Published on February 5th, 2013 | by U.S. Energy Information Administration0
Renewable Portfolio Standards (RPS) — What Are They?
Renewable portfolio standards (RPS) are policies designed to increase electricity generation from renewable resources, including wind, solar, geothermal, and biomass. While there is no national-level renewable portfolio standard, many states have established their own.
What Are Renewable Portfolio Standards?
Renewable portfolio standards (RPS), also referred to as renewable electricity standards (RES), are policies designed to increase generation of electricity from renewable resources. These policies require or encourage electricity suppliers within a given jurisdiction to supply a certain minimum share of their electricity from eligible renewable resources as designated by each state. Generally, these include wind, solar, geothermal, biomass, and some types of hydroelectricity, but may include other resources such as landfill gas, municipal solid waste, and marine energy. In addition, some programs also allocate credits for various types of renewable space and water-heating, fuel cells, energy efficiency measures, and advanced fossil-fueled technologies.
How Have RPS Programs Been Implemented?
Although several RPS or other clean energy proposals have advanced part way through the U.S. Congress in recent years, there is currently no such program in place at the national level. However, many states have enacted RPS programs. These programs vary widely in terms of program structure, enforcement mechanisms, size, and application — no two state programs are exactly the same.
A wide range of policies is considered to be under the RPS umbrella. In general, an RPS sets a minimum requirement for the share of electricity to be supplied from designated renewable energy resources by a certain date/year. Often, the selected eligible resources are tailored to best fit the state’s particular resource base or local preferences. Some states also set targets for specific types of renewable energy sources or technologies to encourage their development and use. Some states focus the RPS requirement on large investor-owned utilities, while others apply the standards uniformly across suppliers. (Detailed descriptions of state RPS programs are available from the Database of State Incentives for Renewables & Efficiency.)
Another common feature of many state policies is a renewable electricity credit (REC) trading system structured to minimize the costs of compliance. Here’s how it works: a producer who generates more renewable electricity than required to meet its own RPS obligation may either trade or sell RECs to other electricity suppliers who may not have enough RPS-eligible renewable electricity to meet their own RPS requirement. In some cases, a state will make a certain number of credits available for sale. Such a system accommodates timing differences associated with planning and construction of new generation capacity. In general, only one entity — the generator or the REC holder — may take credit for the renewable attribute of generation from RPS-eligible sources. In addition to the cost control mechanism of a REC, many RPS programs have “escape clauses” if renewable generation exceeds a cost threshold.
Does an RPS Program Increase Levels of Electricity Generated from Eligible Renewable Resources?
An RPS is one policy mechanism to encourage development of renewable energy. States with RPS policies have seen an increase in the amount of electricity generated from eligible renewable resources. At the same time, other states without RPS policies have also seen significant increases in renewable generation over the past few years resulting from a combination of federal incentives, state programs, and market conditions. Increases in renewable generation have been driven by the availability of federal tax incentives, as well as by state RPS policies.2
- 1 This total includes West Virginia, which the Interstate Renewable Energy Council categorizes as a goal state rather than an RPS State. The RPS/goal in Indiana, Ohio, Pennsylvania, and West Virginia include non-renewable alternative resource.
- 2 See Wind Power and the Production Tax Credit: An Overview of Research Results – Senate Testimony (March 2007), page 6.