Renewable Portfolio Standards
A Renewable Portfolio Standard (RPS) provides states with a mechanism to increase renewable energy generation using a cost-effective, market-based approach that is administratively efficient. An RPS requires electric utilities and other retail electric providers to supply a specified minimum amount of customer load with electricity from eligible renewable energy sources. The goal of an RPS is to stimulate market and technology development so that, ultimately, renewable energy will be economically competitive with conventional forms of electric power.
How Does a Renewable Portfolio Standard Encourage Clean Energy?
An RPS creates market demand for renewable and clean energy supplies. Currently, states with RPS requirements mandate that between 4 and 30 percent of electricity be generated from renewable sources by a specified date. While RPS requirements differ across states, there are generally three ways that electricity suppliers can comply with the RPS:
- Owning a renewable energy facility and its output generation.
- Purchasing Renewable Energy Certificates (RECs).*
- Purchasing electricity from a renewable facility inclusive of all renewable attributes (sometimes called "bundled renewable electricity").
* A REC is a tradable right to claim the environmental and other attributes associated with 1 megawatt-hour of renewable electricity from a specific generation facility.
Which States Have Established Renewable Portfolio Standards?
As of March 2013, RPS requirements or a renewable portfolio goal (RPG) have been established in 37 states, the District of Columbia, Guam, N. Mariana Islands, Puerto Rico and the U.S. Virgin Islands, where biogas from anaerobic digesters is potentially an eligible biomass renewable energy resource (see the map below). Louisiana implemented a renewable energy pilot program .
What Are the Key Features of a Renewable Portfolio Standard?
States have tailored their RPS requirements to satisfy particular policy objectives, electricity market characteristics and renewable resource potential. Consequently, there is wide variation in RPS rules from state to state with regard to the minimum requirement of renewable energy, implementation timing, eligible technologies and resources, and other policy design details. The key features of RPS requirements are highlighted below.
Goals and Objectives. There can be multiple goals for an RPS and some states aim for a broader set of objectives than others. Examples of broader goals and objectives include local, regional, or global environmental benefits; local economic development goals; and advancing specific technologies.
Applicability. RPS requirements are most commonly applied to investor-owned utilities and electric service providers. It is unusual for mandatory RPS requirements to extend to municipal utilities and cooperatives, as these entities are predominately self-regulated. However, some states have included provisions for municipal utilities and cooperatives to voluntarily join the RPS program.
Eligibility. Eligibility usually depends on whether or not an energy resource or technology supports the goals and objectives established for the RPS. Thus the types of technologies, fuels, age of generation facility and geographical requirements vary considerably among states' RPS.
For More Information:
The Database of State Incentives for Renewable Energy (DSIRE) is a comprehensive source of information on state, local, utility, and selected federal incentives that promote renewable energy.