Beyond Pennsylvania: How Other PJM States Are Adopting Efficiency Credit Programs

Pennsylvania's Tier II REC market is the most established and lucrative energy efficiency credit program in the PJM region, but it's not the only one. Several neighboring states are developing or expanding their own mechanisms for valuing and incentivizing demand-side energy savings. For building owners with facilities across multiple states, understanding these emerging opportunities is essential.

The PJM Interconnection territory spans 13 states and the District of Columbia, covering approximately 65 million people. Within this footprint, each state has developed its own renewable energy portfolio standard (or equivalent), creating a patchwork of compliance obligations and credit markets. While Pennsylvania's Tier II program is uniquely favorable for energy efficiency, other states offer complementary opportunities that multi-state operators should not ignore.

Maryland's Renewable Energy Portfolio Standard (RPS) includes a Tier II category that has historically encompassed waste-to-energy and hydroelectric resources. While Maryland's approach to energy efficiency credits has been less direct than Pennsylvania's, recent legislative discussions have explored expanding the definition to include demand-side management measures. The Climate Solutions Now Act of 2022 set aggressive greenhouse gas reduction targets that may drive expansion of efficiency credit mechanisms.

Maryland's EmPOWER Maryland program, while not directly creating tradeable credits, provides substantial utility incentives for efficiency projects. Commercial building owners in Maryland can access rebates for lighting, HVAC, and controls upgrades through BGE, Pepco, Delmarva Power, and Potomac Edison. These programs complement any future efficiency credit market and provide immediate financial benefits for building upgrades.

New Jersey's Clean Energy Act of 2018 set aggressive energy efficiency targets and established the state's first comprehensive energy efficiency program. The state aims to reduce energy consumption by 2% per year through 2030 — one of the most ambitious targets in the region. While New Jersey does not currently have a direct equivalent of PA's Tier II REC system for efficiency, the state's Class II REC category includes certain qualifying resources.

New Jersey's approach to energy efficiency is evolving rapidly. The BPU (Board of Public Utilities) has been exploring performance-based mechanisms that would create financial incentives tied to verified energy savings. If New Jersey adopts a tradeable efficiency credit model — which policy experts consider increasingly likely — it would create the second-largest efficiency credit market in the PJM region and new revenue opportunities for NJ building owners.

Ohio's Energy Efficiency Resource Standard (EERS) has had a more turbulent history, with legislative battles over the scope and ambition of the state's efficiency requirements. Despite this volatility, Ohio continues to operate utility-administered efficiency programs through AEP Ohio, Duke Energy Ohio, Ohio Edison, and other utilities. The possibility of a more robust efficiency credit market remains under discussion.

Ohio's political landscape makes prediction difficult, but the underlying economics of energy efficiency are compelling regardless of policy specifics. Ohio's industrial base — with significant manufacturing, food processing, and distribution operations — represents enormous efficiency potential. Any future credit mechanism would likely find strong participation from the state's large commercial and industrial energy consumers.

The District of Columbia has implemented one of the nation's most aggressive building performance standards through the Clean Energy DC Omnibus Act. Large buildings must meet energy performance targets that decline over time, effectively requiring efficiency improvements. While DC doesn't currently create tradeable credits from these improvements, the compliance framework could evolve into a credit-based system as the program matures.

Delaware's Renewable Energy Portfolio Standard includes an energy efficiency component, though at a smaller scale than Pennsylvania's. Delaware's efficiency provisions require Delmarva Power to invest in demand-side management programs, creating utility incentive opportunities for commercial building owners. The state's small size limits the potential market for efficiency credits, but multi-state operators should include Delaware facilities in their portfolio planning.

Virginia's Clean Economy Act of 2020 established a comprehensive clean energy framework that includes energy efficiency resource standards for Dominion Energy and Appalachian Power. While Virginia is not technically in the PJM footprint for all purposes, its energy market is interconnected with PJM states. Virginia's ambitious efficiency targets — requiring utility-administered programs to achieve 5% savings by 2025 — create significant incentive opportunities for building owners.

For multi-state portfolio operators, the strategic implication is to monitor these developing markets while maximizing the proven opportunity in Pennsylvania. PA's Tier II market offers the highest prices, the most established infrastructure, and the greatest certainty of any efficiency credit program in the region. Building owners should prioritize registering their Pennsylvania projects now while keeping an eye on emerging opportunities in neighboring states.

A practical approach for multi-state operators: catalog all efficiency projects completed in the past five years across all PJM-state facilities, prioritize Pennsylvania projects for immediate REC registration, apply for utility rebates in all states where programs exist, and monitor regulatory developments in Maryland, New Jersey, and Virginia for emerging credit opportunities.

Emergent Energy Solutions tracks regulatory developments across all PJM states and can advise multi-state operators on the best strategies for maximizing efficiency credit revenue across their entire portfolio. Our team maintains relationships with policymakers, utility program administrators, and market participants across the region, providing early insight into new opportunities as they emerge.