Shining Light on Best Practices for Global Renewable Portfolio Standard Policies
June 7, 2019
Governments worldwide are getting serious about their renewable energy commitments. As of April 2017, 173 countries had developed some type of renewable energy target, and of those countries, at least 67 set targets for renewable energy capacity or generation.
In their research report, International Best Practices for Implementing and Designing Renewable Portfolio Standard (RPS) Policies, NREL analysts Jenny Heeter and Bethany Speer, along with Mark B. Glick of the Hawaii Natural Energy Institute, took a closer look at some of these global RPS policies to pinpoint the key elements and best practices for governments implementing an RPS.
This analysis resulted from an international collaboration between the government of Vietnam, the U.S. Agency for International Development (USAID), and the U.S. Department of State to provide technical assistance in strengthening Vietnam’s enabling environment for renewable energy development.
RPS Policy Design: Best Practices
RPSs are like snowflakes: no two policies are alike. And, like most policy instruments, RPSs are developed around a variety of factors such as local priorities, desired targets, and technology approaches. These policies can stipulate the share of energy demand that must come from renewable sources, i.e., 20% of the electrical supply; or they can be tied to a fixed amount of energy production or consumption. They can also require the use of a specific type of renewable energy technology. What sets an RPS apart from a renewable goal is the inclusion of a mechanism to penalize missing the mark.
Individual variances aside, across the board, all RPSs are structured to achieve a certain policy goal. Other common key characteristics of an RPS are:
- Production target (in megawatt-hours)
- Target year
- List of eligible technologies
- A stipulation as to whether renewable imports are eligible, and
- Compliance and enforcement structure.
The researchers found RPS best practices to consist of:
- Using analysis to inform RPS design
- Gathering stakeholder input in developing targets
- Identifying eligible renewable resource types and vintages
- Clearly defining the RPS
- Enforcing compliance, and
- Providing a cost-containment provision.
How Can Other Policies Complement the RPS?
Also described in the report are policies and procurement strategies that enable renewable energy project finance and can thus serve as a complement to RPS targets. Renewable energy auctions, for example, can facilitate long-term contracts for the finance of renewable energy that can then be used to meet RPS targets.
Another important type of companion policy to RPSs can be compensation policies such as feed-in-tariffs (FIT) and net metering. As they do not sell directly to a utility or wholesale market, distributed generation systems must be compensated for their electricity output. Under a FIT, renewable developers provide energy under a long-term, fixed-price contract, i.e., 10 cents per kilowatt-hour. With net metering, customers receive a monetary or kilowatt-hour reduction in their monthly bill for generation consumed, and the excess is exported to the grid.
Other types of policies that can complement the RPS are:
- Transmission planning
- Tax incentives
- Financial incentives
- Carbon reduction policies, and
- Energy efficiency mandates.
Different Countries, Different Approaches
Researchers also reviewed the RPS structures of the United States, Mexico, China, Korea, and Australia. Shaped by local power markets and government priorities, these case studies illustrate the variety of approaches countries have adopted to meet renewable energy worldwide.