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Maryland Community Solar Policy Guide for Asset Owners & Developers

Everything you need to know about Maryland’s current community solar legislation, eligibility rules, crediting mechanism and other important market details, created by Perch’s internal policy team. We help asset owners navigate the growth of community solar in markets across the country, and as new laws are considered and passed, Perch will provide updates and perspective on how it impacts your business.

5 min read • Last updated: Mar 30, 2023

1. Maryland’s Community Solar Program

Maryland began developing a plan to bring renewable energy into its mix back in 2002 with its first renewable portfolio standard. After many revisions, the state now calls for 50% renewable energy by 2030 with a requirement of at least 14.5% coming from solar. The state first passed legislation to create a community solar pilot program in 2015, then a three-year pilot program which began operation in 2017. The program’s capacity was set at 1.5% of the state’s 2015 peak demand, or just shy of 200 megawatts (MW). In 2019, the program was extended another four years through 2024 and expanded to just over 400 MW, and again in 2021 to nearly 600 MW, still calculated as a percentage of peak demand.

In year five of the seven-year pilot program, approximately 10%, or 59 MWs across 43 projects, of the program’s capacity has come online. In Maryland, projects are called “community solar energy generation systems” (CSEGS). Though there is a backlog of accepted projects awaiting completion, the program is adding capacity slowly but surely. The primary issue in bringing projects online has been siting issues in Maryland’s relatively limited geography and local permitting and siting issues. This has in part prompted legislative action in 2022 to ease siting requirements and expand the maximum capacity of projects from 2 to 5 MWs, as well as prompting a local tax exemption for serving low- to moderate-income (LMI) electricity customers with agrivoltaics or projects built on other desirable locations like rooftops, brownfields, or landfills.

Though Maryland’s pace of community solar adoption has been relatively slow, the state has been effective at generating interest in the program and troubleshooting through legislation to ensure its continued success. The state has also positioned itself well to benefit from the federal government’s expanded Investment Tax Credit (ITC) for projects serving LMI customers with its existing carveouts for that customer class. Though the pilot program will end in December 2024, it has been extended twice before and will transition to a permanent successor program.

2. Program & Project Specifications

Project Requirements

Maximum size of 5 MW AC
Minimum 2 customers per project
At least 40% of the total project capacity must be made up of subscriptions 200 kilowatts or smaller
Subscribers may not be allocated more than 120% of their previous 12 months electric usage
Subscribers cannot exceed 200% of their annual energy usage inclusive of rooftop solar and any other community solar subscription

Program Categories

With nearly 600 MW, community solar capacity is split into three categories:

Open category, 40% – 235 MW
- Any project that meets the basic program requirements and the energy may be sold to anyone, residential or commercial.
Small, Brownfields, and Other (SBO), 30% – 176 MW
- This category represents small projects less than 500kW with siting restricted to brownfield locations, and “other” projects, which includes rooftop, parking structures, and cleanfills.
- Any project agreeing to subscribe more than 51% of the subscribed energy to LMI customers is allowed to receive capacity in this category.
Low-and-Moderate Income (LMI) category, 30% – 176 MW
- An LMI project is one that allocates at least 30% of project capacity to LMI subscribers.

3. LMI Requirements

A small but significant amount of the overall program capacity is dedicated to serving LMI customers. In the LMI category, only 10% of a project’s capacity must be allocated to low-income subscribers, with another 20% open to either low-income or moderate-income subscribers. The remaining 70% of the available energy can be subscribed to by anyone.

However, the state has passed a bill in 2022 with an incentive to increase LMI subscriber participation in the program through HB 1039. This law exempts community solar projects from both county and municipal corporate property taxes if 50% of a project’s generation serves LMI households at a rate which is at least 20% lower than the base electricity rate and are located on a rooftop, landfill, or brownfield site.

Definitions

Low Income: Subscriber’s gross annual household income is at or below 175% of federal poverty level for the year of subscription or is eligible for any federal, state or local assistance program that limits participation to households with the required income level.

Moderate Income: Subscriber’s gross annual household income is at or below 80% of the median state income for the year of subscription.

Verification Rules

Subscriber organizations are responsible for verifying the eligibility of all LMI subscribers before receiving PTO. The Commission is also empowered to establish other ways to verify the status of LMI subscribers. LMI participants can be verified through the following avenues:

Participation in the Maryland Office of Home Energy programs
Subscriber organizations may qualify a customer through use of their paystubs or income tax documents
An owner or operator of a low-income multi-family housing unit may apply to the PSC to qualify as a low-income subscriber

4. Project Selection

To participate in the community solar program, a subscriber organization – which is the term Maryland uses to refer to the owner of a project as well as actual subscriber organizations – must submit an application with the Maryland Public Service Commission (PSC) and receive a Subscriber Organization identification number.

Projects will then apply to the utility to be a part of the pilot program, with an interconnection agreement and community solar pilot application. Each participating investor-owned utility has an application process. Projects are selected from the list of subscriber organizations and are placed on a waitlist if the allocations for the year have already been awarded.

Find each utility’s application processes here:

5. Incentives and Credit Mechanism

Incentives

County and municipal corporate property tax exemption for 50% LMI participation with 20% reduction in normal electric bill cost for subscribers.
Federal Investment Tax Credit (ITC) and Production Tax Credit (PTC)
Community Solar LMI-PPA Grant Program, applications due December 2022

Credit Mechanism

The credit program length in Maryland is 25 years
The value of the credit is tied to the subscriber’s retail rate.
Utilities can choose whether credits are monetary or kWh offsets.
Solar credits expire after three years.
Unsubscribed energy will be purchased by the utility at the PJM Locational Marginal Price.
Excess credits roll over to the following month until either the subscriber's account is closed, or the last meter read before the month of April (whichever is earlier).
Any excess credits remaining at the last meter read are paid to the subscriber, adjusted to exclude the distribution, transmission and non-commodity portion of the Subscriber's bill for the excess generation amount.
If the amount of payment is less than $25, it may be applied as a bill credit.

Utility	BG&E	Delmarva	Pepco	Potomoc Edison
Residential Rate	See rate	See rate	See rate	See rate
C&I Rate	See rate	See rate	See commercial customer rates	See nonresidential rate table PDF

*Table accurate as of October 2022

6. Market Analysis

Maryland, one of the most densely populated states in the country, has an interest in balancing space-intensive solar development with the maintenance of farm and forest land. A local permitting exemption for utility scale solar has frustrated county and municipal stakeholders, manifesting in restrictive siting requirements for other types of solar development.

While this has impacted the speed at which CSEGS have come online, the legislature has successfully passed legislation in 2022 that allows for project development on contiguous lots and provided greater incentives for agrivoltaics, brownfield, cleanfill, landfill, and parking areas or structures. Pairing a project with battery storage capacity should also be implemented to maximize the benefit to the grid.

With the passage of the Inflation Reduction Act by Congress, Maryland’s community solar laws as written provide a solid foothold for projects to benefit from the ITC and PTC. With LMI carveouts in place, albeit smaller than the federal minimum of 50% LMI subscribers, Maryland project owners will realize significant reductions to their tax burdens, potentially up to 70%.