Renewable portfolio standard (United States)

A Renewable Portfolio Standard (RPS) is a regulation that requires the increased production of energy from renewable energy sources, such as wind, solar, biomass, and geothermal. The federal RPS is called the Renewable Electricity Standard (RES).

The RPS mechanism generally places an obligation on electricity supply companies to produce a specified fraction of their electricity from renewable energy sources. Certified renewable energy generators earn certificates for every unit of electricity they produce and can sell these along with their electricity to supply companies. Supply companies then pass the certificates to some form of regulatory body to demonstrate their compliance with their regulatory obligations. Because it is a market mandate, the RPS relies almost entirely on the private market for its implementation. Unlike feed-in tariffs which guarantee purchase of all renewable energy regardless of cost, RPS programs tend to allow more price competition between different types of renewable energy, but can be limited in competition through eligibility and multipliers for RPS programs. Those supporting the adoption of RPS mechanisms claim that market implementation will result in competition, efficiency, and innovation that will deliver renewable energy at the lowest possible cost, allowing renewable energy to compete with cheaper fossil fuel energy sources.[1]

RPS programs have been adopted in 29 of 50 U.S. states, and the District of Columbia.[2][3]

Program diversity

Of all the state-based RPS programs in place today, no two are the same. Each has been designed taking into account state-specific policy objectives (e.g. economic growth, diversity of energy supply, environmental concerns), local resource endowment, political considerations, and the capacity to expand renewable energy production. At the most basic level, this gives rise to differing RPS targets and years (e.g. Arizona's 15% by 2025 and Colorado's 30% by 2020).[4] Other factors in program design include resource eligibility, in-state requirements, new build requirements, technology favoritism, lobbying by industry associations and non-profits, groups cost caps, program coverage (IOUs versus Cooperatives and Municipal utilities), cost recovery by utilities, penalties for non-compliance, rules regarding REC creation and trading, and additional non-binding goals. Since RPS programs create a mandate to purchase renewable energy, they create a lucrative captive market of buyers for renewable energy producers who are eligible in a particular state's RPS program to issue RECs. A state may choose to promote new investment in renewable energy generation capacity by not making eligible existing renewable energy such as hydroelectric plants or geothermal energy to qualify under an RPS program.[2]

Many states that have mandatory Renewable Portfolio Standards also have additional voluntary targets either for the total proportion of renewable energy or for a particular technology type.[5]

In many states, municipalities and cooperatives are exempt from the RPS target, have a lower target, or are required to develop their own targets. Furthermore, in some states such as Minnesota, individual utilities (e.g., Xcel Energy) are singled out for special treatment.[5]

Renewable energy certificates (RECs)

States with RPS programs have associated renewable energy certificate trading programs. RECs provide a mechanism by which to track the amount of renewable power being sold and to financially reward eligible power producers. For each unit of power that an eligible producer generates, a certificate or credit is issued. These can then be sold either in conjunction with the underlying power or separately to energy supply companies. A market exists for RECs because energy supply companies are required to redeem certificates equal to their obligation under the RPS program. State specific programs or various applications (e.g., WREGIS, M-RETS, NEPOOL GIS) are used to track REC issuance and ownership. These credits can in some programs be 'banked' (for use in future years) or borrowed (to meet current year commitments). There is a great deal of variety among the states in the handling and functioning of RECs and this will be a major issue in integrating state and federal programs.[5]

Multipliers

RPS multipliers are powerful tools for regulators to direct revenue, investment, and job creation to particular types of renewable energy vs a free market of renewable energy. Since the definition of what is renewable energy isn't clear cut, for example, nuclear power, and whether an RPS program should consider environmental damage of a renewable energy source (for example, hydroelectric dams, bird strikes of wind turbines, geothermal earthquakes, solar thermal water use) affects RPS program implementations. A state can use a multiplier as protectionism to local renewable energy generators from out of state renewable generators. Since RECs are regulated at a state level, their ability to be traded over state lines varies.[5]

Solar renewable energy certificates (SRECs)

Over 16 of the approximately 30 states with RPS programs have also established a set-aside for solar energy.[6] This results in the creation and trading of RECs specific to solar known as solar renewable energy certificates (SRECs). With a separate market for SRECs, states are able to ensure that a portion of their renewable energy comes from solar. As a result, states with solar carve-outs, such as New Jersey, have had more success in promoting solar energy through the RPS than states, such as Texas, with a generic REC market or REC multiplier.

