Waste-to-Energy REC Eligibility: Maryland Deleted 14% of Its Tier 1 With One Sentence

On July 1 this year, two mass-burn units in Montgomery County, Maryland stopped earning renewable energy credits. Nothing happened at the plant. Same boilers, same household trash, same megawatt-hours onto the same wires. What changed is that a line in the Maryland code that used to read "waste-to-energy" now reads nothing at all, and the compliance market that had been paying roughly twenty-seven dollars a megawatt-hour for those certificates closed on a date chosen by a legislature. Waste-to-energy REC eligibility, it turns out, is not a fact about a boiler.

It's a property of a sentence that other people get to edit.

I size debt on these projects for a living, so let me put the uncomfortable part up front. The REC line in a waste-to-energy model was never an asset. It's an appropriation. Debt sizes off the contracted line, not the merchant upside, and this industry has spent two decades booking a political variable as though it were contracted revenue.

What Maryland Actually Struck

The change rode in on the Next Generation Energy Act, Chapter 625 of the 2025 session laws, effective June 1 of that year. A standalone bill would have done the same job, and it died in committee; the edit reached the code as a passenger on a much larger energy package. The operative move sits in the Public Utilities Article at section 7-701(s), the definition of a Tier 1 renewable source. Maryland's Department of Legislative Services put it in one clause: the act "removes waste-to-energy and refuse-derived fuel from eligibility for inclusion in the State Renewable Energy Portfolio Standard."

The edit itself, in the drafting convention where brackets mark deleted law:

(9) poultry litter-to-energy;

(10) [waste-to-energy;

(11) refuse-derived fuel;

(12)] thermal energy from a thermal biomass system

Read item nine again. Poultry litter stayed. Chicken manure is still a Tier 1 renewable source in Maryland, and the household waste of the same state is not. And black liquor, the spent chemical broth left over from pulping wood, supplied 32.22% of the Tier 1 certificates Maryland retired in 2024, according to the Public Service Commission's annual RPS report. The single largest renewable resource in the state's compliance stack is a paper-mill byproduct.

Waste plants held 14.17%. Four of them retired 474,398 Tier 1 certificates into Maryland compliance that year: Wheelabrator's Baltimore plant, Covanta's Fairfax unit, and Montgomery County's two generators. At the average Tier 1 certificate cost of $27.09 that year [Maryland PSC], that's a little under thirteen million dollars a year of revenue that existed because of a list, and stopped existing when the list changed. Actually, let me qualify that. Only three of those four plants sit in Maryland. Covanta's unit is in Virginia and sold across the border into Maryland compliance, which tells you something about how portable this revenue was, and how portable it wasn't.

Two dates matter more than the effective date. The provision applies to compliance years starting on or after January 1, 2025, which is five months before the act took effect, so revenue booked in the first half of a compliance year was unbooked behind it. The exception ran to July 1, 2026, and only for a facility owned by a public instrumentality of the State, which in practice meant Montgomery County and nobody else. That's the deadline that went by a couple of weeks ago.

Eligible Is the Wrong Question. The Tier Is.

Ask about waste to energy REC eligibility and you'll get an answer that's true and useless. Sometimes. The question that moves money is which tier, because the tier is where the price is and the tier is the part that's political.

Maryland's own table makes the case. A Tier 1 certificate averaged $27.09/MWh in 2024. A Tier 2 certificate averaged $11.16. Same electron, same plant, same grid; the difference is which paragraph of the statute it's listed under. Most states that still count renewable energy from waste park it in the lower tier, which is why an eligibility claim in a teaser deck deserves a follow-up question about pricing rather than congratulations. Across the waste conversion facilities I've reviewed, the eligibility claim and the revenue claim were rarely the same size.

Maine is the clearest case of the tier doing the real work. Its Class II requirement runs to 30% of a supplier's portfolio, and under Title 35-A, section 3210, a generator fueled by municipal solid waste in conjunction with recycling collects a 300% multiplier on its output, provided it holds a solid waste facility license from the state's environmental department. Three certificates for one megawatt-hour. Then read the parenthetical the statute carries directly above that paragraph: text repealed 1/1/27. The multiplier has a death date already written into the law it lives in.

Massachusetts runs waste energy through a Class II certificate of its own, separate from the Class I resources that get the headlines. California counts conversion technologies but excludes direct combustion of municipal solid waste outright. There is no national answer to the renewable portfolio standard waste to energy question, and there was never going to be one, because the standard is fifty separate negotiations that happen to share a name.

There's a bookend worth noticing. An archived EPA primer from the standard's early years tabulates which states let waste-derived fuels qualify, and Maryland is the only one on it counting municipal solid waste at all. The federal government's teaching example of a state that treated trash as renewable is the state that just wrote it out of the list.

Why the Line Stays Broken

The structural problem doesn't go away when the lobbying improves. A REC has no counterparty.

