ALTERNATIVE ENERGY PORTFOLIO STANDARD (AEPS) IN PENNSYLVANIA

Under the AEPS, electric distribution companies and electric generation suppliers in Pennsylvania are required to obtain a certain percentage of the electricity they sell from renewable sources. As of 2021, the AEPS required that 8% of total electricity sales come from Tier I renewable sources, which includes wind, low-impact hydropower, geothermal, and importantly, solar photovoltaic (PV) systems. Within this 8%, a solar-specific carve-out mandates that 0.5% must come exclusively from solar PV generation.

This dedicated solar target ensures continued investment in solar technology by:

• Creating a reliable demand for solar electricity.
   
• Encouraging utilities and developers to invest in new solar infrastructure.
   
• Supporting the growth of Pennsylvania’s clean energy workforce and economy.
   

To comply with AEPS requirements, utilities must acquire Solar Renewable Energy Credits (SRECs). These credits are issued for every megawatt-hour (MWh) of electricity generated by a qualifying solar system. Solar system owners—residential, commercial, or utility-scale—can sell these credits on the open market or through long-term contracts with utilities.

• Tradable Commodity:
  SRECs can be bought and sold via state-certified SREC marketplaces, allowing solar producers to monetize their energy production.
   
• Ongoing Revenue Stream:
  Selling SRECs provides an additional financial incentive on top of electricity bill savings, improving the return on investment (ROI) for solar installations.
   
• Market-Driven Pricing:
  The price of SRECs fluctuates based on supply and demand. When fewer systems are installed, SREC prices may rise due to scarcity; when supply outpaces demand, prices may fall.
   
• Eligibility:
  To generate SRECs, a solar system must be certified by the Pennsylvania Public Utility Commission (PUC) and registered in the AEPS Alternative Energy Credit (AEC) Program.
   

Utilities that fail to meet their solar obligations under the AEPS are subject to Alternative Compliance Payments (ACPs). These are financial penalties calculated based on the shortfall in required SREC purchases.

• Disincentivize Non-Compliance:
  ACPs are intentionally set higher than average SREC market values, making it more cost-effective for utilities to purchase SRECs than to pay penalties.
   
• Reinvestment into Renewable Energy:
  The funds collected from ACPs are reinvested into renewable energy programs within Pennsylvania, helping fund future development, research, and infrastructure upgrades.
   
• Market Stability:
  This compliance structure ensures a steady demand for solar generation and helps stabilize the SREC market, encouraging long-term investment in solar systems.
   

The combination of AEPS targets, SREC incentives, and enforcement through ACPs has played a vital role in shaping Pennsylvania’s solar landscape. These policies:

• Stimulate growth in residential and commercial solar adoption.
   
• Drive private sector investment in solar development projects.
   
• Promote job creation in clean energy sectors including manufacturing, installation, sales, and maintenance.
   
• Support the development of distributed generation, which reduces stress on the power grid and improves energy resilience.
   

As Pennsylvania continues to explore future updates to its energy goals and renewable standards, SRECs remain a cornerstone policy tool for ensuring that solar power remains viable, competitive, and accessible.