This article is part of MACo’s Deep Dive series, where expert analysts explore and explain the top county issues of the day. A new article is added each week – read all of MACo’s Deep Dives.

As Maryland races to meet its goal of 100 percent renewable energy by 2035 and achieving net-zero greenhouse gas emissions across the state’s economy by 2045, there is significant pressure to ramp up clean energy production.

But while many policymakers claim insufficient clean energy financial incentives are the most significant barrier to meeting the state’s clean energy goals, regulatory logjams might actually be the greatest threat.

Renewable Energy

Renewable energy is power generated by fuel sources that naturally restore themselves over a short period and do not diminish.

Maryland’s Renewable Portfolio Standard (RPS) was established in 2004 to capture the economic, environmental, fuel diversity, and security benefits of renewable energy, establish a market for renewable energy, and lower the cost of obtaining electricity from renewable sources.

Maryland’s RPS Program does this by gradually increasing the amount of renewable energy suppliers must procure from renewable sources by 2030 by 50 percent, as most recently updated by the Clean Energy Jobs Act of 2019. And Governor Wes Moore has committed to 100 percent renewable energy by 2035.

In addition, the Climate Solutions Now Act of 2022 increases Maryland’s target for reducing greenhouse gas emissions to 60 percent below 2006 levels by 2031, up from a previous target of 40 percent by 2030 set in 2016. It also sets a 2045 deadline for achieving net-zero greenhouse gas emissions across the state’s economy.

While there are several renewable energy sources — including sunlight, wind, biomass, geothermal heat, and more — Maryland’s RPS requires that renewable sources generate specified percentages of Maryland’s electricity supply each year, including a solar carve-out at 14.5 percent by 2028.

Solar Tax Incentives 

The Database of State Incentives for Renewables & Efficiency lists 47 State and federal solar incentives that are applicable in Maryland or have been in the recent past, including both financial incentives and regulatory policies. State financial incentives include sales and use tax and property tax incentives and grant and rebate programs funded by the Strategic Energy Investment Fund (SEIF).

Notable examples include:

Federal Solar Tax Credit

Marylanders who install solar panels qualify for the federal Solar Investment Tax Credit (ITC). The ITC is worth 30 percent of the entire cost of a qualifying solar energy system, reducing most homeowners’ solar costs by thousands of dollars.

Maryland Solar Renewable Energy Certificates (SREC)

The Maryland SREC program credits customers for each megawatt-hour (MWh) of clean energy their system generates. Homeowners can sell these solar renewable energy credits to utility companies throughout the state.

Maryland Solar System Sales Tax Exemption

All taxpayers in Maryland are exempt from paying sales tax on solar equipment.

Maryland Renewable Energy System Property Tax Exemption

While most home improvement projects — like an inground pool — would raise a homeowner’s annual property taxes, Maryland residents do not have to pay taxes on the value added to their property due to a solar or wind renewable energy system.

Local Property Tax Credits and Incentives

Several counties offer property tax credits and other incentives for homeowners that use solar energy for heating and cooling, water heating, and electricity generation.

Community Solar Property Tax Exemption

Specified community solar energy systems are exempt from personal property taxes.

Community Solar is employed in at least 20 states to allow households unable to have solar on their roof to participate in solar energy. These projects are small- to mid-scale solar facilities typically sited on private land, commercial rooftops, landfills, industrial sites, and other preferred areas near the utility customers they’re intended to serve.

Maryland law exempts eligible community solar systems from the county or municipal personal property tax for each taxable year in which the property continues to meet eligibility requirements. A county or municipality may not accept an application from a property owner for the exemption after December 31st, 2025.

MACo Perspective

MACo generally supports legislation that provides local autonomy to determine the best way to offer tax incentives, rather than those that mandate reductions in local revenue sources. Mandated tax exemptions require counties to forego meaningful local revenues to support essential public services, even if the exemptions do not serve their best interests.

MACo would appreciate broad flexibility to enact local solar tax incentives, especially as counties promote solar projects on rooftops, brownfields, or less desirable lands as alternatives to large-scale energy generation facilities, but resists state-mandated changes that preclude local input.

