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Maryland Energy Prices to Increase with New Renewable Portfolio Standards

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In May 2019, Maryland passed the Clean Energy Jobs Act, a law that will require the state’s homeowners, business owners and corporations alike to participate in procuring at least half of the state’s electricity supply from renewable sources. As a result, Renewable Portfolio Standards (RPS) - the line item on your electricity bill that funds renewable energy projects - will increase significantly after the law takes effect on October 1, 2019.

As of summer 2019, about 20 percent of the state’s electricity is sourced from renewable energy. To invest in renewables and make up the remaining 30 percent of the goal, the RPS fee consumers pay is expected to increase about $3 per MWh each year through the next 10 years. Homes and businesses across the state can expect to spend significantly more on energy going forward - unless they take immediate action.

Fortunately for Maryland businesses, there is an opportunity with a long-term strategy to address this significant cost increase and transition to renewable electricity supply. But you will need to act soon to protect your energy budget.

How does the law effect energy costs?

Increasing solar requirements drive most of the financial impact of the new law. Maryland’s current RPS require 1.95 percent of energy purchased to be sourced from solar energy. The new requirements increase the 2019 RPS to 5.5 percent solar – almost triple the current requirement – and by 2030, solar RPS requirements are slated to increase more than seven times their current rate to about 14.5 percent. Combine the solar RPS increases with other RPS components, such as offshore wind, and together they total about 50 percent by 2030. For homeowners and businesses alike, that's a significant budget implication compared to today's 20.4 percent. 

To understand how the new RPS requirements could impact your budget, let’s look at the expected 2020 costs for a business using 10,000 MWh per year. As the RPS edges up toward 28 percent, prices will go up $2.41 per MWh, leading to an increased annual cost of $24,100.

But the price hikes won’t end there. In 2021, RPS will rise to 30.8 percent, leading to an estimated yearly cost increase of $31,100. By 2030 - the end of the 10-year goal set by the new law - the total cost of price increases for a business using 10,000 MWh per year adds up to about $250,000.

What can I do about price increases?

Maryland businesses do have options to ease the burden of the price increases, but the opportunity has a short timeline.

Energy consumers with a contract signed prior to October 1, 2019 will be exempt from RPS cost increases through the duration of their contract. In other words, power contracts existing prior to October will be "grandfathered in" under the current RPS rate.

To further alleviate the transition and support Maryland businesses, Direct Energy Business is extending existing electricity contracts and offering new ones as far out as December 2027. Signing a contract at the current lower RPS rate gives you the opportunity to plan your budget over the next several years with the new legislation in mind, and transition when your business is prepared to bare higher costs. A wide variety of procurement options are available, from fixed and market-based rates to custom layering procurement, as well as contracts that allow for cancellation with just 30 days notice.

With the October deadline quickly approaching, there is little time to waste to get in on these savings. To take advantage of this opportunity, request a callback to discuss the options for your organization.

What opportunities come with higher renewable portfolio standards?

Apart from the grandfather clause, now may be a good time to consider or reevaluate plans for new renewable projects, whether that means purchasing renewable energy credits, sourcing renewable energy from a specific region or investing in behind-the-meter solar technology. Renewable energy is the way of the future in Maryland, and we can help your organization meet both the state’s requirement and your own corporate responsibility goals at a pace and price tag that fits your organization.

Manage your energy budget now and into the future: act today!

Posted: July 15, 2019

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