Every other line in a waste project's model has a name on the other side of it. The gate fee has a municipality or a hauler. The steam has an offtaker. The ferrous has a broker. You can read their financials, price their credit, and sue them when they don't pay, because the counterparty's balance sheet is the real collateral. But a compliance certificate is bought by whoever happens to be short that year under a mandate a legislature wrote, and a legislature has no balance sheet you can attach and no duty to keep buying. How do you price a revenue line whose buyer can vote itself out of the obligation?

Then there's the arithmetic of the pie. An RPS is a fixed percentage of load, carved into slices, and the slices are contested. Maryland's solar carve-out climbs from 6% in 2023 to 14.5% by 2030. Waste-to-energy was sitting on 14.17%. When a mandate has to make room for a constituency with better organization and a cheaper cost curve, the slice that moves is the one held by the least popular resource in the stack, and trash combustion is the least popular resource in every stack it's in. That isn't a forecast. It's a description of the seating chart.

I learned the general version of this on someone else's balance sheet. In 2023 I ran a merchant-power stress test on a UK energy-from-waste plant and ranked the risks wrong. The base case held through everything I threw at it: power price down, availability down, gate fee flat in real terms. Then the capacity-market floor didn't clear, and a case that had survived every sensitivity broke on the one line I'd treated as structural rather than political. The lesson transfers exactly. Policy revenue doesn't degrade gracefully the way a commodity price does. It goes to zero on a date.

Which is why the pro formas keep failing in the same place. A model that runs certificate revenue at a flat real price for twenty years isn't forecasting anything. It's assuming a legislature's composition for twenty years.

What to Underwrite Instead

Maryland handed the industry the answer inside the same act that took the money. The bill provides that a presently existing obligation or contract right may not be impaired in any way by it. The legislature protected contracts. It did not protect revenue. If your certificates sat inside a signed offtake with a named buyer, you have a document. If you were selling merchant into the compliance market, you had a listing, and the listing is gone.

So size the debt off the gate fee, because it's the line with a counterparty and a term. Treat certificate income as equity upside and keep it out of the coverage ratios. If you want it in the base case anyway, get it into writing with a party obliged to pay whether or not the statute survives, which usually means a REC-inclusive strip rather than a spot position (and that assumes your counterparty stays solvent, which is a separate conversation). Run the tier-migration case next to the price case, because a resource can drop from Tier 1 to Tier 2 without any hearing you'd have noticed. And read the vintage and legacy language every session, since that clause is the whole ballgame and it fits in a sentence.

Underneath all of it is a trade the better operators priced years ago: the plant sells disposal first and electrons second. At current solar PPA prices a mass-burn facility is a tipping-fee utility and the kilowatt-hour is byproduct. Firms marketing zero-waste-to-landfill solutions to industrial clients have understood that for years, because what their customers actually buy is the certainty of the tip. If you want the long version of why the generating side was never the asset, we've been through it in the anatomy of a waste-to-energy plant.

None of this applies evenly, and it's worth saying where it stops. In a state with no standard at all, waste to energy REC eligibility is a non-question, the certificate line was never in your model, and none of this is news. Plants holding a REC-inclusive PPA signed before the change are protected by the terms of Maryland's own contract clause until that agreement runs out, which is precisely the point rather than an exception to it. Landfill gas sits in a different political position and has held its tier nearly everywhere. And outside the US the analogue is usually a contract-for-difference or an obligation certificate with a real counterparty standing behind it, which changes the underwriting entirely. The claim here is narrow: in a US compliance market, an uncontracted certificate is merchant revenue wearing a policy costume, and merchant exposure is the fastest way to turn an investment-grade waste project sub-investment-grade.

The two units in Montgomery County are running today. Same trash, same steam, same export to the same grid. What they lost on July 1 wasn't generation. It was a listing.

Maine's multiplier expires January 1, 2027. The plants it covers have known that date since the legislature wrote it down. I'd be curious how many of their lenders have.

Sources & Notes

• The certificate volumes, the 14.17% Tier 1 share, and the average per-tier certificate costs all come out of the Maryland PSC's 2025 Renewable Energy Portfolio Standard report, which carries calendar-year 2024 data. Footnote 13 is where the Commission quietly records the eligibility change.
• For the statutory mechanics and both effective dates, the Department of Legislative Services fiscal and policy note for SB 937 is the cleanest summary going. The public-instrumentality exception and the contract-rights clause are both described there in plain language.
• That bracketed strike I quoted comes from the Reclaim Renewable Energy Act as introduced. Worth knowing the standalone bill never made it out of committee; the identical edit reached the code inside the larger package.
• Maine's multiplier, the 30% Class II requirement, and the repeal date are all in Title 35-A, section 3210, where the repeal is flagged inline in the statute text itself.
• The UK stress test and the underwriting practice described here are drawn from my own project files. That 2023 case stays anonymized at the client's request.