Tiers and set-asides

Energy supply companies need to show that they have acquired a particular percentage of their power sales from the designated technology type. Multiple technology types are bundled together in 'tiers' or 'classes' with similar effect. Not all states have set-asides or tiers (some preferring to promote particular technologies through credit multipliers) and each state that groups technologies together in a tier does so differently.[5]

Eligible technologies

Every state defines 'renewable' technologies differently. Many states exclude existing renewable facilities from benefiting from an RPS program for the same reason. A state's definition of eligible technologies is also driven by the objectives of the program. Programs designed to promote diversity in generation types may include or promote technologies different from programs designed to achieve environmental goals.[5]

In a 2011 report published by the Union of Concerned Scientists, Doug Koplow said:

Nuclear power should not be eligible for inclusion in a renewable portfolio standard. Nuclear power is an established, mature technology with a long history of government support. Furthermore, nuclear plants are unique in their potential to cause catastrophic damage (due to accidents, sabotage, or terrorism); to produce very long-lived radioactive wastes; and to exacerbate nuclear proliferation.[7]

The United Nations classifies a particular subset of presently operating nuclear fission technologies as renewable. Reactors that produce more fissile fuel than they consume - breeder reactors and, eventually, nuclear fusion, are classified within the same category as conventional renewable energy sources, such as solar and falling water.[8]

Penalties

In order to motivate compliance, states that have enforceable standards will have penalties for utilities that fail to reach the specified targets. States may choose to set penalty values or make arbitrary penalty amounts when suppliers fail to meet a renewable target. Where specific technologies are promoted through either tiers or set-aside provisions, the penalties for missing these targets are typically separate and higher. Some states have higher penalties for repeat violations and others escalate penalties on a yearly basis according to price indices.[5]

Cost caps

All states either place caps on the cost of the program or include some form of 'escape clause' whereby the regulatory authority can suspend the program or exempt utilities from meeting its requirements. The need for such measures arises from the difficulties in estimating in advance the actual cost of the RPS program. The realized cost to the utility and the ratepayer is not known until the supply and cost base of renewable power, along with actual demand, is established.[5] However, likely costs can be estimated, and some states appear to have set cost caps low enough that complete RPS requirements could not be fulfilled without a significant decrease in renewables costs.[9]

Cost recovery

With few exceptions, utilities are allowed to recover the additional cost of procuring renewable power. The method by which this can be achieved varies by state. Some states opt for a ratepayer surcharge while others require utilities to include costs in rate base. In some instances, utilities are even able to recover the cost of penalties associated with non-compliance.[5]

Policy by jurisdiction

However, the federal government has discussed enacting a nationwide RPS in the future. Such a policy would establish a common goal for every state in the country, which is less confusing than the state by state table below. If the federal government does pass a national Renewable Portfolio Standard it could be problematic for some states. Since each state has a unique environmental landscape, each state has different abilities when it comes to producing renewable energy. States with less renewable resources available could be penalized for their lack of ability.

RPS mechanisms have tended to be most successful in stimulating new renewable energy capacity in the United States where they have been used in combination with federal Production Tax Credits (PTC). In periods, where PTC have been withdrawn the RPS alone has often proven to be insufficient stimulus to incentivise large volumes of capacity.[10]

Federal

Public Utility Regulatory Policies Act is a law, passed in 1978 by the United States Congress as part of the National Energy Act. It is meant to promote greater use of renewable energy.

In 2009, the US Congress considered Federal level RPS requirements. The "American Clean Energy and Security Act" reported out of committee in July by the Senate Committee on Energy & Natural Resources includes a Renewable Electricity Standard that calls for 3% of U.S. electrical generation to come from non-hydro renewables by 2011–2013.[11] However, the proposed Support Renewable Energy Act died in the 111th Congress.

