Alternative Energy Credits

The Alternative Energy Portfolio Standard (APS) was developed in 2008 to require a certain percentage of the Massachusetts electricity supply to be sourced from specific alternative energy sources. In October of 2017, the Massachusetts Department of Energy (DOER) drafted regulations, pursuant to Chapter 251 of the Acts of 2014 and Chapter 188 of the Acts of 2016, that added renewable thermal, fuel cells, and waste-to-energy thermal to the APS.

Alternative Energy Credits (AECs) are issued as an incentive to the owners of eligible renewable thermal energy facilities per every megawatt-hour equivalent (MWhe) of thermal energy generated. Retail electricity suppliers may purchase these credits to meet APS compliance standards. The APS expands the current renewable mandates to a broader spectrum of participants, as the state continues to expand its portfolio of alternative energy sources.

States Eligible for AECs

MA

Tracking Registry

NEPOOL-GIS

Energy Year

Jan - Dec

Production Tracking

Independent Verifier or MassCEC

Eligible Energy Sources

The following renewable thermal energy sources are eligible to produce AECs:

Any facility that generates useful thermal energy using sunlight, biomass, biogas, liquid biofuel, or naturally occurring temperature differences in air or water.

  • Solar Thermal
  • Air Source & Ground Source Heat Pump*
  • Biomass**
  • Biogas**
  • Liquid Biofuels
  • Compost Heat Exchange System
  • Combined Heat and Power (CHP)
  • Flywheel Energy Storage Unit
  • Compost Heat Exchange System
  • Fuel Cell
  • Thermal Waste-to-Energy

AEC Facts

  • 1 AEC = 1 megawatt-hour equivalent (MWhe) of thermal energy
  • AECs are sold separately from the thermal energy
  • Value is determined by market supply and demand mechanics
  • Facilities must be certified by MA DOER to produce AECs

* Air source heat pump installations in a new construction must supply 100% of the building’s annual heat load for eligibility in the program. Air source heat pump installations in existing constructions must supply at least 90% of the building’s annual heat load and:
1) Be integrated into a heating distribution system.
2) Be capable of distributing produced heat to all air conditioned areas of the building.
3) Have a heating capacity at 5 degrees Fahrenheit that is at least 50% of the nameplate capacity of the existing heat source equipment.

** Biomass and biogas facilities must meet specific standards for eligibility. These standards can be found in-depth at Biomass and Biogas Eligibility Standards.

Minimum Standard and Alternative Compliance Rate

Energy Year % Minimum Standard ACP
2018 4.50% $22.64
2019 4.75% $23.13
2020 5.00% N/A
2021 5.25% N/A
2022 5.50% N/A
2023 5.75% N/A
2024 6.00% N/A
2025 6.25% N/A
2026 6.50% N/A
2027 6.75% N/A
2028 7.00% N/A
2029 7.25% N/A

An obligated entity may meet the Minimum Standard requirement by paying the Alternative Compliance Penalty (ACP) for every Megawatt-hour (MWh) equivalent of thermal energy shortfall of the obligation. The DOER announces the ACP annually, on January 31st, which is adjusted each year based upon the previous year’s Consumer Price Index. The ACP rate caps the market for the given compliance year.

Eligibility Period

A registered system has 10 years of AEC production eligibility. For all solar thermal, heat pump, biomass, or biogas systems, the unit must have been put into operation after January 1st, 2015 to be eligible for the program.

Eligibility Start Date

A facility’s eligibility to produce AECs can begin with the system’s operation start date, so long as the SQA application is submitted prior to that quarter’s application deadline. Otherwise, the eligibility start date will be based on the application date and its corresponding quarter.

AEC Useful Life

AECs have a useful life of 1 year. AECs must be sold by the end of each trading year (June 15th).

AEC Minting Schedule

There are three different schedules by which the state mints AECs:
Pre-Minting - All AECs for the 10 year lifespan are issued upfront at the end of the first calendar quarter. Only small systems are eligible for pre-minting.
Forward Minting - A predetermined number of AECs are issued on a quarterly basis. Only small systems are eligible for forward minting.
Quarterly Minting - AECs are issued on a quarterly schedule based upon production metering. Intermediate and large systems will quarterly mint their AECs.

Meter Readings

Meter readings vary by system size and type. There are 3 different buckets for system size: small, intermediate, and large.

Classification Small Intermediate Large
AEC calculation basis Calculated net renewable thermal output Calculated net renewable thermal based on indirect metering Calculated net renewable thermal output based on direct metering of fuel input Metered net renewable thermal output
Solar thermal: evacuated tube and flat plate solar hot water Collector surface area less than or equal to 660 sq ft Collector surface area between 660 and 4,000 sq ft - Collector surface area greater than or equal to 4,000 sq ft
Solar thermal: solar hot air - Collector surface area less than or equal to 10,000 sq ft - Collector surface area greater than 10,000 sq ft
Eligible Biomass Fuel - - Capacity less than or equal to 1,000,000 Btu per hour Capacity greater than 1,000,000 Btu per hour
Air source heat pump: electric motor or engine driven Output capacity less than or equal to 134,000 Btu per hour - Output capacity between 134,000 and 1,000,000 Btu per hour Output capacity greater than or equal to 1,000,000 Btu per hour
Ground source heat pump Output capacity less than or equal to 134,000 Btu per hour - Output capacity between 134,000 and 1,000,000 Btu per hour Output capacity greater than or equal to 1,000,000 Btu per hour

Small

Small renewable thermal systems do not require meter readings, as pre-minted AECs are issued based upon predetermined formulas that estimate future production.

Intermediate

Intermediate renewable thermal systems’ production is calculated by indirect metering, which is based upon the electric draw of the pump and the Coefficient of Performance. Intermediate biomass systems must comply with direct metering that is based upon equations that account for fuel input.*

Large

All large APS systems must comply with extensive metering requirements that measure useful thermal energy output.*


*Intermediate and large system’s meter readings must be verified by an Independent Verifier (IV). The IV has to access and read all meter output information and ensure that the report is reasonable before submitting the data to NEPOOL-GIS on a quarterly basis. An individual or party must submit an Independent Verifier Request Form for consideration as a qualified IV. Woodard and Curran is the only IV for Solar Thermal Heat, ASHP, and GSHP. A list of independent verifiers can be found here.