Solar Alternative Energy Credits

Pennsylvania's Alternative Energy Portfolio Standard (AEPS), created by S.B. 1030 on November 30, 2004, requires each electric distribution company (EDC) and electric generation supplier (EGS) to retail electric customers in Pennsylvania to supply roughly 18% of its electricity using alternative-energy resources -- roughly 8% from Tier I technologies and 10% from Tier II technologies -- by 2021. The standard also contains a solar set-aside requiring obligated entities to procure a small percentage of their electricity sales from photovoltaic (PV) systems as part of the Tier I requirement. As with the other components of Pennsylvania's AEPS, the percentage requirement ramps up slowly over time. The obligation was set at 0.0120% for the compliance year running from June 2009 - May 2010, accelerating to an ultimate target of 0.5% in compliance year 2020-2021.

Under Pennsylvania law, a solar alternative energy credit (SAEC) represents proof that 1 megawatt-hour (MWh) of electricity was generated by a qualifying PV facility. In many other states the term "solar renewable energy certificate" or "SREC" is used to represent the functional equivalent (i.e., a means of compliance with a solar energy standard) of an SAEC in Pennsylvania. Electricity suppliers must purchase SAECs in order to meet their compliance obligations under the law, or pay a Solar Alternative Compliance Payment (SACP) for any shortfalls in SAEC purchases.

In Pennsylvania the SACP varies from year to year based largely on the market price of SAECs traded during the prior compliance year, thus it is only known after the end of a compliance year. The SACP is for a given year is calculated as 200% times the sum of (1) the market value of SAECs of the reporting period and (2) the leveled value of up-front rebates received by sellers of SAECs (see PUC order listed above for a more detailed description). As of February 17, 2022, the SACP was $76.48, the largest part of which is attributable to the weighted average SAEC market price of $40 per SAEC for the 2021 period.

Under this system SAECs represent a potentially significant source of revenue for owners of qualifying PV facilities with a value determined by demand in the trading market. Eligible generators in Pennsylvania, including on-site generators, retain ownership of SAECs generated by their system until they voluntarily transfer them to another party. A generator remains eligible to generate SAECs for as long as the facility remains certified as an eligible generator. An SAEC may generally be used for compliance by a utility for the compliance year during which it was generated or the two subsequent compliance years. However, SAECs purchased by a utility during a time period for which the utility is under rate caps -- rate caps for some utilities did not expire until January 1, 2011 -- may be used by the utility in the compliance year the rate caps are lifted or in the subsequent compliance year.

In order to begin producing SAECs that can be used for compliance with Pennsylvania's AEPS, a generator must apply for and be certified as an eligible generator. In order to be considered an eligible generator for the purpose of the AEPS, the generator must generally be located either within the state of Pennsylvania or within the broader PJM region. The exception to this rule is that energy from resources located within the footprint of the Midwest Independent Systems Operator (MISO) -- which also serves a small portion of Pennsylvania -- may be used for compliance in areas served by the MISO. The practical impact of this exception is that out-of-state resources located in the MISO may only be used for compliance by the Pennsylvania Power Co. or energy suppliers operating within its service territory.

Systems must be operational before the owner can apply for a certification number. Once a generator has received a certification number from the program administrator, they may create an account on the PJM-EIS Generation Attributes Tracking System (GATS). The GATS is used to track the generation and transfer of SAECs from an eligible facility. The GATS issues SAECs to correspond with energy generation readings that the system owner uploads to the system. Facilities less than 15 kW DC capacity, interconnected prior to May 18, 2017, that did not receive funding from the PA Sunshine program, and do not have a Revenue Grade Meter may be eligible to produce SRECs from estimated generation based on PV Watts estimates. A facility must use actual, metered production if the facility is equal to or greater than 15kW, has a revenue-grade PV meter installed, or if the facility is composed of adjustable tilt PV modules or laminate PV modules, or if the facility was interconnected on or after May 18, 2017. In addition, estimates are not allowed if the facility already has metered generation processed by PJM-GATS, as stated in the GATS Operating Rules, Section 6.3.3 Section d.

Pennsylvania will only recognize the generation of SAECs by a system after the date of the application for certification. In 2017, Pennsylvania passed Act No. 40, which restricted geographical eligibility for the PA SREC market to Pennsylvania-sited solar photovoltaic systems effective October 30, 2017. The law may also impact out-of-state systems which were certified prior to the rule change. The Pennsylvania Public Utilities Commission will be reviewing the Act and issuing an Order regarding eligibility in the program in the coming months.

For a period of time before January 2011, PA-sited systems were eligible to apply to the DC SREC market; today, PA-sited systems are only eligible for PA and OH

The program website contains additional information on Pennsylvania's AEPS, registering a facility, and using credit brokers and aggregators.