In 2007, the Edison Electric Institute, a trade association for America’s investor-owned utilities, reiterated their continuing opposition to a nationwide RPS; among the reasons included were that it conflicts with and preempts existing RES programs passed in many states, it does not adequately consider the uneven distribution of renewable resources across the country, and it creates inequities among utility customers, by specifically exempting all rural electric cooperatives, and government-owned utilities from the RES mandate.[12]

The American Legislative Exchange Council (ALEC) has drafted the model bill Electricity Freedom Act, which ALEC affiliate representatives are now attempting to roll out in various states and which "would end requirements for states to derive a specific percentage of their electricity needs from renewable energy sources."[13] As a result, of being unable to stop the approval of this model legislation, the American Wind Energy Association and the Solar Energy Industry Association allowed their ALEC membership lapse after one year as members.

Different state RPS programs issue a different number of Renewable Energy Credits depending on the generation technology; for example, solar generation counts for twice as much as other renewable sources in Michigan and Virginia.[14]

State

State Amount Year Notes
Arizona 15% 2025[15] Of this percentage, 30% (i.e. 4.5% of total retail sales in 2025) must come from distributed renewable (DR) resources by 2012 and thereafter. One-half of the distributed renewable energy requirement must come from residential applications and the remaining one-half from nonresidential, non-utility applications.
California 100% 2045[16] Interim target of 60% by 2030[17]
Colorado 30% 2020[18] Electric cooperatives: 10% by 2020[18]

Municipal utilities serving more than 40,000 customers: 10% by 2020[18]

Connecticut 27% 2020[19]
District of Columbia 20.4% 2020 RECs retain a three-year trading lifetime from their generation date before they must be retired.[20]
Delaware 25% 2025 Suppliers will receive 300% credit toward RPS compliance for in-state customer-sited photovoltaic generation and fuel cells using renewable fuels that are installed on or before December 31, 2014.[21]
Hawaii 100% 2045[22] Interim targets of 30% by 2020, 40% by 2030, and 70% by 2040[23]
Iowa 105 MW 1999[5]
Illinois 25% 2025[24]
Kansas 20% 2020 10% by 2010, 15% by 2019
Massachusetts 15% 2020 Rises by 1% per year until revised by the legislature.[5]
Maryland 40% 2030 Legislation enacted May 2012 accelerated the RPS by 2 years. Of the 20% renewable target, solar power goal is 2%.[25] Legislation enacted in April 2016 set a new RPS for 2030 of 40%.[26]
Maine 10% (new renewable resources; existing RPS is 30% and has been since 2000) 2017 (increasing 1% every year for 10 years, until reaching 10% by 2017)
Michigan 15% 2021[27] Legislation enacted in 2016 increased the previous standard from 10% by 2015 to 15% by 2021. There is an interim compliance requirement of 12.5% in 2019 and 2020. [28]
Minnesota 25% 2025 Xcel Energy has its own individual standard: 30% by 31 December 2020.[5]
Missouri 15% 2020 In Nov. 2008 Missouri passed Proposition C, requiring the state's 3 largest utilities to generate or

purchase at least 15% of their energy from renewable sources by 2021.[5]

Montana 15% 2015 For compliance year 2011 through compliance year 2014, public utilities (not applicable to competitive suppliers) must purchase both the renewable-energy credits (RECs) and the electricity output from community renewable-energy projects totaling at least 50 MW in nameplate capacity.[29]
New Hampshire 23.8% 2025
New Jersey 50% 2030 Alternate Compliance Credits (ACP) and Solar ACPs (SACP) can be purchased by

retailers and used as RECs and Solar RECs. Starting on June 1, 2008, SACPs will be set according to the following schedule ($/MWh) decreasing by 3% per year until 2016: June 1, 2008 - May 31, 2009, $711; June 1, 2009 - May 31, 2010, $693; June 1, 2010 - May 31, 2011, $675; June 1, 2011 - May 31, 2012, $658; June 1, 2012 - May 31, 2013, $641; June 1, 2013 - May 31, 2014, $625; June 1, 2014 - May 31, 2015, $609; June 1, 2015 - May 31, 2016, $594. After May 31, 2016, the BPU will review the SACP annually in consultation with an advisory committee. .[5]

