Market Update: Clean Energy Standard Expansion in Massachusetts
The Department of Energy and Environmental Affairs and the Department of Energy Resources established Massachusetts’ Clean Energy Standard (CES). The CES regulations (form 310 CMR 7.75) were revised in July 2020 to include amendments known as the Clean Energy Standard Expansion (CES-E). CES and CES-E regulations are designed to help increase the amount of ‘clean’ electricity purchased from the regional electric grid for consumption in Massachusetts.
The Clean Energy Standard applies to a percentage of electricity sales coming from ‘clean generation units’ in commercial operation after 2010, while the Clean Energy Standard Expansion focuses on ‘existing clean generation units’ in commercial operation prior to 2011. The purpose of the CES-E is essentially to ‘lock-in’ the contribution of those existing resources and not necessarily to reduce emissions from current levels.
The CES begins its buildout, based on percentage of electricity sales, in 2018 with 16% and continues its buildout at 2% annually through 2050. Then, beginning in 2050 and for each year thereafter, the percentage will be 80%. There is a grandfathering provision that exempts users from experiencing any increased costs for compliance with this regulation in 2018 and 2019 for contracts that were executed as of August 11, 2017.
The CES-E begins in 2021. The percentage requirement will be set at 20% of electricity sales for 2021 and 2022. Then in 2023 through 2050, the percentage will be determined by dividing 20% by the percentage provided by the DOER for the four years before the calendar year for which the percentage requirement applies, rounded to the nearest percent. For example, if in 2026 the percentage provided is 105%, then the requirement for 2030 would be: 20% ÷ 105% = 19%. A grandfathering provision exempts users from experiencing increased costs for compliance of this regulation in 2021 and 2022 for contracts that were executed as of October 4, 2019.
By December 31, 2021 the department is expected to complete a review of the requirements in the CES and CES-E to determine whether the programs should be amended. This review will evaluate the projected clean energy credit supply and costs, and any other information relevant to review of the program.
As a Massachusetts electricity customer, why is this information important to you?
Electricity suppliers are required to comply with these regulations that help support the state in achieving its greenhouse gas reduction goals. Suppliers can comply by (1) procuring the appropriate amount of relevant credits or (2) by making an alternate compliance payment.
Ultimately there is some variability to these regulations and it’s important to understand how your electricity supplier treats these costs. It could have an impact your contracted rate going forward. Some suppliers may be passing these components through, some may be including them at the known costs based on current regulations and subject to change, while others may be fully fixing the cost with no opportunity for adjustment. There are benefits to each scenario that can be further explored with your energy adviser.
Freedom Energy is available to address these concerns with you.
About Freedom Energy Logistics: FEL is an energy management firm based in Auburn, N.H., that specializes in unique methods of electricity and natural gas supply purchasing. Founded in 2006, FEL serves the region’s largest manufacturers, municipalities and businesses. Pioneering the ‘Direct-to-Grid’ movement, many of Freedom’s customers source wholesale energy direct from the ISO NE Pool. FEL is among the thought leaders for Community Choice Aggregation in New Hampshire. FEL is named twice to the Inc. 5000 list of fastest growing companies in America and to the list of Fastest-Growing Family Businesses in NH by Business New Hampshire Magazine. Stay Work Play’s Coolest Company for Young Professionals. Led by father and son duo Gus and Bart Fromuth, they were awarded Business Excellence Awards from New Hampshire Business Review in 2019 and 2016. For more information visit www.felpower.com or call 603.625.2244.