Renewable Portfolio Standard

on Energy

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A Renewable Portfolio Standard (RPS)—also known as a renewable energy portfolio standard—is a mandate to electric utilities to generate a minimum amount of electricity from eligible renewable energy sources. Depending on the type of standard adopted, utilities may be permitted to purchase and sell credits representing the equivalent amount of electricity from renewable sources. As of March 2017, 29 states had an enforceable Renewable Portfolio Standard and eight states had a voluntary renewable standard or target. In 1983, Iowa became the first U.S. state to establish an RPS program.^[1]

Background

A Renewable Portfolio Standard (RPS) requires affected electric utilities, which can include publicly owned municipal utilities, electric cooperatives, and/or retail electric suppliers, to generate a minimum amount of their electricity from eligible renewable energy sources. Each state may levy an RPS on different utilities with different renewable energy targets. Moreover, each state can have different lists of eligible renewable sources. The minimum amount of electricity can be set as a percentage share of a utility's annual or quarterly electricity sales, depending on the RPS. An RPS program can include penalties against utilities that do not meet minimum requirements in a given period. RPS programs can also include a system for utilities to purchase, sell, or trade renewable energy credits or certificates (RECs) to promote compliance, lower costs, or increase flexibility.^[1][2]

Eligible renewable energy sources can vary by state. They include but are not limited to wind energy, solar energy, geothermal energy, biomass, hydroelectric power, wave and tidal power, and fuel cells that are powered by any of the above renewable sources.^[1]

Renewable Energy Credits/Certificates

An RPS program can include a system for purchasing, selling, or trading renewable energy credits, also known as renewable energy certificates or RECs. An REC is a legal instrument issued to a utility or consumer when a certain amount of electricity, such as one megawatt, is generated from renewable energy sources. RECs are used to assign ownership to and account for a utility that generates electricity from eligible sources. They include information about the location, emissions, and fuel source of an electric generator. Under some RPS programs with REC systems, electric distribution companies and electric suppliers acquire a certain number of RECs to show compliance with a state's standard.^[3][4][5]

Production targets

An RPS can include an annual target for utilities to generate electricity from renewable sources. This target is often set as a percentage of total electricity generation. Under a percentage requirement, the amount of mandated electricity from renewable sources may change depending on end-use electricity sales. For several state RPS programs, renewable energy targets increase on a gradual basis over a number of years. These annual targets are meant to be predictable so that utilities and consumers can plan for rising energy targets and allow for competition between providers of renewable energy sources.^[1]

Debate

Opposition

Opponents of RPS programs argue that they result in higher electricity prices for consumers because renewable energy sources are not as cost-effective as the electricity generated from coal or natural gas. In a November 2015 report published by the Heritage Foundation, a conservative think tank, economist Salim Furth argued that the average household would see an increase in electricity prices by $108 per year under an RPS program; the price effect would depend on the state, the goals set under a specific RPS program, and the availability of sunlight, wind, and water to power renewable energy facilities.^[6]

Other critics of RPS program argue that RPS programs favor wind and solar energy over other renewable sources, particularly nuclear power. Mark J. Perry, a professor of economics at the University of Michigan at Flint and energy economist at the American Enterprise Institute, a free market think tank, argued in June 2016 that nuclear energy accounted for around 60 percent of U.S. renewable energy but was excluded by all state RPS programs excluding Ohio. Perry contended that renewable energy policy should focus more on supporting existing nuclear plants and expand the use of nuclear power given the ability of nuclear power to supply electricity at all times of the day compared to solar and wind, which cannot generate electricity except at certain times.^[7]

Support

Proponents of RPS programs argue that the economic and environmental benefits of RPS programs outweigh the costs. Authors of an January 2016 study by Lawrence Berkeley National Laboratory, a division of the U.S. Department of Energy, argued that renewable portfolio standards in the United States produced an average of $2.2 billion in economic benefits from reduced carbon dioxide emissions and $5.2 billion in benefits associated with reductions in sulfur dioxide and other air pollutants. The report's authors argued that annual compliance costs as a result of the RPS programs totaled approximately $1 billion. To calculate the benefits of reduced carbon dioxide emissions, the study's authors used the social cost of carbon, which is defined as the monetary value of worldwide impacts from changes in CO₂ emissions.^[8]

Other proponents of RPS programs argue that requiring greater use of renewable sources to generate electricity creates and supports jobs in renewable energy sector and that the cost of renewable energy has decreased as a result. The American Council on Renewable Energy, a renewable energy advocacy group, argued in August 2016 that approximately 300,000 individuals were employed in wind and solar energy jobs. Further, the group argued in June 2015 that states with more renewable energy sources had power rates increase at a slower pace than states with fewer renewable energy sources.^[9][10]

See also

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  Ethanol

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  Solar energy

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  Wind energy

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  Glossary of energy terms

Footnotes

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