New Mexico 20% 2020 Rural electric cooperatives: 10% by 2020[29]
Nevada 25% 2025 5% solar
New York 50% 2030[30] In January 2010, a goal of 30% by 2015.[31] In December 2015, it was increased to 50% by 2030.
North Carolina 12.5% 2021
Ohio 12.5% 2025 Additional 12.5% from alternative sources
Oklahoma 15% 2015 Signed May 27, 2010[32]
Oregon 50% 2030 Two companies must supply 50% of Oregon's power as renewable by 2040.[33]
Pennsylvania 18% 2020 0.5% solar
Rhode Island 15% 2020
South Dakota 10% 2015 Compliance is not mandatory
Texas 5,880 MW 2015[34] Approximately 10% according to energy use in 2011.[35]
Utah 20% 2025 Voluntary
Vermont 75% 2032[36]
Virginia 12% 2022 Voluntary
Washington 15% 2020[37]
West Virginia Repealed in 2015 through House Bill 2001.
Wisconsin 10% 2015
California

The California Renewables Portfolio Standard was created in 2002 under Senate Bill 1078 and further accelerated in 2006 under Senate Bill 107. The bills stipulate that California electricity corporations must expand their renewable portfolio by 1% each year until reaching 20% in 2010. On November 17, 2008, Governor Arnold Schwarzenegger signed executive order S-14-08 which mandated a RPS of 33% by 2020 which sits in addition to the 20% by 2010 order.[38][39] The target has been extended to 50% by 2030.[40] In September of 2018, Governor Jerry Brown signed legislation increasing the state's requirement to 100% renewable energy by 2045 and increasing the interim target to 60% by 2030.[41]

Colorado

The Colorado Renewable Portfolio Standard was updated from 20% to 30% in the 2010 Legislative Session as House Bill 1001. This increase is anticipated to increase solar industry jobs from current (2009) estimated 2,500 to 33,500 by 2020. The updated RPS is also anticipated to create an additional $4.3B (U.S.) in state revenue within the industries.[42]

Michigan

On October 6, 2008, Public Act 295 was signed into law in the State of Michigan. This Act, known as the Clean, Renewable and Efficient Energy Act, established a Renewable Energy Standard for the State of Michigan. The Renewable Energy Standard requires Michigan electric providers to achieve a retail supply portfolio that includes at least 10% renewable energy by 2015.[43]

A ballot proposal to raise the standard to 25% renewable energy by 2025 as a constitutional amendment was put to the voters in the November 2012 General Election as Proposal 3. A Proposal To Amend the State Constitution to Establish a Standard for Renewable Energy.[44] The ballot proposal was defeated with over 60% opposing the proposal.[45]

According to the State of Michigan, as of March 4, 2013 "progress toward the first compliance year in 2012 and the 10 percent renewable energy standard in 2015 is going smoothly. Michigan’s electric providers are on track to meet the 10 percent renewable energy requirement. The renewable energy standard is resulting in the development of new renewable capacity and can be credited with the development of over 1,000 MW of new renewable energy projects becoming commercially operational since the Act became law. The weighted average price of renewable energy contracts is $82.54 per MWh which is less than forecasted in REPs."[46]

Nevada

In 1997 Nevada passed a Renewable Portfolio Standard as part of their 1997 Electric Restructuring Legislation (AB 366) It required any electric providers in the state to acquire actual renewable electric generation or purchase renewable energy credits so that each utility had 1 percent of total consumption in renewables. However, on June 8, 2001, Nevada Governor Kenny Guinn signed SB 372, at the time the country's most aggressive renewable portfolio standard. The law requires that 15 percent of all electricity generated in Nevada be derived from new renewables by the year 2013.[47]

The Nevada RPS includes double goal. The 2001 revision requires that at least 5 percent of the renewable energy projects must generate electricity from solar energy.[47]

In June 2005, the Nevada legislature passed a bill during a special legislative session that modified the Nevada RPS (Assembly Bill 03). The bill extends the deadline and raised the requirements of the RPS to 20 percent of sales by 2015.[47]

Florida
On Friday January 9, 2009 the Florida Public Service Commission unanimously agreed to require the state's utilities to generate 20 percent of their power from renewable resources by 2020.
This is still not law until the legislature approves. This will drastically change the landscape for renewable energy applications for a state that gets less than 3 percent of its power from renewable energy. The proposal calls for 7 percent renewable energy by January 2013, 12 percent by 2016, 18 percent by 2019 and 20 percent by end of 2020.

