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7.2 RPS programs
Publication date: 20 Jul 2016
us Utilities guide
RPS program goals often include environmental improvement, increased diversity and security of energy supply, reduced volatility in power prices (given the absence of significant fuel costs), and local economic development.
Renewable requirements are typically established at a local level or on a state-by-state basis by a regulatory commission, state legislature, or other governing body. Twenty-nine states and the District of Columbia have mandatory RPS, while eight states have renewable energy goals. There is currently no federal RPS standard. Figure 7-1 illustrates the current status of RPS requirements by state:
Figure 7-1
Renewable portfolio standards requirements by state
Renewable portfolio standards requirements by state
States develop their RPS programs individually. Although there are some similarities in certain jurisdictions, most programs are unique to each specific state. Each RPS mandate has its own parameters, rules, and requirements, especially with respect to qualifying generation sources, renewable resource goals (usually expressed as a percentage of total load), and target dates for compliance:
- Allowable generation
Wind, solar, and biomass are accepted sources in all states that have an RPS requirement, while certain states also include energy-efficiency measures as an allowable source. Examples of other sources include ocean thermal and tidal energy in California and New York, advanced nuclear and carbon capture and sequestration in Ohio, waste tire in Nevada, and anaerobic digestion in North Carolina.
- Resource goals
Many states have established initial minimum renewable energy targets with the requirement increasing over time. Most states have set goals between 15 percent and 20 percent, although some states have higher targets (such as Hawaii at 40 percent). In addition, certain states have defined a megawatt-hour goal in lieu of a percentage, or a combination of percentage and megawatt-hours. Some states also establish goals for specified types of renewable sources. For example, New Jersey has specified targets for solar and offshore wind power sources. In some states, goals vary between utilities within a jurisdiction or are based on the size of a utility or type of utility (municipal vs. investor owned).
- Penalties for noncompliance
Some states have mandated penalties for noncompliance. For example, Washington has a penalty of $50/MWh shortfall (adjusted annually for inflation), while other states have discretionary penalties. Penalties are typically not recoverable from customers.
- Target dates
Most states mandated 2010 or earlier as an initial implementation date for some minimum level of compliance, while 2020 or 2025 are often targeted as the dates for complying with the ultimate goal.
Renewable energy credits provide evidence of the generation of electricity from a qualifying renewable facility. Because qualifications vary, RECs may be accepted for purposes of compliance in one state but not another.
The outputs from a qualifying renewable facility provide the same benefit to the off-taker as production from a traditional plant, except that the government has incentivized certain parties to pay more for power from renewable energy sources. The REC is issued by the government to assist in demonstrating compliance with RPS requirements and is a mechanism that has been created to certify that energy (the actual output) was produced by a qualifying facility.
Typically, one REC is created for every megawatt-hour of energy produced from a qualifying facility. A reporting entity may generate RECs for its own compliance with RPS requirements, or may generate them for sale.
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