Interconnection is the process of connecting power generation and storage projects to the local grid or transmission system. This process is sometimes costly, requiring upgrades to the broader network or additional infrastructure at the interconnection point, particularly for variable renewable resources like solar.

Given the need for rapid solar, wind,  other renewables, and storage deployment to meet Maryland’s goals, an expeditious interconnection process is paramount.

But PJM, a regional transmission organization that coordinates the movement of wholesale electricity in all or parts of 13 states and the District of Columbia, faces a massive queue of interconnection requests, and PJM will not review new interconnection requests until 2026.

In 2022, the Federal Energy Regulatory Commission approved a PJM plan to revamp their interconnection backlog and begin reviewing multiple projects at once. PJM expects this new approach to accelerate its process.

However, a new report from the Natural Resources Defense Council (NRDC) found that, even under recent reforms, the country’s largest grid operator is unlikely to approve new renewable projects quickly enough to meet mandatory minimum state standards.

According to the NRDC analysis, “Even under ongoing reform proposals, the pace of renewable development in PJM just barely meets minimum clean energy demands of state RPS laws through 2027. The proposed reforms are very unlikely to meet total regional demand for new renewable generation through 2030.”

Task Force to Study Solar Incentives

As Maryland has quadrupled its solar energy capacity from 258 to 1,000 megawatts, there is significant pressure to ramp up solar energy generation.

This year, the Maryland General Assembly established the Task Force to Study Solar Incentives. The task force, staffed by the Maryland Energy Administration, includes three MACo representatives representing rural, suburban, and urban counties, respectively.

The task force must study

• the impact of solar grant programs, tax credits, exemptions, classification of solar energy property for assessment purposes, solar renewable energy credits, and other financial incentives on the State’s ability to meet the solar energy goals established in the RPS
• the impact of federal solar energy incentives and how to maximize the benefit of federal solar energy incentives in Maryland
• how the solar alternative compliance fee under the RPS is calculated, and its market relationship to the value of solar renewable energy credits
• whether different levels or types of incentives should exist for different types of solar development, including customer-sited residential and nonresidential, aggregated net metered, community, and utility-scale, based on cost variance and other factors.

The task force must make recommendations regarding measures and incentives needed to ensure

• the State meets the solar energy goals established in the RPS
• minority business enterprise participation in solar development in the state
• that solar development in the state creates good quality, family-sustaining jobs with training and outreach focused on the communities in which solar development is occurring
• equitable access to renewable energy in the state
• the efficient use of land in the state by maximizing solar energy production on previously developed property, including rooftops, parking canopies, and brownfield sites or energy or transportation rights of way.

During its first meeting this week, the task force reviewed presentations about Maryland’s clean energy goals and what it will take to meet them.

According to the meeting documents, By December 2023, Maryland will have 398.8 MWs of Operational utility-scale solar projects. By Dec. 2026 – Additional 851 MWs expected to be operational.

By 2026, 17 utility-scale solar projects will become operational, equaling 1249.8 MWs. 34/49 utility-scale solar projects have firm operational dates.

In addition, meeting the RPS goal for solar energy will require more than 12,000 acres for thousands of acres of land (over 7,000 acres of farmland) and an additional 130,000 homes with rooftop solar panels.

The Bottom Line

While solar tax incentives are beneficial, it’s unclear whether more subsidies would outweigh regulatory hurdles in ensuring Maryland meets its goals for solar energy generation, as delays in the interconnection process by PJM are hindering the timely approval and implementation of renewable energy projects.

And as much as solar power has popped up in suburban neighborhoods rooftop by rooftop in recent years, the real growth in solar worldwide has been in larger “farms” where electricity is generated and sold to utilities. It is a formula that may help promote renewable energy, but it’s not the best land use in all cases.

County governments will continue working with policymakers and stakeholders to balance the need to reach clean energy targets while protecting local revenues and ensuring local input on large solar projects to ensure communities can help guide their own historical, agricultural, and residential character.

Stay tuned to Conduit Street for more information.

Click here to learn more about the Solar Incentives Task Force and review meeting materials.