Ohio

In an April 2008 unanimous vote, the Ohio legislature passed a bill requiring 25 percent of Ohio's energy to be generated from alternative and renewable sources, of which half or 12.5 percent must derive from renewable sources.[48] However, in June 2014, the state froze its RPS at 2.5 percent for two years.[49]

Oregon

For Oregon’s three largest utilities (Portland General Electric (PGE), PacifiCorp and the Eugene Water and Electric Board), the standard starts at 5% in 2011, increases to 15% in 2015, 20% in 2020, and 25% in 2025. Other electric utilities in the state, depending on size, have standards of 5% or 10% in 2025.[50] In 2016, the target was raised to 50%, as two companies must supply 50% of Oregon's power as renewable by 2040.[33]

Texas

The Texas Renewable Portfolio Standard was originally created by Senate Bill 7 in 1999. The Texas RPS mandated that utility companies jointly create 2000 new MWs of renewables by 2009 based on their market share. In 2005, Senate Bill 20, increased the state’s RPS requirement to 5,880 MW by 2015, of which, 500 MW must come from non-wind resources. The bill set a goal of 10,000 MW of renewable energy capacity for 2025. The state's installed capacity reached the 10,000 MW target in early 2010, 15 years ahead of schedule.[51]

See also

References

  1. ↑ awea.org >> Policy Archived 2007-02-02 at the Wayback Machine.
  2. 1 2 Compare State Renewable Portfolio Standard Programs
  3. ↑ "State Renewable Portfolio Standards and Goals". www.ncsl.org. Retrieved 2016-02-29.
  4. ↑ http://dsireusa.org/incentives/incentive.cfm?Incentive_Code=CO24R&re=1&ee=1
  5. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 M.J. Beck RPS Edge
  6. ↑ DSIRE Solar Set-Asides in Renewable Portfolio Standards Archived 2012-10-21 at the Wayback Machine.
  7. ↑ Koplow, Doug (February 2011). "Nuclear Power:Still Not Viable without Subsidies" (PDF). Union of Concerned Scientists. p. 10.
  8. ↑ http://www.un-documents.net/ocf-07.htm Today's primary sources of energy are mainly non-renewable: natural gas, oil, coal, peat, and conventional nuclear power. There are also renewable sources, including wood, plants, dung, falling water, geothermal sources, solar, tidal, wind, and wave energy, as well as human and animal muscle-power. Nuclear reactors that produce their own fuel ('breeders') and eventually fusion reactors are also in this category.
  9. ↑ Johnson, S.D. and E.J. Moyer (2012). "Feasibility of Renewable Portfolio Standards Under Cost Caps and Case Study for Illinois". Energy Policy 49, p. 499-514, 2012.
  10. ↑ Wind Power: Barriers and Policy Solutions Archived 2011-09-27 at the Wayback Machine.
  11. ↑ http://www.renewableenergyworld.com/rea/news/article/2009/07/house-and-senate-move-to-address-climate-and-energy-mixed-bag-for-clean-energy
  12. ↑ Oppose the Revised Udall 15% RPS Amendment, August 2, 2007
  13. ↑ Gerhardt, Tina (1 February 2013). "ALEC Targets Renewable Energy Standards and Global Warming Education". The Progressive.
  14. ↑ Challenges of Playing Favorites: State & Federal RPS Programs Archived October 15, 2009, at the Wayback Machine.
  15. ↑ Mark Bissegger (March 13, 2013). "Arizona Takes Steps Towards Incentive Free Solar". ClearSky Advisors. Retrieved 2013-03-18.
  16. ↑ Green, Miranda (2018-09-10). "California commits to 100 percent renewable energy by 2045". TheHill. Retrieved 2018-10-08.
  17. ↑ Green, Miranda (2018-09-10). "California commits to 100 percent renewable energy by 2045". TheHill. Retrieved 2018-10-08.
  18. 1 2 3 "Archived copy". Archived from the original on 2012-05-11. Retrieved 2012-05-15.
