An analysis of the Massachusetts Renewable Portfolio Standard

Pat Knight, Ariel Horowitz, PhD, Patrick Luckow, Tyler Comings, Jason Gifford, Po-Yu Yuen, Edward Snook, and Jordan Shoesmith

Prepared for the NECEC in Partnership with Mass Energy

Executive summary
Massachusetts has long been a national leader in efforts to advance clean energy to enhance energy diversity and security, increase economic development, and reduce environmental impacts including greenhouse gas emissions. The state’s Renewable Portfolio Standard (RPS) is the foundation for clean energy markets and a proven policy tool for supporting successful, cost–effective renewable energy development at the state level.

t is also an important part of the leadership needed to address climate change. Along with 29 other states across the country, Massachusetts has enacted an RPS policy mandating that clean energy sources supply a minimum percentage of the Commonwealth’s electricity.

The RPS is a market–based mechanism that creates demand for clean energy, which can be met by a variety of cost–effective resources. Throughout New England, RPS compliance is tracked through the sale of Renewable Energy Credits (RECs), which are either embedded in contracts for renewable energy or bought separately on an open market. The price for RECs is determined by market transactions and is affected by the relative balance of demand for RECs—created by the RPS—and supplied by renewable resources.

The Massachusetts RPS requires that retail electricity suppliers provide customers with a minimum percentage of electricity from renewable energy. This percentage currently increases by 1% each year. In 2016, the Massachusetts RPS required suppliers to purchase enough renewable energy to cover 11% of their customers’ retail load; under the existing policy, this number will reach 25% by 2030. This increase alone will not be enough to comply with the state’s clean energy and climate goals.

The RPS and supporting policies have successfully spurred the development of the existing renewable energy fleet-creating jobs, tax revenue, and price-hedging opportunities for electricity customers in the process. Existing policies have driven both centralized and, increasingly, distributed generation. Projects facilitated by the RPS, built after 1998, have expected useful lives of 30 years or more. However, as the Commonwealth moves to fulfill its obligations under the Massachusetts Global Warming Solutions Act (GWSA) to reduce emissions by 80 percent by 2050, new policies are likely to be needed to support and accelerate continued growth in renewable resources.

In 2016, Massachusetts enacted An Act to Promote Energy Diversity (Energy Diversity Act), which requires Massachusetts investor-owned utilities to enter long-term contracts with offshore wind, large hydroelectric, and other renewable resources. Laws with similar requirements have also been enacted in Connecticut and Rhode Island. Other recent policies have contributed to substantial solar development, with more on the horizon, and the expectation is that this supply will increasingly be coupled with energy storage. These laws and policies will contribute to the Commonwealth’s clean energy and climate goals.

However, it is possible and even necessary for Massachusetts to go further to achieve the GWSA-mandated greenhouse gas emission reductions and align its clean energy policies.
An increase in the Commonwealth’s annual RPS growth rate is likely necessary to correct the existing imbalance between policies that impact renewable energy supply and policies that impact demand for renewable energy. While the Commonwealth’s historic success and recent policy enhancements will increase the supply of renewables, policies like the RPS that create demand for renewables have not kept pace. A remedy to this supply and demand imbalance is necessary both to maintain the current renewable energy fleet and to encourage new investment and production in a cost-effective and sustainable manner.

Market research and analysis demonstrates that a technical correction to annual RPS targets is likely required to maintain a balanced and stable market while fulfilling existing policies. Massachusetts relies on both existing and new (or planned) renewable energy projects to meet its RPS and GWSA obligations. A successful policy will support not only new projects but also those built in response to the early years of the RPS, allowing the Commonwealth to incentivize new, incremental, cost-effective renewable generation.

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