Like similar laws in many other states, Pennsylvania’s Alternative Energy Portfolio Standards Act (the AEPS Act) requires electric distribution companies (EDCs) and competitive retail electric generation suppliers (EGSs) to purchase an increasing percentage of energy from renewable energy sources. The AEPS Act also includes a “set-aside” that requires some of that renewable energy—as measured in alternative energy credits (AECs)—to be derived from solar photovoltaic (solar PV) facilities.
Until recently, Pennsylvania EDCs and EGSs could meet their solar PV requirements using solar AECs generated from solar PV facilities located anywhere within PJM, the regional transmission organization that includes Pennsylvania and all or part of 13 other states (including Washington, DC). Now, under Act 40 of 2017, signed into law on October 30 by Governor Tom Wolf, the rules have changed.
Solar AECs must now come from a system that
- directly delivers the electricity it generates to a retail customer of an EDC or to the distribution system operated by an EDC operating within the commonwealth and currently subject to AEPS Act requirements; or
- is directly connected to the electric system of an electric cooperative or municipal electric system operating within the commonwealth; or
- connects directly to the electric transmission system at a location within the service territory of an EDC operating within the commonwealth.
Significantly, the legislation will not affect the eligibility of existing solar PV systems to satisfy solar PV requirements if those systems (1) have a certification originating within the geographic boundaries of the commonwealth qualifying the alternative energy system for purposes of the AEPS Act prior to the effective date of Act 40; or (2) have a binding written contract for the sale of solar AECs that was entered into prior to the effective date of Act 40. For those systems falling under the second category, however, the in-state requirements will apply to contracts entered into or renewed on or after the effective date of the new legislation.
In its annual report on the AEPS Act issued in September 2016, the Pennsylvania Public Utility Commission (Commission) projected that the capacity of solar PV systems installed in Pennsylvania would not be sufficient to meet future AEPS Act solar PV requirements unless significant increases were realized in each of the next several years. The Commission presented the following graphic to demonstrate its projections:
The report also found that Pennsylvania AEC prices were lower than in states adjacent to Pennsylvania and elsewhere in PJM, which the Commission attributed to the relatively “modest” renewable energy requirements and the wider geographic scope from which AECs can be obtained.
The in-state solar requirement of Act 40 is clearly intended to narrow the projected gap between Pennsylvania’s solar PV requirements and existing in-state installed capacity. Less clear are other potential effects of the law, including the extent to which limiting the geographic scope of eligible solar AECs might increase the cost of AEPS Act compliance.
 2015 Annual Report, Alternative Energy Portfolio Standards Act of 2004, Prepared by the Pennsylvania Public Utility Commission in cooperation with the Pennsylvania Department of Environmental Protection, at 26-27.
 Id. at 26.