Delaware’s renewable portfolio growing out of state
Fifteen years ago, Delaware set out on a path toward a more sustainable future when legislators approved the state’s Renewable Energy Portfolio Standards Act (RPS).
The law mandated that utilities begin to utilize renewable sources, such as wind, solar and biogas, and created 20 years of benchmarks culminating in 25% of the state’s energy production coming from such sources. Three-quarters of the way toward the state’s goal, power providers are meeting their mandate in investing in clean energy, but much of that power isn’t actually being produced in the First State.
Delmarva Power, the state’s largest energy provider and the only one regulated by the Public Service Commission, acquired more than half of its mandated renewable energy through the Renewable Energy Credit (REC) market during the 2019-20 compliance year.
RECs are the commodity equivalent of 1 megawatt hour of power produced from renewable sources. As wind turbines spin and solar arrays absorb sunlight, they produce energy that is returned to the power grid and sold at market price, but they also produce RECs and their sought-after cousin Solar RECs (SRECs).
These credits can be sold along with the power produced as a package, but they are also increasingly split apart and sold to power providers principally to meet state benchmarks.
For instance, last year Delmarva Power purchased about 25% of all its renewable energy from four wind farms in western Maryland, Pennsylvania, and North Carolina. About 7% of its renewable energy came from solar projects in Delaware, including the Dover Sun Park project, the Dover White Oak project, the Delaware Terraform project, and more.
The Delaware Electric Cooperative (DEC), a not-for-profit energy producer and distributor that serves much of Kent and Sussex counties, has made investments of its own in solar energy, building the 23-acre Bruce A. Henry Solar Farm in Georgetown in 2013. This year it completed a 17-acre addition along with Constellation Energy to push the project’s total capacity to more than 4 megawatts.
Despite its investment, DEC only produced 7% of its total power last year through renewable sources, with the remainder of its RPS compliance coming through the reduction of energy usage – an allowable measure under the state law. DEC President and CEO J. William Andrew has said that the cooperative will pursue more solar power in the near future, but for now the utility’s power is largely coming from cleaner but non-renewable sources like natural gas and nuclear.
Dale Davis, a solar installer and president of the Delaware Solar Energy Coalition, said that Delaware’s allowance of SRECs within its 13-state regional network opens it to additional competition. Solar arrays built in states without a requirement for SRECs seek out markets that will take them to further monetize projects.
“It’s found money for them, and since their systems tend to be large and Delaware’s RPS is small, they can quickly overwhelm our RPS,” he said.
According to Delmarva Power’s 2018-19 compliance year report, the company spent at least $7.8 million buying out-of-state RECs and $300,000 on SRECs from North Carolina.
According to the Solar Energy Industries Association database, Delaware has nearly 7,000 solar installations statewide, but only 13 are considered major solar projects. Of those, only two produce 10 megawatts or more – a threshold that insiders see as a large versus small project. Delaware currently ranks 38th out of all states with 145 megawatts of solar capacity installed but is projected to fall to 46th in five years with only 180 megawatts added, according to the SEIA.
That means that utilities seeking to buy large amounts of renewable power in Delaware to meet higher benchmarks in coming years will be left with fewer options unless developers invest in new arrays here. One way to incentivize the building of more solar in Delaware would be too reactivate multipliers that were in effect early in the RPS’s 20-year window.
Davis explained that out-of-state SRECs suppress the value of in-state credits, making solar projects harder to finance than in other states.
“That’s why you see a lot more solar in New Jersey, Massachusetts, and other places where they have viable electric markets,” he said.
One of the ways that the state has been seeking to boost investment in the RPS is through passing its extension legislation. Longtime State Sen. Harris McDowell, who retired at the end of his term this past legislative year, tried to get late approval for his Senate Bill 650, which would have extended the RPS an additional 10 years to 2035. Most importantly, it would have raised the renewable energy goal to 40% and the solar energy goal to 10% in that span.
The bill died after facing some opposition from the Delaware Municipal Electric Cooperative, which represents nine power-producing Delaware towns or cities. DEMEC specifically raised concerns with the timing of the bill that would have made public comment difficult.
Co-signing that bill was Democratic State Sen. Bryan Townsend, who said that the assembly will see some version of SB 250 in the next session. With renewable energy becoming cheaper since the last revisions to the state law in 2010 and data indicating potential climate change implications being more severe than before, Townsend said his colleagues feel the urgency even with five years remaining on the RPS.
“There’s a renewed sense of, ‘OK, we can do more and we have to do more,’” he said. “Emotionally, I think it feels like we’re 99% of the way through the RPS, even if we’re only three-quarters through it.”
It’s a sense shared by Democratic State Sen. Trey Paradee, who served as vice chair of the Senate Energy Committee under McDowell in the last session. Both Townsend and Paradee said that the RPS’s ultimate goal was to reduce greenhouse gas emission, regardless of whether the power is produced in Delaware or elsewhere.
“More job creation in Delaware in terms of building facilities would be wonderful. But there’s also benefits to the idea of having less expensive power for Delaware consumers and businesses, and the development of more renewable energies to our west that will lead to less pollution floating over Delaware,” Paradee noted.
Both senators said they would love to find legislation that would help bring more renewable energy jobs and power to Delaware, but they added that the cost of doing so should be weighed. If the state were to mandate a percentage of power came from within Delaware, they would have to examine whether that would raise energy costs for providers, and ultimately customers.
Paradee pointed to the 2017 Offshore Wind Working Group that looked into whether Delaware should back wind farms off its coast. The senator who served on the group said it “turned into a sales pitch,” but he found that the proposal to buy wind energy from such an offshore project at 12 cents a kilowatt hour was roughly three times as high as buying wind energy from Western Pennsylvania farms.
“Unfortunately, the idea of offshoring just was not in the consumer’s best interest,” he said.
By Jacob Owens