Renewable Portfolio Standards
A renewable portfolio standard (RPS) is a regulatory mandate to increase production of energy from renewable sources such as wind, solar, biomass and other alternatives to fossil and nuclear electric generation. It's also known as a renewable electricity standard.
An RPS is most successful in driving renewable energy projects when combined with the federal production tax credit. States often design them to drive a particular technology by providing "carve out" provisions that mandate a certain percentage of electricity generated comes from a particular technology (e.g. solar or biomass). States can choose to apply the RPS requirement to all its utilities or only the investor owned utilities. States can also define what technologies are eligible to count towards the RPS requirements.
Having adequate transmission capacity to accommodate generation from renewable resources is important for the success of an RPS. States with successful RPSs either have adequate transmission available or plans to build it.
Ratepayer impacts of an RPS can also derail its adoption politically. A counterbalance to the impacts on ratepayers is that RPS mandates usually drive local economic growth. Under a well designed RPS, costs are shared fairly by all ratepayers. Another way to address ratepayer impacts is to include provisions in the RPS to prevent costs from escalating excessively.
Design Best Practices
When designing an RPS, incorporate the following best practices:
- RPS targets should be stable, ramp up steadily over time and not be subject to sudden or uncertain shifts
- An RPS program should be of sufficient duration to allow for long-term contracting and financing
- An RPS program should apply to all load-serving entities: investor owned, municipal, and electric cooperatives, including suppliers of last resort
- The eligibility of specific renewable energy technologies and generators should be well defined
- Use of tradable renewable energy credits for RPS compliance should be considered and adhered to with a robust tracking system
- The cost of RPS compliance should be allocated fairly across all utility customers
- An RPS program should be mandatory and impose non compliance penalties on those entities that fail to meet requirements.
For more information about renewable portfolio standards, see the following NREL publications:
- Renewable Portfolio Standards in the States: Balancing Goals and Implementation Strategies
- State Clean Energy Practices: Renewable Portfolio Standards
- State of the States 2009: Renewable Energy Development and the Role of Policy
- California RPS Integration Study: Phase I Summary and Results
- A Look Behind the Texas Renewable Portfolio Standard (U.S. Department of Energy Weatherization & Intergovernmental website)
The following databases provide information about policy implementation and the status of legislation in the states: