Many homeowners, institutions or businesses are considering switching to modern wood heat to save money on their winter fuel bills.  Those who install and operate a new modern wood heating system can save money on their fuel and may qualify for annual payments from the Alternative Portfolio Standard program, further increasing their fuel savings.



What is the Alternative Energy Portfolio Standard (APS)?

The Alternative Portfolio Standard, 225 CMR 1600 (APS), is a fantastic program intended to stimulate the growth and development of alternative thermal energy generation in Massachusetts. Modern wood heating is one of the eligible technologies offering an efficient and sustainable solution to heating the Commonwealth. A driving force behind the APS is the need to reduce carbon dioxide emissions. The Commonwealth’s Global Warming Solutions Act requires a 25% reduction of CO2 emissions by 2020 and an 80% reduction by 2050, as compared to 1990 levels.

The APS was established in 2009 and went into effect for combined heat and power (CHP) units that year. Rulemaking was broadened on January 1, 2015 to introduce thermal generation units. Final thermal regulations and guidelines were promulgated at the end of 2017. Due to the complexity of the regulations and diversity of stakeholders these eight years allowed for input from the public and revisions by the Department of Energy Resources (DOER).

What are Alternative Energy Credits (AECs)?

Under the APS, electric utilities are obliged to match a portion of their delivered electricity with alternative energy credits “AECs”. Each year that match increases by a quarter of a percent. Currently, electric utilities must match 4.5% of what they deliver or pay a penalty to DOER. This penalty money funds many of the state’s environmental initiatives. By 2020, electric utilities will need to match 20% of their electrical distribution with renewable or alternative energy. AECs will comprise 5% of that, making alternative thermal energy generation a key part of the Commonwealth’s carbon reduction strategy.

Utilities must purchase AECs, but who is making them?

Eligible units (such as a wood boiler) create AECs by producing useful thermal energy. Currently, AECs can be sold at the market price of $16 per megawatt-hour (MWTH) of net useful thermal energy, generated on a quarterly basis. This is a market driven price and fluctuates. One MWTH is roughly equivalent to 3,412,000 British Thermal Units (BTUs). For woody biomass systems, the system can earn AECs for its working life. Other technologies may only receive AECs for 10 years.

This can result in great cost savings for the thermal energy producers. For example, one ton of pellets contains approximately 16 million BTUs and costs approximately $260. If all that fuel is used, roughly four AECs will be earned and can be sold for approximately $60. Thus, participating in the APS program has “reduced” fuel costs by 20%.  The cost savings are even greater for dry wood chip systems. A ton of dry wood chips contains about 3 MWTH and costs about $65. This ton of fuel earns about $45 in credit. Therefore, the cost of the wood fuel per ton can be dramatically reduced by up to 70%, with wood users spending only $20 per ton of wood chips.

What constitutes eligibility for the APS?

The APS can include combined heat and power systems, however our focus here is on thermal-only systems. Conventional fossil fuels are not eligible to receive thermal AECs. Eligible thermal technologies include air-source and ground source heat pumps, solar thermal, biogas and liquid biofuels, compost heat exchange systems, as well as eligible woody biomass systems.

Eligible Woody Biomass Systems (Modern Wood Heat)

To be eligible for the APS, woody biomass systems (modern wood heating) must meet requirements of fuel quality, efficiency and system specifications, and emissions.

Fuel Quality

To be eligible for the APS, wood fuel must be made from wood that is sustainably sourced, meaning that the source meets DOER’s definition of sustainable forest management and its life cycle green house gas emissions can be calculated. In general, sustainability means that best management practices and biomass retention guidelines are observed and that the long-term viability of the forest is preserved. DOER verifies sustainable sourcing with field audits. Operators of an eligible woody biomass system must be able to demonstrate where the wood fuel comes from (via invoices, receipts, etc). For eligibility, the fuel must also be clean wood. Wood from construction and demolition work is not eligible, nor is any wood fuel containing metal, paint, glues, or other contaminants. Wood fuel that is produced during land clearing for development is not eligible. Some examples of fuel sources that, meeting the above requirements, may produce eligible wood fuel include: wood cut for utility line, road, park, and train track maintenance, residues of tops of trees cut for lumber, and wood produced during the milling of lumber.

Depending on the system being used, wood pellets, semi-dry wood chips (with a moisture content below 35%), and green chips (those with a moisture content between 35-50%) are eligible.


To be eligible for the APS, modern wood heating systems must convert fuel into useful heat with a minimum of 75% efficiency. Systems that meet this requirement utilize the best commercially available technology. Wood and pellet stoves and exterior wood boilers generally do not meet the efficiency requirements. Because modern wood boilers that meet the APS’s requirements can be expensive, MassCEC offers rebates to offset approximately 50% of the cost, making these systems cost-comparable to a conventional boiler.

Additional System Requirements

To be eligible for the APS, the modern wood heating system needs to have a bulk fuel storage system that automatically conveys the fuel to the combustion chamber. Unlike a pellet stove, a modern wood boiler must be connected to a central heating system. As a general rule, the fuel storage capacity should be at least 3 tons. The unit must also have the capacity for dynamic modulation, responding to heating demand via a thermostat. Units smaller than 1MMbtu/hr (or 300kw) earn AECs based on how much fuel they consume. Units larger than 1MMbtu/hr must have a meter that records how much heat is generated. Finally, the APS requires thermal storage unless granted a variance by the Department of Energy Resources.


For eligibility, modern wood heating systems need to meet certain emissions requirements. Because wood has a higher moisture content than conventional fuels, it tends to have slightly higher emissions per unit of heat. For instance, a wood boiler installed in a school may emit no more than .03lb/MMbtu of PM2.5. Although this is a very small amount, a comparable oil boiler will likely emit slightly less emissions. It is important to note, however, that while wood emissions may constitute a respiratory irritant, emissions from the burning of fossil fuels contain higher levels of toxic, potentially carcinogenic compounds. The APS regulations do not specify the toxicity of emissions, only the amount.


For those operating a modern wood heating system, the APS can create substantial cost savings in the form of AEC income. Careful review of the regulations and guidelines to ensure that a system meets emissions, efficiency, fuel quality and other specifications will pay off in quarterly AEC award.

The benefit to the Commonwealth is also of note. The APS offers a great opportunity to stimulate the development of alternative thermal energy in Massachusetts to meet carbon dioxide emission reduction goals. Modern wood heating systems, which can easily achieve a 50% reduction of greenhouse gas emissions in the first decade of their working life as compared to conventional fossil fuel systems, play an important role in the collage of alternative and renewable technologies contributing towards a sustainable future.

If you are interested in learning more about the APS, consult the regulations and guidelines on DOER’s website

Watch our video series about the APS program here.