regulatory models, to evaluate the efficacy of energy storage assets under multiple application ownership models.” Specific goals and objectives for the group are as follows:
Maryland law authorizes the Maryland PSC to adopt alternative forms of rate regulation, which the PSC has implemented on a case-by-case basis for utilities, approving the use of decoupling mechanisms, riders and surcharges. The new proceeding at the PSC was opened to examine how multi-year rate plans might be used to enable the greater use of distributed energy resources, including storage.
· Created a working group of stakeholders to determine how best to implement a method for multi-year rate plans.
· The method would set rates for a maximum of three years into the future.
· Maryland currently sets rates on a 12-month period that are based on a historical test years and allow utilities to obtain a certain rate of return.
· Utilities in the state had lobbied for this measure based on the argument that the traditional approach toward rate setting in Maryland produces a “regulatory lag” that prevents them from achieving returns on investments in a timely manner. As a result, the utilities end up submitting multiple rate increase requests, which provides uncertainty for both the utilities themselves and their customers.
· Multi-year rate plans are intended to improve all utility performance in controlling costs and with less frequent rate cases, and provide more predictable rates for customers and more predictable revenue recovery for utilities.
· The order is also intended to explore the application of performance-based ratemaking principles to renewables, DERs and energy storage initiatives. This is similar to the approach that is being evaluated in Hawaii, in which utilities would have the opportunity to receive incentives if they meet certain metrics or goals such as integrating specific amounts of renewables, reducing timelines for interconnecting distributed resources to the grid, encouraging peak demand reductions, and facilitating the growth of energy storage.
As noted there are a few issues that appear to be stalling rapid growth of the energy storage market in Maryland. Perhaps the most critical issue that remains a market barrier is the question of utility ownership of storage assets. For starters, the state prohibits third party ownership of energy storage assets and yet, due to the provisions of the state’s energy competition / deregulation policies, it is unclear whether utilities can own generation assets either if the assets include generation capabilities. Nothing in Maryland law explicitly prohibits utilities in the state from owning and operating storage assets. However, Maryland statute does prohibit “the generation, supply, and sale of electricity, including all related facilities and assets” from being regulated as an electric company service or function. The relevance is that, depending on how storage is classified, questions of cost recovery through rates and storage’s eligibility to participate in broader wholesale markets remain unanswered.
Thus, it’s an ambiguous grey area within the state’s energy storage policy that will need to be resolved in order to provide market clarity that is essential for potential investors. With the regulatory mandate to develop energy storage pilot program at the utility level (with various ownership scenarios), Determining whether utilities may own storage, whether it’s behind the meter or in front of the meter, would resolve a major source of uncertainty among utilities and third-party developers.
it is anticipated that the state of Maryland will resolve this ambiguity, but it may not be for a couple of years. If Maryland were to expand eligibility for the tax credit to allow for third-party ownership of energy storage systems, the market in the state would like see significant gains. Whether or not state law is changed to allow third-party-ownership of energy storage assets, or when, remains to be seen.
In addition, the other potential barrier to broader deployment of energy storage solutions across the state is the fact that, while innovative in its approach, the state tax credit for energy storage does not appear to be enough to address the array of financial considerations with the deployment of an energy storage system.
Policy questions relevant to energy in Maryland that still to need to be resolved include:
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