March 30, 2022
Renewable portfolio standards (RPSs) are important regulatory tools used to increase the generation of energy from renewable sources such as solar PV. States across the country have been successfully implementing RPSs in their pursuit of further clean energy deployment. In this article, we will examine the definition of a renewable portfolio standard, and explore why and how states are implementing RPSs.
What is a Renewable Portfolio Standard?
A renewable portfolio standard (RPS) is a regulatory mandate intended to increase production of energy from renewable sources such as solar and wind. It is alternatively known as a renewable electricity standard (RES).
Why do States use Renewable Portfolio Standards?
Thus far, renewable portfolio standards have seen the greatest success in instigating renewable energy deployment when combined with the federal production tax credit. Often, states will design an RPS with the goal of driving implementation of a particular technology (e.g. solar PV). To achieve this, a state will include “carve out” provisions which mandate that a certain percentage of the electricity generated must come from the technology that they are trying to further implement. A state may choose to apply RPS requirements to all of its utilities, or only investor-owned utilities. Additionally, a state may define which technologies are eligible in counting towards the RPS requirements.
Issues in Implementing Renewable Portfolio Standards
In order for a renewable portfolio standard to succeed, adequate transmission capacity to accommodate the energy generated from renewable sources is necessary. Those states which have seen success in the implementation of RPSs either already had adequate transmission in place, or had plans to build it. Politically, the impact of an RPS on ratepayers can hinder its adoption. Proponents of RPSs counter this point with the fact that RPS mandates usually drive local economic growth. Fortunately, under a well-designed RPS, costs will be shared fairly among all ratepayers. Furthermore, the RPS may include provisions to prevent rapid cost escalation.
Best Practices for Designing Renewable Portfolio Standards
According to the National Renewable Energy Laboratory (NREL), the following best practices should be adhered to when designing a renewable portfolio standard.
RPS targets should be stable, ramping up steadily over time and without sudden or uncertain shifts.
An RPS program should run for enough time to allow long-term contracting and financing.
An RPS program should apply to all load-serving entities. This includes:
Investor owned
Municipal
Electric cooperatives
Suppliers of last resort
Eligibility of specific renewable energy technologies & generators should be clearly defined.
The use of tradable renewable energy credits (RECs) for RPS compliance should be considered, adhered to, and applied under a robust tracking system.
The cost of RPS compliance should be allocated fairly across all utility customers.
An RPS program should be mandatory, imposing non-compliance penalties on any entities that fail to meet the requirements outlined in the RPS.
Additional Resources to Learn About Renewable Portfolio Standards
The NREL website also provides a number of supplemental resources for those wishing to learn more about renewable portfolio standards. You can access the additional material by following this link.
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YSG Solar is a project development company responsible for commoditizing energy infrastructure projects. We work with long-term owners and operators to provide clean energy assets with stable, predictable cash flows. YSG's market focus is distributed generation and utility-scale projects located within North America.
Sources:
https://www.nrel.gov/state-local-tribal/basics-portfolio-standards.html