Maryland has taken a critical step forward to encourage solar energy in the state. On May 12, 2015, Maryland Governor Larry Hogan approved a law creating a pilot program for community solar projects, joining 10 other states that allow some form of community solar.

Community solar projects expand access to renewable energy by allowing multiple residential, commercial, or industrial electric customers to invest in or subscribe to one central solar energy project and offset their electric usage or charges – through virtual net metering – based on their share of the solar energy generated by the project. While the “traditional” solar model generally requires home or business premise ownership, community solar removes this obstacle.  Community solar projects can be sited in a variety of places, including the roof of a commercial or government building or a community center. The Maryland law requires the community solar to be in the same electric service territory as its subscribers, but a third party may finance, build, own, or operate a community solar project. Electric companies must buy the virtual net excess generation, up to specified limits.

The Maryland law creates a three-year pilot program that allows for the construction of community solar projects under the authority of the Maryland Public Service Commission (PSC). The PSC must adopt regulations implementing the pilot program no later than May 15, 2016, and the three-year program will start following rule adoption, on the earlier of the date of the first petition submitted under the rules or six months from rule adoption. Key issues to resolve in the PSC rulemaking are consumer protection measures—a tariff structure under which an electric company provides kilowatt-hour or value credits to the community solar subscriber;  virtual net metering calculation; protocols for communication among the pertinent parties; and interconnection protocols.

Under the pilot program, individual system sizes are capped at 2 megawatts and 200 kilowatt subscriptions cannot constitute more than 60 percent of its subscriptions. The cumulative nameplate capacity under the pilot program counts toward the existing statutory limitation of 1,500 megawatts for all net energy metering projects in the state. 

The PSC is required to limit the pilot program within certain parameters so that it can conduct a “meaningful” analysis of the program and its results. The law requires the PSC to initiate a stakeholder workgroup that examines and identifies the costs and benefits of the program and recommends whether to establish a permanent community solar program. The PSC will then report its findings and recommendations to the Maryland legislature by July 1, 2019. Projects approved by the PSC during the pilot program may continue operating (and contracts with subscribers may remain in force) after the end of the pilot program, even if a follow-on permanent community solar program is not approved.

Ballard Spahr’s Energy and Project Finance Group assists clients in developing strategies to thrive in the fast-changing regulatory, technological, and financing environment of the energy industry.

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