Introduction
Pennsylvania's Renewable Energy Credit (REC) market is structured under its Alternative Energy Portfolio Standard (AEPS), a policy designed to support both renewable and alternative energy sources. Unlike many states that focus only on renewables like wind and solar, Pennsylvania's AEPS includes a two-tier system that recognizes a broader range of technologies - including energy efficiency projects under Tier II.
This blog post explores the distinctions between Tier I and Tier II, with a deep dive into Tier II energy efficiency: which projects qualify, how to register them and how the trading market works.
Pennsylvania's Two-Tier REC Structure: Overview
Under the AEPS, Pennsylvania mandates that a certain percentage of electricity sold by electric distribution companies (EDCs) and electric generation suppliers (EGSs) come from alternative energy resources.
Tier I includes traditional renewables such as:
- Solar Photovoltaic (Solar PV)
- Wind
- Low-impact hydropower
- Geothermal
- Biomass
- Fuel cells using renewable fuels
- Tier II includes technologies like:
- Waste Coal
- Distributed generation
- Integrated combined heat and power (CHP)
- Demand-side management (DSM) and energy efficiency
- Large-scale hydropower
- Municipal solid waste
What is Tier II Energy Efficiency?
In Pennsylvania Tier II energy efficiency projects reduce electricity consumption on the customer side of the meter. These projects help utilities meet AEPS obligations by offsetting load rather than generating new power.
- Typical eligible Tier II energy efficiency projects include:
- Lighting retrofits (LED uprades with measurable savings)
- HVAC optimization and upgrades
- Variable frequency drives (VFDs)
- Compressed air system improvements
- Building automation system upgrades
- Refrigeration system improvements
- process efficiency enhancements in manufacturing
- Energy management systems (EMS) that deliver measurable savings
Projects must result in verifiable, metered, or calculated electricity savings. only electricity (KWh) savings count - thermal or fuel savings do not qualify under this structure.
How to Register a Tier II Energy Efficiency Project in Pennsylvania
To participate in the REC market, energy efficiency projects must be registered through the PA AEPS Alternative Energy Credits (AEC) Program, administered by PJM-GATs (Generation Attribute Tracking System).
Process is as follows:
Determine Eligibility:
- The project must be located in PA.
- The energy savings must be measurable and directly reduce electric usage.
- Ideally, utility rebate documentation should be available to support the project's savings.
Reach out to Emergent Energy on the requirements relating to your project and the requirements for submission and certification.
How Tier II RECs are Traded
Once approve . Tier II projects generate RECs based on electricity saved each year. These credits can be managed through a multitude of options. Emergent Energy is a high volume REC aggregator and seek to obtain RECs for future trading to either utilities or possible purchasers of the aggregated RECs.
Why Tier II Energy Efficiency Matters
Tier II energy effficiency projects play a unique role by:
- Lowering grid demand during peak periods.
- Enabling businesses and facility managers to monetize savings.
- Supporting a more flexible and inclusive path to compliance under the AEPS.
For organizations pursuing energy upgrades, RECs offer a potential revenue stream that can improve project payback and ROI - especially when paired with utility rebates or tax incentives.
Pennsylvania's inclusion of energy efficiency in its AEPS Tier II structure opens the door for businesses and institutions to capitalize on operational improvements. Since efficiency projects have a deemed operating life of 15 years, past projects that have been completed within the past 10 years can still qualify for these Tier II RECs. By registering and certifying qualifying projects, energy users can not only reduce their utility bills but also generate tradeable RECs that support the state's clean energy goals.
If you are considering an energy efficiency project in Pennsylvania or have completed an energy efficiency project within the past 10 years, understanding the REC qualification process - and working with an experienced verification or brokerage partner like Emergent Energy can help you unlock additional financial value while contributing to a greener grid.
To learn more about this opportunity and about how we can support you with your REC submissions, please reach out to us at
sales@emergentenergy.us.
