Distributed Energy Resources

First-in-nation Clean Peak Energy Standard launched in Massachusetts

Massachusetts this week launched the first incentive program in the nation designed to promote the use of clean energy during times of peak electricity demand.

The so-called Clean Peak Energy Standard (CPS), which goes into effect on Aug. 7, builds on Massachusetts’ existing clean energy policies, such as the state’s Renewable Portfolio Standard (RPS), and requires all electricity suppliers to purchase a certain amount of Clean Peak Energy Certificates (CPECs) each year based on a specified percentage of the amount of electricity that they supply.

Eligible CPS resources include renewable energy sources that meet the state’s RPS criteria, as well as demand response resources.

Public power utilities in Massachusetts, known as municipal lighting plants (MLPs), are exempt from the Clean Peak Energy Standard and resources in MLP territories are ineligible to participate in the program.

In 2020, the clean peak standard will begin at 1.5% of retail electricity sales and increase by at least 1.5% each year to reach a minimum level of 16.5% of retail sales by 2030.

By producing certificates from resources that generate, dispatch, or discharge clean energy, the CPS program envisions that the CPEC market will create revenue for resources that can shift energy usage from the seasonal peak periods or from the periods when net demand for electricity is typically highest.

Renewable portfolio standards are responsible for about half the growth of renewable energy resources between 2000 and 2016, but the effectiveness of renewable portfolio standards have been slipping as deeper renewable penetration leads to the production of more energy than can be consumed and thus to curtailments, according to a report from the Lawrence Berkeley National Laboratory.

Clean peak energy standards are seen as one means of addressing that trend.

Proponents say clean peak standards encourage the deployment of new clean energy resources that are designed to meet peak demand, such as energy storage devices, which can be used to offset the use of fossil fuels, such as gas-fired peaking plants that are often used to meet peak demand. In addition to reducing potentially harmful emissions, switching from fossil fuels to clean energy also has the potential to reduce the cost of energy delivered to customers, proponents say.

The Massachusetts’ Department of Energy Resources (DOER) also will assign multipliers to CPECs in an effort to amplify the effects of the program. For instance, the DOER is using a 0.1x multiplier for existing contracted renewable resources in an effort to avoid saturating the market and suppressing price signals for investments in energy storage.

The DOER anticipates that multiplier will increase the amount of energy storage in the state’s energy resource mix to 59% from 5% while decreasing the amount of offshore wind in the mix to 8% from 53% and of waste-to-energy and biomass resources to 2%, from 25%.

Arizona was one of the first states to propose a clean peak energy standard. The Arizona Corporation Commission has opened a docket on a proposed clean peak energy standard (Docket # RU-00000A-18-0284).

The California Legislature has passed a bill that supports clean peak energy, SB 388, but it only requires regulators to consider how clean energy can help meet peak demand.