Press Release: 8/7/2025

Why We Should Axe the Alternative Energy Portolio Standard

 

Carrie KatanAugust 06, 2025 

 

Massachusetts has some great, and sometimes nation-leading, energy programs; the Alternative Energy Portfolio Standard (APS) is not one of them. That’s why we are excited that Governor Healey has proposed phasing out the APS by 2028 as part of H.4144, An Act relative to energy affordability, independence and innovation, which she filed back in May.

 

 

Created in 2008 as part of the Green Communities Act, the APS was designed to support various low-emission technologies. The program does this by awarding Alternative Energy Credits to organizations and households who take certain actions, like selling a qualifying biofuel, and requiring electricity suppliers (this includes community aggregation programs, utilities, and third-party suppliers) to buy a certain number of these credits every year.  

The idea behind this system, much like the better-known Renewable Energy Portfolio Standard, is to use electric ratepayer money to subsidize the use of specific technologies and thereby encourage their deployment. However, there are fundamental problems with the APS, including its support for combined heat and power systems (CHPs), its overlap with other programs, and the upward pressure it puts on electrical bills.

The APS awards credits to an eclectic mix of technologies — including fuel cells, heat pumps, solar thermal systems, and wood-burning systems — but most of the credits have been awarded to CHP systems, with 64.1% of APS credits going to these systems in 2022 (the most recent year in which data is available).

 

 

Combined heat and power systems burn fuel to generate electricity while also collecting and using the heat produced. This dual role makes them more efficient than separate heating and electric generation systems. However, these systems' climate benefits are undermined by the fact that of the 68 CHPs that the APS supports, 62 run on natural gas (2 run on wood and 4 on digester gas). With the increased availability of zero-emission technologies, such as solar panels and ground source heat pumps, supporting fossil-fuel burning CHP systems is hard to justify from an emission reduction perspective.

It is also unclear to what extent the APS led to the installation of more CHPs, versus just supporting systems that would have been built anyway or had already been built. CHP systems are being built around the country, including in states that did not have similar subsidy systems. This means it's possible that the residents of the Commonwealth pay higher electric bills to subsidize the construction of CHPs that would have been built even if the APS did not exist.

 

Fun fact, Pearl Street Station located in New York City, was the first purpose-built power plant, and a CHP system.

 

The APS also raises questions around fairness because while both residential and commercial ratepayers pay into the program through higher electric rates, commercial customers are better positioned to reap the benefits. While residential customers can, in theory, install CHP and fuel cell systems, their use is much more common among larger customers. Additionally, subsidy payments for biofuel use go to heating oil dealers, not directly to customers, and it is unclear how much (if at all) of those subsidies trickle down to lower customer oil bills.

Another issue with the APS is that many of the technologies it subsidizes are supported by other programs. For instance, waste-to-energy systems are already supported by the Renewable Energy Portfolio Standard, biofuels are supported by a number of federal programs, and heat pump and solar thermal installations are already supported by Mass Save. This overlap means the APS often adds complexity and places an unnecessary administrative burden on the state government.   

It’s also worth noting that since most heat pumps get a lump sum payment for being part of the APS, discontinuing the program will not financially harm the majority of building owners who installed heat pumps under the program. Heat pumps deserve public support, but there are better ways to support them — through existing Mass Save programs and seasonal heat pump rates. 

Finally, the APS increases electric rates by requiring electric suppliers to buy APS credits. Between the start of 2022 and end of 2024, program compliance cost suppliers around $0.75 per MWh, meaning it increased the electric rates for Eversource, Until, and National Grid customers by roughly $98 million over that timeframe. 

The APS is a program that has outlived its usefulness, and getting rid of it is a reasonable step the state government can take to make electric bills more affordable. We hope the House and Senate will keep Sections 9, 58, and 61 in H.4144, which will collectively wind down the APS, as the bill moves through the legislature.