  19. ↑ "Connecticut Renewable Portfolio Standards Overview". Department of Energy & Environmental Protection Public Utilities Regulatory Authority. July 2012. Retrieved July 2, 2013.
  20. ↑
  21. ↑ "Archived copy". Archived from the original on 2010-06-13. Retrieved 2010-04-21.
  22. ↑ Mileka Lincoln (2015-06-08). "Gov. Ige signs bill setting 100 percent renewable energy goal for state". Hawaii News Now. Retrieved 2015-06-25.
  23. ↑ Foley & Lardner LLP (2015-06-13). "Hawaii Sets 100% Renewable Energy Goal and Opens the Door to Community Solar". The National Law Review. Retrieved 2015-06-25.
  24. ↑ http://bioenergy.illinois.edu/education/09seminars/090316_borgia.pdf
  25. ↑ "Archived copy". Archived from the original on 2010-06-13. Retrieved 2010-04-21.
  26. ↑
  27. ↑ http://www.michigan.gov/mpsc/0,4639,7-159-16393_53570---,00.html
  28. ↑ http://www.michigan.gov/mpsc/0,4639,7-159-16393_53570---,00.html
  29. 1 2 "Archived copy". Archived from the original on 2010-06-13. Retrieved 2010-04-21.
  30. ↑ New York Governor's Press Office. "Governor Cuomo Directs Department of Public Service to Begin Process to Enact Clean Energy Standard". Governor Andrew M. Cuomo today directed the State Department of Public Service to design and enact a new Clean Energy Standard mandating that 50 percent of all electricity consumed in New York by 2030 result from clean and renewable energy sources.
  31. ↑ New York Public Service Commission. "Renewable Portfolio Standard - Home Page". On January 8, 2010, The Commission issued its Order establishing new RPS goal and resolving Main Tier Issues. The order establishes a new RPS goal and MWh target and resolves several issues related to the RPS program, with a primary focus on the Main Tier. It adopts a goal of 30% renewable energy by the year 2015.
  32. ↑
  33. 1 2 https://olis.leg.state.or.us/liz/2016R1/Downloads/MeasureDocument/SB1547/Enrolled
  34. ↑ "79(1) SB 20 - Enrolled version - Bill Text".
  35. ↑ "The 10 States That Use the Most Energy - 24/7 Wall St". 247wallst.com. 17 September 2012.
  36. ↑ Herman K. Trabish (2015-06-16). "New Vermont law mandates 75% renewables by 2032, targets residential emissions". Utility Dive. Retrieved 2015-06-25.
  37. ↑ "Energy Independence Act". Archived from the original on 2016-02-18.
  38. ↑
  39. ↑ "We're so sorry, your page was Not Found!". Archived from the original on March 7, 2013.
  40. ↑ Biennial RPS Program Update Section 913.6 Report | January 2016 | Page 4. CPUC
  41. ↑ Green, Miranda (2018-09-10). "California commits to 100 percent renewable energy by 2045". TheHill. Retrieved 2018-10-08.
  42. ↑ "Gov. Bill Ritter: Advancing Colorado's New Energy Economy". Denver Post. March 11, 2010.
  43. ↑ "MPSC - Renewable Energy".
  44. ↑ http://www.house.michigan.gov/hfa/PDFs/Ballot%20Proposal%202012-3.pdf
  45. ↑ "Archived copy". Archived from the original on 2013-02-18. Retrieved 2013-03-18.
  46. ↑ http://www.michigan.gov/documents/mpsc/Report_on_the_implementation_of_Wind_energy_resource_zones_2013_413124_7.pdf
  47. 1 2 3 "Archived copy". Archived from the original on 2008-10-13. Retrieved 2008-09-07.
  48. ↑ "New Ohio Renewable Energy Law Has National Importance". Energy Daily. 2008-04-30. Retrieved 2008-11-28.
  49. ↑ Knox, Tom (June 13, 2014). "The freeze is on – Kasich signs S.B. 310, halts renewable and energy-efficiency standards". Columbus Business First.
  50. ↑ http://www.oregon.gov/ENERGY/RENEW/RPS_Summary.shtml
  51. ↑ "The Texas Renewable Energy Industry" (PDF). Texas Economic Development and Tourism. 2014. p. 5. Retrieved 19 June 2015.
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